When you look at your payslip, you’d see a bunch of deductions & company contributions.
But have you ever wondered what they are? I’ve spent quite a lot of time Googling them all one by one and have compiled the definitions in this convenient article.
Now, why would you even bother to know any of these anyway? To me, it’s because:
I want to know how the money that is deducted from my salary & contributed by my employer each month, benefits me.
Malaysian Payslip Example
Here’s an example of a payslip I got from the internet:
Summary of Deductions & Employer Contributions
Here is the summary for all of your salary deductions & company contributions:
|Your Salary Deductions
|What is it?
|EPF or KWSP (in BM)
|Your retirement fund
|SOCSO or PERKESO (in BM)
|Employee medical & accident Insurance
|Income Tax (Variable)
|Automatic Monthly Tax Deductions (MTD)
|Up to 28%
|Loss of job insurance
|Fund for employees’ courses
Your deductions will amount to 10% + income tax. I split the income tax away because everyone has different tax deductions.
Now, let’s take a look at each deduction, so you’d understand where your money is going:
Employee EPF (Retirement Funds)
EPF (KWSP) is a compulsory retirement savings fund, so all working Malaysians would have some sort of savings for their retirement.
The cool thing about the EPF is that both you and your employer contributes separately to your retirement fund according to the table below:
|Your EPF Contributor
|Your monthly deduction from your salary
|From your employer
|13% for salaries below RM5,000
12% for salaries above RM5,000
The EPF is a fantastic implementation to help Malaysians to save for their future. Not everyone has the discipline to save & invest for their retirement by themselves.
When I started working for a few months, my EPF accumulated quite a lot. That amount would take me many years to save by myself.
If you’re running your own enterprise business, you’re missing out on the employer contribution, unless you set that yourself.
Medical & Loss of Income Insurance – SOCSO or PERKESO
SOCSO (English) & PERKESO (Malay) means the same thing in 2 different languages.
SOCSO/PERKESO is the social security insurance for Malaysian private employees. If you have any work-related medical, disability & loss of income incident, you are able to file a claim from SOCSO.
The coverage amount is not a lot, but it’s good to know that we all are covered in some way:
|Work-related accident insurance
|Pension if you’re medically unable to work
|1. Free medical coverage at gov hospitals and panel clinics.
2. Temporary & permanent disability cash benefits
3. RM 500 constant attendance allowance
4. Dependant cash benefits
5. RM 2,000 Funeral cash benefits
6. Dependant child student loan benefit
|1. Get a pension to help with your expenses
2. Invalidity grant
3. RM 500 constant attendance allowance
4. Dependant child student loan benefit
Contribution Rate: 0.5% from your salary will be deducted, and your employer will also contribute another 1.75% into this insurance scheme. Pretty good coverage if you ask me.
UNDERRATED: I think more Malaysians need to know their rights and protection that’s already in place. Pretty good system we have going on here.
Monthly Tax Deductions (MTD)
Income tax calculations are never easy and straightforward. There’s so many types of incomes, and tax deductions. Everyone will be paying a different amount.
- To see your yearly income tax according to your bracket, click here.
- To make your life easier, use this yearly income tax calculator.
Loss of Job Insurance – Employment Insurance System (EIS)
The Employment Insurance System (EIS) is another insurance scheme under SOCSO that will pay you a certain percentage of your last salary for up to 6 months if you were ever to lose your job.
The capped salary that is being covered for this insurance is RM 4,000. The contributions for this scheme are:
- Your contribution to EIS: 0.2%
- Your employer’s contribution to EIS: Another 0.2%
Click here for their payment schedule and calculator.
Company Contribution: HRDF (Optional)
The Human Resource Development Fund (HRDF) is a special fund that some employers pay for their employees’ training.
If your employer is part of this program, they will contribute 1% of the employee’s pay into this scheme.
Ask your HR if you need more questions about this.
Your Take Home Pay
Your take home pay is your gross salary minus all the deductions above. That’s the real amount that will be banked in to your account.
Well, there you have it. I hope this article has made you understand your Malaysian payslip and know:
- How your deductions benefits you.
- How your employer’s contribution adds more to your benefits.
When I started my own enterprise business, I wasn’t disciplined enough to contribute to my own EPF, and I missed out on the employer’s contribution as well.
Now that you know your employee’s benefit and your take-home-pay, check out my article on how to start managing your money