When we get our paycheck, the first thing that we tend to think about is what to spend on for this month. But for those who are new into the working field, you might be wondering why your total salary is much lower than the agreed salary in your employment contract? That is because your employer has taken in certain statutory deductions from your salary. It is certainly important to check through every paycheck that you receive so that everything right where it should be. Especially when it comes to your income tax, employees provident fund(EPF), the social security organisation(SOCSO) and the recently implemented employment insurance scheme(EIS).
What Is On Your Paycheck?
The paycheck may vary from person to person, but there are a few elements that you will see:
- Total Gross: The amount of money you have earned based on the hours you have work and your annual salary.
- Total Net: The amount after all taxes and deductions that you will actually earn.
- Amount of Hours Worked: If you work on an hourly basis, this will be the total number of hours you have worked.
- Total Deductions: Amount of money deducted from insurance, taxes and schemes.
Four Types Of Payroll Deductions
There are a few statutory deductions that could be deducted from your gross. But what does it stand for?
Your employer has to inform of your employment to the Inland Revenue Board(IRB), which will then result in the issuance of an employee income tax number before your start of employment. You are not obligated to sign any forms as this will be signed and initiated by your employer. If you wish to check your tax file number, you may talk to your employer or contact the IRB.
2.Employees Provident Fund(EPF)
The EPF is set up by the government as a retirement fund to help employees in saving their money for retirement. Any public or private sector employee in Malaysia is required to sign in to contribute to EPF. You will need to go in person to the nearest EPF branch with your identification card and providing your thumbprints. Your EPF account will be linked to your IC number as well. Every paycheck, your employer will deduct 11% of your gross salary to EPF on your behalf. 13% of your gross salary will be contributed by your employer if you are earning below RM5,000 or 12% if your salary is above RM5,000 to your EPF.
3.Social Security Organisation(SOCSO)
Established to provide medical and financial coverage for employees who are injured during their employment period or experiencing invalidity or a death that is not related to the employment. The contributions are required from all employees who are Malaysian citizens or permanent residents regardless of the amount of monthly salary. The amount of contributions is fairly minimal, you may refer to the rate of contribution here. Now SOCSO will cover a spouse that works under the husband or wife business. They are required to register as an employee in the business which was previously exempted under the Employment Insurance System Act 2017.
4.Employment Insurance Scheme(EIS)
Recently came into effect on 1 January 2018, employers and employees are required to contribute to the EIS. The implementation is to provide private sector workers that were laid off by providing them with short-term financial and job training support. Individuals who have contributed will receive job search allowances, early re-employment allowance, reduced income allowance, and training allowances. The contributions cost capped at RM7.90 per month for workers that earn RM4,000 and above. The contributions are applied to employers as well. You may refer to the contribution rate on page 57.
What You Should Keep an Eye Out
It is important to ensure that everything is correct for the number of hours, the total salary mutually agreed upon and so on. It is also essential to identify and determine the payroll deductions are accurately calculated. In this manner, you can be certain that the company is giving out the right amount salary.
What you Should do if there is a Mistake in the Paycheck?
People make mistakes and your employer does too! If you found there is an inaccuracy on your paycheck, get it to check and sorted out immediately. If there is a payroll problem you do not want to delay as the process usually are not reversible. Contact your Human Resource or Payroll department with the problem. If the payroll is outsourced by your company, contact the outsourcing company directly instead to solve the issue. It is your money at stake, so you don’t want to lose any money due to another person mistake.
Ng You Jing Content Marketer at Jobstore Reach me at firstname.lastname@example.org