Many first time employees are shocked at their salary deductions, but we’ve all been there. To help you make sense of it, we break down the usual deductions you’ll see on your very first salary slip.

The Difference between Gross Salary and Nett Salary

A gross salary is the amount stated on your appointment or offer letter as the total before taxes, and other statutory deductions (more on those later) have been made. You may also see it referred to as your basic salary.
On the other hand, nett salary is the amount of earnings you take home each month, once all the deductions have been accounted for.
Confusion often arises when you assume that your gross salary is the same amount you will take home and it usually isn’t.

Typical Deductions on Your Salary Slip

These statutory contributions make up the main deductions in your payslip:

1) Employees Provident Fund (EPF)

Contributions made to the EPF are designed to accumulate retirement savings to help secure employees with a good sum of money when they retire.

You can choose the minimum contribution rate of 8% of your gross salary and this will be deducted every month.
Don’t sweat contributions made to your EPF account as these are tax deductible, up to RM6,000 (inclusive of life insurance premiums) per year in addition to receiving annual dividend payments.

2) Social Security Organization (SOCSO)

SOCSO contributions benefit employees with financial coverage in case of accidents related to job duties and work travel.
The deductions for employees are rather minimal and follow a pre-set schedule based on monthly salaries.

For example, if you earn between RM2,900 and RM3,000 per month, you would, according to SOCSO’s rate of contributions, pay only RM14.75 per month.

3) Monthly Tax Deductions (MTD)

As we’ve covered in our income tax article before, If you earn an annual employment income of RM34,000 and above (after EPF deductions), you will need to register a tax file and your company might deduct a sum directly from your salary for MTD payments.

To find out the accurate amount to be deducted, try the e-MTD calculator from the Internal Revenue Board’s official website and check it against the sum listed on your salary slip. If they do not match, be sure to seek clarification from your company’s payroll department.

Other Deductions

Your company may also make other deductions that are not mandatory and vary between companies. For example, some may deduct a small fee for access to the office gym but these are usually voluntary payments.

Be sure to check for these and see if you’re paying for anything you’re not using. Since these should never be made compulsory, you can ask for the payments to be removed from your payslip to lower your monthly deductions.

How to Calculate Your Nett Salary

Here’s a rough calculation to help you estimate your monthly final take-home pay:
Assume that your basic salary is RM3,000 per month while your monthly EPF and SOCSO contributions are at RM330 (rate of 11%) and RM14.75, respectively. MTD is at zero because income is below the taxable level.

Formula	=	Basic Salary – (EPF + SOCSO + MTD)
(e.g.)	=	RM3,000 – (RM330 + RM14.75 + RM0)
Nett Salary	=	RM2,655.25

Bonus tip: Remember to always keep your salary slip filed as proof of your EPF and SOCSO contributions as well for income tax payments purposes.

Now that you’ve started earning, be sure to put some of it away for a rainy day. We have plenty of high-interest savings accounts for you to consider with our comparison tool. Have anything else to add to this topic? Do share your thoughts with us in the comments section down below!

 

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• Gross Salary
• Money
• Nett Salary
• Payslip
• Salary