Salary Deduction Malaysia: What Employers Can Legally Deduct (Employment Act s.24)

In Malaysia, an employer can only deduct from your salary what the Employment Act 1955 allows. Section 24 lists those deductions, and in any one month they can't add up to more than 50% of the wages you earned that month. Anything else (lateness fines, a broken phone, a cash shortage) isn't a lawful deduction unless the Director General of Labour has approved it.

This guide goes through what can come off your gaji, what needs your written consent, what also needs JTK approval, and how the 50% limit works, with RM examples.

Who these rules cover

The Employment Act applies in Peninsular Malaysia and, by extension order, the Federal Territory of Labuan. Sabah and Sarawak have their own Labour Ordinances, so check those if you work there.

Since the 2022 amendments took effect, the Act covers anyone with a contract of service. The First Schedule removes only a short list of provisions, mostly overtime and termination benefits, for people earning more than RM4,000 a month. Part IV (deductions from wages) isn't on that list, so section 24 protects you whatever your salary is.

The three groups of lawful deductions

Section 24(1) is the starting rule: "No deductions shall be made by an employer from the wages of an employee otherwise than in accordance with this Act." The Act then sorts lawful deductions into three groups.

1. Deductions the employer can make without asking (s.24(2))

• Overpaid wages, made by the employer's mistake, during the previous three months. If HR paid you too much in August, they can recover it from September, October or November pay. An overpayment older than three months can't be clawed back through payroll this way.
• The indemnity you owe under s.13(1). If you resign without serving your notice, you owe your employer wages in lieu of the notice you didn't give, and the employer can deduct this.
• Recovery of a salary advance under s.22, as long as no interest is charged on it.
• Deductions authorised by any other written law. This is where EPF (KWSP), SOCSO and EIS (PERKESO) and PCB (LHDN) come in. Each has its own Act requiring the employer to deduct and pay it over.

2. Deductions that need your written request (s.24(3))

• Payments to a registered trade union or a co-operative thrift and loan society: entrance fees, subscriptions, loan instalments and interest, or other dues.
• Payments for shares in the employer's business that the employer offered for sale and you bought.

Your employer can't start these on its own. You have to ask in writing.

3. Deductions that need your written request *and* the Director General's prior written permission (s.24(4))

• Payments into a superannuation scheme, provident fund, employer's welfare scheme or insurance scheme set up for your benefit.
• Repayment of a salary advance where interest is charged, and the interest itself.
• Payments to a third party on your behalf.
• Payments for goods sold by the employer's business.
• Rent for accommodation, and the cost of services, food and meals the employer provides at your request or under your contract. The Director General can only allow this if satisfied it's for your benefit (s.24(5)).

There's also a special case for co-operative shops (s.24(6)): if you buy food or goods on credit from a co-op shop, your employer can deduct up to the credit amount, at your written request and with the shop manager's agreement.

Finally, s.24(7) lets the Director General approve other deductions for a specific purpose, for one employer or a whole class of employers. If a deduction on your payslip isn't in any of the groups above, ask HR which approval it relies on.

The 50% limit (s.24(8))

The total deducted under section 24 in any one month can't be more than 50% of the wages you earned that month. Statutory deductions are made under s.24(2)(d), so the safest reading is to count EPF, SOCSO, EIS and PCB inside the 50% along with everything else.

The limit doesn't apply in three cases (s.24(9)):

• deductions from the indemnity the employer pays you under s.13(1);
• deductions from your final wages when your contract ends, for amounts you still owe the employer;
• housing loan repayments, which can go up to an extra 25% of wages (75% in total), but only with the Director General's prior written permission.

Example 1: Gaji RM3,000 with an overpayment

Aina earns RM3,000 a month. In August, payroll keyed in her allowance twice and overpaid her RM600. HR spots it in October.

Her normal deductions at RM3,000 (Malaysian, below 60):

• EPF (11%): RM330.00
• SOCSO (Category 1, employee share): RM14.75
• LINDUNG 24 Jam (unless she opted out): RM22.15
• EIS: RM5.90
• Subtotal: RM372.80

August is within the three months before October, so the employer can recover the RM600 from her October pay under s.24(2)(a):

• Total deductions: RM372.80 + RM600 = RM972.80
• 50% limit: RM3,000 × 50% = RM1,500
• RM972.80 is within the limit, so this is lawful. Net pay before PCB: RM3,000 − RM972.80 = RM2,027.20

Recovering in one go is lawful but can hurt. Many employers agree to spread it, for example RM200 a month for three months. That's also lawful, as long as each month's deduction is for an overpayment made in the three months before that month. Spreading an August overpayment past November isn't covered by s.24(2)(a), so agree a plan that finishes by then.

PCB is left out above because it depends on your reliefs. Run your own figures in the salary calculator.

Example 2: Gaji RM4,000 with an advance and a co-op loan

Hafiz earns RM4,000. In January he took an interest-free advance of RM3,000 for his mother's hospital bill. Medical expenses for immediate family are one of the s.22 purposes that allow an advance bigger than a month's wages. He repays RM500 a month. He also asked HR in writing to deduct his RM800 loan instalment to a co-operative thrift and loan society.

Statutory deductions at RM4,000:

• EPF (11%): RM440.00
• SOCSO: RM19.75
• LINDUNG 24 Jam: RM29.65
• EIS: RM7.90
• Subtotal: RM497.30

Add the advance and co-op deductions:

• Total: RM497.30 + RM500 + RM800 = RM1,797.30
• 50% limit: RM4,000 × 50% = RM2,000
• Within the limit. Net before PCB: RM2,202.70

Now suppose Hafiz's co-op instalment were RM1,100. The total becomes RM2,097.30, which is RM97.30 over the limit. The employer would have to deduct less that month (for example, a smaller advance repayment) and can't deduct the full amounts.

What happens on your last month

Two rules change when you leave:

• If you leave without serving your notice, the employer can deduct the s.13(1) indemnity (the wages for the unserved notice period).
• From your final wages, the employer can deduct anything you still owe and the 50% limit doesn't apply (s.24(9)(b)).

So an unpaid advance balance or unreturned overpayment can be taken from your final pay in full. Your last month's salary itself is usually prorated to the days you worked. See how to calculate prorated salary.

Common mistakes

• Fining staff for lateness or mistakes. Fines aren't on the s.24 list. Not paying for a day of unpaid leave is proration under s.18A, not a deduction, but a flat "RM50 for being late" isn't a lawful deduction.
• Deducting for damage, loss or cash shortages. Unless the Director General has approved it, a broken laptop or a till shortage can't simply come off your gaji. The employer would have to raise it with you separately.
• Charging interest on a salary advance without approval. An interest-free advance can be recovered without your consent. Once interest is charged, the deduction needs your written request and the Director General's permission.
• Going above 50%. Payroll systems often process each deduction separately and nobody checks the total. Add them up.
• Recovering an old overpayment. Payroll recovery only works for overpayments in the three months before the month of deduction.
• Docking rent or meals without approval. Even if you agreed, hostel rent and meal deductions need the Director General's prior written permission.

What you can do if a deduction looks wrong

1. Ask HR in writing what the deduction is and which part of s.24 it relies on. Ask for any approval letter.
2. Compare it with your payslip and the list above. The payroll checklist shows what each line on a Malaysian payslip should look like.
3. If you can't sort it out, you can complain to or file a claim with the Labour Department (JTK). An employer that makes deductions not authorised by s.24 commits an offence under s.91 of the Act, and s.25(2) lets you recover wages that weren't lawfully deducted.

This guide explains the law in general terms. It isn't legal advice, and your contract, a collective agreement or a JTK approval can affect your case.