# What an Employer Can and Cannot Deduct from Your Wages

> Section 24 of the Employment Act 1955 permits only a closed list of wage deductions. This guide explains which deductions are lawful without approval, which require the employee's written request, and which need the Director General's permission.

- Category: employment
- Language: en
- Status: published
- Updated: 2026-08-08
- Canonical: https://negaraku.md/en/employment/wage-deductions-malaysia

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Your payslip is less than the amount you expected, and the reason given is "company policy". But an employer cannot deduct wages at will: the Employment Act 1955 lays down a closed list of lawful deductions — anything outside that list is not permitted.

## What is the basic rule?

Section 24(1) of the Employment Act 1955 states a clear principle: **no deduction may be made from an employee's wages except in accordance with this Act**. Since 1 January 2023, the Employment Act applies to all employees in Peninsular Malaysia, no longer only to lower-wage earners.

This means a deduction must rest on one of the categories permitted by the Act. If a deduction does not fall within one of the categories below, it is not permitted under Section 24.

## What deductions are allowed without your approval?

Section 24(2) lists the deductions an employer may make without requiring either your consent or the approval of the authorities:

| Deduction | Condition |
|---|---|
| Other written law | Includes statutory contributions such as EPF, SOCSO, EIS and PCB (Section 24(2)(d)) |
| Overpaid wages | Only if the overpayment was made within the **three months** preceding the month of deduction, due to the employer's error (Section 24(2)(a)) |
| Indemnity | Indemnity owed to the employer for leaving without notice, under Section 13(1) (Section 24(2)(b)) |
| Salary advance | Repayment of an advance under Section 22, **provided no interest** is charged (Section 24(2)(c)) |

Note the three-month limit on overpaid wages: if the employer mistakenly overpaid you a year ago, they cannot deduct your wages now to recover it, because that payment falls outside the three months preceding the month of deduction.

## What deductions require your consent or permission?

Section 24(3) lists deductions that may only be made at your **written request** — namely payments to a registered trade union or a thrift and loan co-operative society, and the purchase of shares in the employer's business.

Section 24(4) is stricter: the following deductions require your written request **and** the prior written permission of the Director General of Labour:

- Contributions to a retirement scheme, provident fund, welfare scheme or insurance scheme for the benefit of the employee
- Repayment of a salary advance under Section 22 on which **interest is charged**, together with the payment of that interest
- Payments to a third party on your behalf
- Purchase of goods from the employer's business offered for sale
- Rent for accommodation and the cost of services, food and meals provided by the employer at your request or under the contract of service

## Can an employer deduct as a penalty?

This is the most frequently misunderstood question. Deductions as a "penalty" for lateness, poor performance, or damage to goods are **not listed** among the deductions permitted without consent under Section 24(2). Nor are they among the deductions listed under Section 24(3) or 24(4).

There is also a limit on the overall total. Section 24(8) provides that the total of all deductions in a single month **may not exceed 50%** of the wages earned that month. Section 24(9) exempts several items from this limit: indemnity under Section 13(1), final payment of amounts owed to the employer when the contract ends, and repayment of a housing loan — which, with the written permission of the Director General, may exceed the 50% limit by a further amount of no more than **25%** of the wages earned.

## What's next

- Check your payslip and match each deduction against the categories above.
- If a deduction does not match, ask the employer to show its legal basis in writing.
- If it is not resolved, file a complaint with the nearest Labour Department (JTKSM) office.

## Sources

- Laws of Malaysia — Act 265, Employment Act 1955 (teks cetakan kemas kini), Seksyen 22, 24 — https://www.mp.gov.my/images/doc/legislation/EA1955.pdf (Laws of Malaysia (teks cetakan rasmi, portal Kerajaan Malaysia .gov.my))
- Employment Act 1955 (Amendment) 2022 — FAQ (perluasan 1 Januari 2023) — https://jtksm.mohr.gov.my/en/frequently-asked-questions/employment-act-1955-amendment-2022 (Jabatan Tenaga Kerja Semenanjung Malaysia (JTKSM))
- When Can Your Employer Deduct Your Salary? (penjelasan sekunder) — https://dnh.com.my/when-can-your-employer-deduct-your-salary/ (Donovan & Ho)

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Source of truth: https://github.com/negaraku-md/NegaraKu.md
License: CC BY-SA 4.0