What is Salary Structure? Definition, How to, Template

Salary is not just a simple payment given to employees. It consists of different elements that need to be understood.

Having a clear salary structure also helps employees understand how much they are earning, what deductions are made, and promotes transparency.

A well-structured system also makes it easier to track salary trends from past to present.

In this article, we will discuss salary structures, their definition, why they are important, the key components, and how to create one. Read on to learn more.

What is a salary structure?

A salary structure is a framework that defines how employees are paid based on factors such as job role, experience, industry standards, and company policies.

It helps businesses create a fair and consistent pay system while managing costs.

A well-planned salary structure benefits both employers and employees. It helps businesses attract the right talent and retain skilled workers.

Employees also gain clarity on their earning potential and career progression.

By having a clear salary structure, businesses:

Have transparency in salary payment, so employees understand how their salaries are determined.
Create fairness in compensation. This prevents salary discrimination and ensures equal pay for similar roles.
Helps companies plan payroll expenses effectively.
Can comply with labor laws. Employers must meet the minimum wage and other legal requirements.
Foster career growth and improve performance to boost employee motivation and enhance business retention.

Key Components of a Salary Structure in Malaysia

In a salary structure, it includes these key components below:

1. Basic Salary

Basic salary is the fixed monthly income an employee receives before any deductions or bonuses. It is the main part of an employee’s salary.

2. Allowances

Employers may offer additional payments for specific needs, such as:

Housing allowance
Transportation allowance
Meal allowance
Mobile allowance

Some allowances are taxable, while others are not. With this, allowance must be classified correctly to calculate payroll deductions properly.

3. Overtime Pay

Employees who work beyond standard working hours may be eligible for overtime pay.

Malaysian labor laws regulate overtime pay, and employers must compensate employees according to legal requirements.

4. Bonuses & Incentives

Bonuses are additional payments given based on performance, company profits, or special occasions. Some common types of bonuses in Malaysia include:

Performance-based bonuses: Given for outstanding work or meeting targets.
13th-month salary: An extra month's salary, often given at year-end.
Festive bonuses: Paid during festive seasons as a goodwill gesture.

5. Salary Deductions

Several mandatory deductions apply to employees' salaries in Malaysia:

EPF (Employees Provident Fund): Retirement savings contribution.
SOCSO (Social Security Organization): Workplace injury and disability coverage.
EIS (Employment Insurance System): Financial aid for retrenched employees.
PCB (Monthly Tax Deduction): Income tax deduction based on salary.

Employers are responsible for deducting and submitting these contributions to the relevant authorities.

6. Other Benefits

Apart from salary and allowances, businesses may offer additional benefits such as:

Medical insurance
Commissions (for sales-related jobs based on performance)
Stock options
Profit-sharing

Types of Salary Structures Used in Malaysia

Different businesses use different salary structures depending on their industry, company size, and payroll policies.

1. Fixed Salary Structure

Employees receive a set monthly salary with fixed benefits. This structure is common in office jobs, government positions, and administrative roles.

2. Variable Pay Structure

Some industries, such as sales or marketing, include commissions, incentives, and performance-based bonuses.

Employees’ earnings may change depending on their work results.

3. Hourly & Contract-Based Pay

Part-time, freelance, and contract workers are paid based on the number of hours worked or tasks completed. This model is used for temporary jobs and gig workers.

4. Performance-Based Salary

In this structure, salaries are linked to employee performance. Companies set performance goals (KPIs), and employees who achieve them receive higher salary increases.

How to Decide a Salary Structure

Here are key factors to consider when deciding on a salary structure:

1. Follow the Minimum Wage Policy

Employers must comply with Malaysia’s minimum wage policy. The government updates minimum wage rates from time to time to reflect the cost of living.

2. Comply with the Employment Act 1955

The Employment Act regulates salary payment rules, including overtime pay, salary deductions, and payroll matters. Ensure to align their salary structures with these laws.

3. Determine Payment Frequency & Payslip Requirements

Salaries in Malaysia are typically paid monthly. Employers must also provide payslips that show the breakdown of earnings, deductions, and final salary.

4. Plan for Salary Adjustments & Increments

Companies should review and adjust salaries periodically based on:

Employee performance
Market salary trends
Inflation and cost of living

How to Create Salary Structure in Excel

Employers can use Excel to create salary structures by listing employee details, salary components, and deductions. Below is a simple example:

Get the template in here.

Salary Structure by Industry in Malaysia (2025)

Salaries differ across industries. Below is an estimated salary range for different sectors in Malaysia from Glassdoor and Indeed:

Industry	Role	Average Monthly Salary (MYR)
Food & Beverage (F&B)	Chef	2,000 – 5,000
Food & Beverage (F&B)	Waitstaff	1,200 – 2,000
Retail	Sales Assistant	2,000 – 3,000
Retail	Store Manager	3,000 – 7,000
Administration	Administrative Assistant	2,000 – 3,000
Administration	Office Manager	5,000 – 10,000
Manufacturing	Production Operator	2,000 – 3,500
Manufacturing	Quality Control Inspector	2,000 – 4,000
Customer Service	Customer Service Representative	2,700 – 5,000
Customer Service	Team Leader	4,000 – 8,000
Other Blue-Collar	General Laborer	1,500 – 2,500
Other Blue-Collar	Skilled Technician	3,000 – 4,500

Note: These figures are approximate and can vary based on factors such as experience, qualifications, and specific employer policies.

Frequently Asked Questions (FAQ)

What is the standard salary structure in Malaysia?

The standard salary structure in Malaysia consists of a basic salary plus additional components such as allowances, overtime pay, bonuses, and deductions for statutory contributions.

Employers use different salary structures depending on the industry, job role, and company policies.

Common salary structures include fixed salaries, variable pay (commission-based), hourly wages, and performance-based salaries.

What is the minimum wage in Malaysia for 2025?

The minimum wage in Malaysia is subject to government updates.

As of 2025, employers should refer to the latest minimum wage policy set by the Ministry of Human Resources.

Currently, the minimum wage is RM1,700 per month in urban areas, but adjustments may be made based on economic conditions.

Employers should regularly check for updates to remain compliant.

How do you calculate take-home pay in Malaysia?

Take-home pay is the final salary an employee receives after statutory deductions such as EPF, SOCSO, EIS, and PCB (income tax). The calculation follows this formula:

Take-Home Pay = Gross Salary - (EPF + SOCSO + EIS + PCB + Other Deductions)

For example:

Gross Salary: RM5,000
EPF Deduction (11%): RM550
SOCSO Deduction: RM20
EIS Deduction: RM10
PCB (Income Tax): RM200
Take-Home Pay = RM5,000 - (550 + 20 + 10 + 200) = RM4,220

What deductions are made from an employee’s salary?

Employers must deduct and submit the following contributions:

EPF (Employees Provident Fund): Employees 11% and employers 12%-13%.
SOCSO (Social Security Organization): Employees 0.5% and employers 1.75% for employees under 60 years old.
EIS (Employment Insurance System): Employees 0.2% and employers 0.2%.
PCB (Monthly Tax Deduction): Based on salary, tax reliefs, and applicable tax rates.
Zakat (for Muslim employees): Optional deduction for those opting to contribute through payroll.
HRDF (for companies with more than five employees): 0.5%-1% employer contribution for employee training funds.

How often should salaries be reviewed and adjusted?

Salaries should be reviewed at least once a year to stay competitive and retain employees. Adjustments may be based on:

Performance appraisals
Market salary trends
Cost of living and inflation
Company financial performance

Employers should also monitor industry benchmarks to ensure their salaries remain attractive to job seekers.

What is the salary system in Malaysia?

Malaysia follows a structured salary system where wages are determined based on job roles, experience, and statutory regulations. Employers may use different methods such as:

Fixed salary structures (monthly wages with standard benefits)
Variable salary structures (commissions and performance incentives)
Hourly wages (freelancers, gig workers, part-time staff)
Performance-based pay (linked to individual and company performance)

Statutory deductions like EPF, SOCSO, and PCB apply to all employees under formal employment contracts.

Is RM7,000 a good salary in Malaysia to offer to employees?

Yes, RM7,000 is considered a competitive salary in Malaysia, especially for mid-level professionals. It allows employees to afford a comfortable lifestyle, particularly in smaller cities.

However, in high-cost areas like Kuala Lumpur, expenses for housing, transportation, and daily living can be higher, so salary expectations may vary.

What is considered a good salary in Malaysia for employees?

A good salary depends on job position, industry, experience level, and location.

RM3,000-RM5,000: Suitable for entry-level jobs.
RM6,000-RM9,000: Mid-career professionals.
RM10,000 and above: Senior roles or highly skilled jobs.

Salaries should also match industry benchmarks and living costs in different regions.

Is RM3,000 a good salary in Malaysia for employees?

RM3,000 is an entry-level salary, which can cover basic living expenses in smaller towns but may be challenging in big cities like Kuala Lumpur or Penang due to higher living costs. Employees earning RM3,000 may look for additional allowances, benefits, or career growth opportunities to increase their overall income.

Now that you understand what a salary structure includes and why it matters, it’s important to apply this knowledge in managing employee salaries effectively.

A well-planned salary structure helps businesses stay competitive, maintain transparency, and comply with labor laws.

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