Labour Law Malaysia: Salary Rules and Minimum Wage 2025

Every month, HR and payroll teams must ensure that salaries are paid on time, payslips are accurate, and deductions comply with the law. With Malaysia’s minimum wage now at RM1,700, understanding the Employment Act’s salary rules is more important than ever for employers.

Salary Regulations under Malaysian Labour Law

The Employment Act 1955 sets the core rules for wage periods, payment timing, and payslips. Wage periods are usually one month and cannot exceed one month. Salary must be paid within 7 days after the last day of the wage period. Overtime is treated slightly differently. It must be paid not later than the last day of the next wage period.

Salary payments cover the basic wage and other cash payments agreed in the employment contract. They exclude items such as travelling allowance, deductions, bonus, accommodation, contributions, and other expenses incurred. When calculating the wage component, ensure that it is settled within the 7-day window.

Every employee must also receive a payslip every time they are paid. Payslips help staff track earnings, statutory contributions, and leave items, and they create a clean audit trail for the company. It needs to clearly state the basic salary, allowances, deductions, and benefits.

Minimum Wage in Malaysia (2025)

From 1 February 2025, the national minimum wage is RM1,700 per month for:

Employers with five or more employees, and
Employers in professional sectors, as classified by MASCO, regardless of size.

From 1 August 2025, the RM1,700 minimum wage applies to all employers, no matter the size or industry.

This update replaces the previous RM1,500 rate and is designed to address cost-of-living pressures. Domestic employees remain excluded from the minimum wage order.

Salary Components and Structure

An employee’s salary package usually consists of several parts:

Basic salary: The fixed amount stated in the employment contract.
Allowances: Additional cash benefits provided to employees, such as transport allowance, meal allowance, or other agreed allowances.
Overtime: Pay for hours worked beyond normal working hours. Must be settled no later than the last day of the following wage period.
Commissions: Payment based on sales or performance targets, as agreed in the contract.
Bonuses: Incentive or performance-related payments according to company policy or contract terms.
Statutory deductions: Contributions and deductions that must be recorded on the payslip:

When & How Salaries Must Be Paid

Wage periods are usually set on a monthly basis, although a different arrangement can be made if it is clearly stated in the employment contract. Regardless of the agreed frequency, the Employment Act 1955 states that salaries must be paid within 7 days after the last day of the wage period. For overtime, payment can be made no later than the last day of the following wage period.

Salaries can be paid via bank transfer, cash, or cheque, provided the method is mutually agreed between employer and employee. Many businesses opt for bank transfers for better record-keeping and security.

Every payslip should reflect accurate statutory deductions. These include EPF, SOCSO, EIS, and PCB (monthly tax deductions). Under Section 24 of the Employment Act, only certain deductions are permitted, such as those required by law, authorised in writing by the employee, or stated in a court order. Any other form of deduction is not allowed.

Failing to follow the payment timelines can lead to complaints with the Labour Department, potential fines, and in serious cases, legal action. To stay compliant, keep a clear payroll schedule, process deductions accurately, and treat the 7-day deadline as non-negotiable.

Termination and Final Salary Payment

When an employee resigns, is terminated, or retires, treat the final salary like a normal wage period payout. Settle the basic wage and contract cash payments within 7 days after the last day of the final wage period, and pay any overtime by the end of the next wage period. Provide a final payslip that shows the full breakdown.

Salary Disputes and Legal Recourse

If salary issues arise, clear payslips and strong records help both sides understand what was paid and why. Employees who believe wages were paid late or incorrectly may raise the matter with the Labour Department. Staying on schedule, documenting calculations, and issuing complete payslips reduces dispute risk.

FAQs

What is the minimum wage in Malaysia 2025?

RM1,700 from 1 February 2025 for certain employers, and for all employers from 1 August 2025 (not applicable to domestic employees).

Can employers deduct salary for lateness?

Only deductions permitted by law should be made. Record all deductions clearly on the payslip.

Is overtime compulsory for employers to pay?

Where overtime is payable under the employment terms or law, pay it not later than the last day of the next wage period and show it on the payslip.

How often must a salary be paid?

Wage periods are commonly monthly and cannot exceed one month. Pay within 7 days after the period ends.

Is payslip compulsory in Malaysia?

Yes. A payslip must be issued every time employees are paid.

How to calculate EPF and SOCSO contribution?

Use the statutory schedules and show the EPF, SOCSO, EIS and PCB figures on the payslip. Keep the related records for audit.

What can I do if my employer does not pay my salary on time?

Employees may bring the matter to the Labour Department. Employers should keep to the 7-day rule to avoid issues.

Can I refuse to work overtime without extra pay?

If overtime is approved and payable under the contract or law, it should be reflected and paid on time as stated above.

What’s the penalty for underpaying employees in Malaysia?

Underpayment may lead to complaints and enforcement. Accurate payslips and timely payment help avoid action.

What is the difference between gross salary and net salary?

Gross is before deductions; net is after EPF, SOCSO, EIS, PCB and other lawful deductions shown on the payslip.

How to handle salary increments under the Employment Act?

Record the new basic wage, update payroll, and reflect the change on the payslip from the effective date. Keep the increment letter in the employee file.

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