The biggest expenditure incurred by all companies is delivering payroll to all its employees. While pay day may be a significant day both for the employee and the employer, the little flimsy piece of paper called the payslip may be the most important document that gives you an itemised snapshot of your salary and its various components. 

First of all, payslips are miniature financial statements and therefore, a record-keeping document. All organisations offer payslips to their employees just before or on the same day the amount gets deposited into their bank accounts. In Malaysia, a typical payslip offers a glimpse into an individual’s gross (total earnings) and net pay (take home after deductions) as well as all the statutory deductions the company makes on behalf of the employee.

Payslips across organisations and countries can differ in the kind of information they list out. If you are an expatriate employee or an HR manager looking for a provider to manage payroll and payslips for your contract workforce, here are some basic deductions you ought to know about:

EPF & SOCSO Deductions
All employees and their employers contribute to the Employee Provident Fund, which operates as a pension manager for all employees. The contributions that both parties make is duly marked so that the employee knows how much he or she is contributing and how much their organisation is putting in for them as well. Currently, the regulated contribution rate stands at 9% for employees while for employers, it is 12% for wages more than RM5,000 and 13% for wages less than RM5,000.

Malaysia’s Social Security Organisation is called SOCSO. This agency set up under the Human Resources Ministry ensures that employees are financially supported during an injury, invalidity or hospitalisation. It deducts O.5% from employees and 1.75% from employers for Malaysian and Permanent Residents. For foreign workers, including expatriates, only employers are required to contribute to SOCSO (Under Employment Injury Scheme). Employees are exempt from making a contribution. The rate of contribution for employers stands at 1.25%. All the above rates of contribution are capped at monthly wage ceiling of RM4,000.

Employee Insurance System (EIS)
The EIS upholds a safety net in the event of loss of job and provides employees with basic financial support should they face a job crisis. Both the employee and employer equally contribute 0.2% to this insurance system, which is capped at monthly wage ceiling of RM4,000.

Income Tax & Variable Pay
Given Malaysia’s diverse and layered workforce, the government specifies different income tax deductions based on whether the employee is resident in Malaysia or not. The country’s employment income tax deductions stand at 30% for non-residents, whereas, residents who earn an annual employment income of more than RM34,000 are eligible to be taxed between 1-30%.

The calculation of individual threshold of non-taxable income is taken into account after the deduction of annual gross income with eligible individual reliefs and tax rebates. The basic individual reliefs may include individuals and their spouse and children (under the age of 18 years old) in the case of married individuals. An individual rebate (RM400) and spouse (RM400 – if applicable) is allowed if the individual’s taxable income is not more than RM35,000 with progressive tax rate of 1% to maximum of 30% and this amount is automatically deducted from the employee’s salary. 

Known as the LHDN or the Inland Revenue Board, the country's revenue collector determines your income tax through your salary slab via a regulated Monthly Tax Deduction (MTD) formula. Determination of resident or non-resident depends on the number of days one stays in the country (if one is a skilled talent).

Medical Leaves, Casual Leaves & Special Leaves
This is a variable that changes with the kind of companies one works for. This amount differs in case employees outdo the number of leaves assigned to them or decide to go on an unpaid sabbatical. 

Besides the above, payslips also represent the employee’s name, payroll number, tax ID, cycle of payroll (some companies pay by mid-month) and issuing officer’s signature. While payslips are generally dismissed as non-important, it comes in quite handy when employees are looking for new jobs and want to negotiate their pay while submitting proof. It also helps people acquiring credit to buy a car or home or simply submit evidence of their earning at a court of law or bank.

Most companies offer e-payslips that are seamlessly accessible to all employees. At Propay Partners, our cloud-based e-HR system gives employees the opportunity to view their payslip in protected formats at secured designated portal. Payslips can be saved, downloaded or even shared within seconds, enabling employees to make better decisions with greater financial access and flexibility.

To know more, please visit us at

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