Introduction: Why You Should Start Reading Your Payslip

Joining the workforce as a fresh graduate can be quite overwhelming, especially if you’ve never worked for a salary before. While there’s plenty to learn on the job, one main thing you must understand is your salary and the payslip that comes with it. 

A payslip is a crucial document that tells you everything you need to know about the income you receive in exchange for your hard work. Employers provide it to you in either a printed or digital format as required by law, and it’s a crucial tool to help you manage your personal finances.

This guide will teach you everything you need to know about understanding your payslip and making the most of the information it provides. By reading this guide until the end, you’ll learn about:

• Payslips and how they can help your financial planning
• The differences between gross and nett income
• Common types of deductions on payslips
• How payslips can help with your career progression

To help you along the way, we’ll use Chen as an example. He’s a fresh graduate who just started his first job and is learning how to make the most of his payslips:

Ready to begin? Then let’s proceed!

Summary

1. What Is A Payslip?
2. Why Are Payslips Important To You?
3. When Do You Get A Payslip?
4. Are There Income Types That Don’t Have Payslips?
5. Differences Between Payslip & Income Statement That You Should Know
6. What Are Common Entries On A Payslip?
7. Where to Find Income Tax Info on Your Payslip?
8. Understanding Gross vs Nett Income – Why It Matters
9. Three Common Payslip Mistakes, And What You Can Do About Them
10. The Importance Of Keeping Your Payslips
11. Three Ways You Can Use Your Payslip To Make Career Decisions
12. Final Thoughts
13. 15 Frequently Asked Questions About Payslips

 

What Is A Payslip?

 

A payslip is a document that employers give to their employees when paying their salaries. It records important details like the amount of money paid, any money deducted, and so much more!

Payslips are provided as part of the legal requirement under the Employment Regulations 1957 (Regulation 9), which complements the Employment Act 1955. That’s because the law requires employers to give their workers a clear breakdown of the money they receive in exchange for their hard work.

More specifically, it’s mandatory for a payslip to include details like:

 

• Work details: Your name, role, and who you work for
• Productivity: How much work you’ve done and how long you’ve worked to earn that salary
• Income: Basic pay and other earnings like commissions, allowances, and bonuses
• Deductions: Money deducted from your salary for things like the Employees Provident Fund (EPF), Social Security Organisation (SOCSO), and monthly tax deductions (MTD) to be paid to the Inland Revenue Board of Malaysia (IRB)
• Employer contributions: Payslips also include details about employer contributions made on your behalf, such as to the EPF
• Nett earnings: Also known as your ‘take-home pay’, this is the final amount you’ll receive after all deductions

 

However, you must also understand that there are some details you likely won’t find on your payslip, such as non-financial incentives or benefits. That means you won’t find details like education benefits, special awards, or company shares on it.

But don’t let that overwhelm you! We’ll dive deep into everything you need to know about payslips in this guide.

 

Why Are Payslips Important to You?

Each payslip shows a detailed breakdown of your earnings so you know how much you earn. It also shows each of your deductions and, lastly, how much you’ll receive in your bank account.

That information will help you plan your spending and create an effective monthly budget.

Payslips are also essential tools for making career decisions. The details on your payslip show you how much money you earn and the benefits your employer gives you. These can include overtime payments, allowances, and retirement contributions. 

With such info, you can compare your current job to other work or business opportunities and decide which option best meets your financial needs.

 

Lastly, payslips are crucial as official documents that prove how much you earn. Banks and other financial institutions use that information to decide if you qualify for facilities like home mortgages and car loans!

As you can see, your payslip is a critical document regarding your personal finances. So, check your payslip regularly for errors, especially if you’re new to the company or your salary has recently been adjusted.

One way to do that is by ensuring the payment you receive in your bank account matches the final amount on your payslip. Then, speak to your employer if there are any mistakes.

 

When Do You Get A Payslip?

You will get your payslip within 7 days of your salary payment, as required by the Employment Act 1955.

Be sure to check with your employer if a printed or digital copy has not been made available to you within that time frame.

 

Are There Income Types That Don’t Have Payslips?

In Malaysia, salaried employees with formal employment contracts typically receive regular payslips (e.g. every month around the time they receive their salary). That includes government workers, corporate employees, and both part-time and full-time workers of established businesses.

However, there are people with some income types who do not receive regular payslips, like these common roles: 

 

1. Gig Workers

These workers are usually paid based on how many tasks they complete (e.g. how many parcels they deliver in a day) instead of receiving a regular salary. As a result, they usually don’t receive regular payslips.

 

2. Self-Employed

Individuals in this category, like those operating micro, small, and medium-sized enterprises (MSMEs), usually don’t get conventional payslips because they generate their own income.

 

3. Informal Workers

For this category, workers are usually paid in cash according to informal work arrangements like verbal contracts. So, they don’t receive normal payslips.

 

4. Government Pensioners

Lastly, pensioners who have retired from government roles receive a monthly payment, but do not have payslips. Their payments are processed through pension systems like the Malaysian government’s MyPencen platform instead of normal payroll systems.

 

Differences Between Payslip & Income Statement That You Should Know

Even though these groups of people don’t receive regular payslips, they might receive other payment documents, like income statements. These documents provide similar information, such as the amount paid and any deductions that might apply.

Let’s take a quick look at the differences and similarities between payslips and income statements:

	Payslips	Income Statements
What are they?	A formal document showing a breakdown of an employee’s earnings and deductions for a specific period (e.g. a month).	Any documents that show a person’s total earnings for a specific period. It could consist of a worker’s invoices, bank statements, or receipts showing how much they’ve earned.
Typical details included	Employee and employer information Total earnings Deductions  Nett pay Work period (e.g. payslip for a month’s work)	Total earnings Total expenses Nett profit or nett loss
Recipients	Salaried employees with formal work agreements like government workers, corporate employees, and staff at established businesses.	Workers without salaries like gig workers, self-employed individuals, informal workers, and government pensioners.
What makes them alike?	Helpful for proving how much a person earns.  Helpful to budget and plan expenses.  Required by banks to decide if you qualify for a loan.

 

As you can see, there are many similarities between the payslips and income statements. So, even though some income types don’t receive payslips, they can still rely on their income statements for the same purposes like tracking their income, budgeting, and applying for loans.

 

What Are Common Entries On A Payslip?

Earlier, you read that a payslip typically includes sections with entries regarding your work information, productivity, earnings, deductions, and finally, nett income. While most payslips show the same information, they sometimes use different names for each category.

In the next few lessons, we’ll dive into the most common sections you’ll find on payslips and the entries in each of them. Don’t worry if you’re not a salaried worker – we’ll show you how each section applies to contract workers and gig workers, too!

Let’s get a closer look:

1. Work Details

 

The first section you’ll typically find on payslips is the one with your work details. This section provides essential information about you and your employer, like the name of your employer, your full name, and your department and role. Some payslips may also state which bank account your salary will be deposited into.

Lastly, this section will also show the time period the payslip covers, such as whether you’re being paid for the previous week or month.

For Contract Workers	For Gig Workers
Contract and gig workers who don’t receive regular payslips will still find this information on their income statements. For example, contract and gig workers may receive an income statement with the same details showing they performed work for an organisation and were paid for a task/day/week.

 

2. Productivity

Another section of your payslip might include entries that track your productivity. For example, a full-time salaried employee might see the total number of days worked during the month printed on their payslip.

Similarly, a part-time salaried employee will see their total hours on their payslips, assuming they’re paid by the hour.

While these details are pretty straightforward for salaried employees, they can be much more complex for contract and gig workers. That’s because these informal workers have varying work schedules and payment structures.

 

For Contract Workers	For Gig Workers
Instead of the days or hours worked, the productivity entries for contract workers could include specific targets reached based on their work agreements. For example, a construction worker will have payslips that show the payment for completing a particular job.	The productivity of a gig worker is tracked through the number of completed tasks or ‘gigs’. For example, a rideshare driver’s income statement will show how many times they’ve driven a passenger to their destination.

 

3. Earnings

 

Now comes the section that you will most likely be attentive to: earnings. As the name suggests, this section details how much money you’ve earned, starting with your basic salary.

Then come any additional earnings you might have, such as overtime, allowances, commissions, and other payments you receive. Remember: all the entries in this section are part of your gross pay, which is the amount you’ve earned before taking away any deductions (which we’ll discuss soon!).

Contract and gig workers will also see details about their earnings in their income statements. However, these may differ depending on the jobs they’ve done.

For Contract Workers	For Gig Workers
While a salaried employee is mainly paid for their work time, a contract worker is paid based on specific tasks completed. So, the earnings entries on their income statement will be more detailed. They’ll usually show a list of tasks or projects completed and the pay for each one.	A gig worker’s earnings are tied to their productivity. For example, the income statement for rideshare drivers will show their earnings for each passenger driven. Some gigs also include other kinds of earnings, like tips from passengers. These will be included as a separate item for clarity.

 

4. Deductions

 

The earnings entries mentioned earlier show how much money you’ve been given in exchange for your hard work. However, those earnings may not equal your ‘take-home pay’ or the amount you’ll receive in your bank account.

That’s because deductions must first be taken from your earnings. Some deductions are mandatory because they are required by law. Others are optional, which you voluntarily include.

Let’s take a closer look at the typical entries for deductions and why they appear on your payslip:

 

4.1 Mandatory Deductions

As mentioned, mandatory deductions are the ones required by law, such as retirement and social security contributions, as well as income tax advance payments. 

Employers will automatically deduct these from their employees’ earnings and pay them to the relevant government organisations. Here’s a quick overview of the mandatory deductions:

 

 

For Contract Workers	For Gig Workers
Contract workers may have mandatory EPF or SOCSO deductions if they are classified as employees. However, those contributions are voluntary if they are independent contractors.	Typically don’t have such mandatory deductions. However, gig workers can make voluntary contributions through schemes like i-Saraan (EPF) or the Self-Employment Social Security Scheme (SOCSO). Some gig platforms, such as Grab Malaysia, provide incentives to encourage this.

 

4.2 Optional Deductions

In addition to mandatory deductions, your payslips may also have entries for optional deductions. These are not required by law but are included at the worker’s request.

Optional deductions are usually made to help employees service their monthly financial obligations, so that they pay on time and in full for commitments like:

• Education loans: Some student loan facilities, like Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN), are payable through an optional salary deduction.
• Bank loans: Some banks and financial institutions also allow repayments for personal, home, and car loans to be made through optional salary deductions.
• Private Retirement Scheme (PRS): Workers who invest in PRS can also arrange for optional salary deductions.

Although these optional deductions reduce your take-home pay, they help simplify your financial planning and ensure you make your essential payments on time. 

 

For Contract Workers	For Gig Workers
Unlike salaried employees, contract and gig workers cannot have these deductions taken automatically from their earnings. Instead, they have to handle these payments directly.

 

5. Employer Contributions

Some of your deductions, which are required by law, also require employers to contribute on behalf of the worker. For example, the Employees Provident Fund (EPF) Act 1991 requires employers to also contribute to employees’ EPF. Employers are also obligated to make SOCSO and EIS contributions for their workers. 

Although these contributions do not affect your earnings, some employers will include those entries on your payslip. That way, you get a clearer picture of the earnings and benefits you receive.

 

For Contract Workers	For Gig Workers
Unlike salaried employees, contract and gig workers aren’t entitled to the same benefits like retirement contributions by employers.  So, they will not see employer contributions on their income statements. Instead, these workers are responsible for managing their own contributions.

 

6. Nett Earnings

Last but certainly not least, your payslip will also include details of your nett earnings. That is the final amount that you receive after the necessary deductions have been taken out from your basic pay and other earnings (gross pay).

Let’s see how Chen arrives at his nett earnings when he earns a monthly gross income of RM 5,000. As you can see below, his deductions – consisting of EPF, SOCSO, EIS, and MTD – come up to a total of RM695. This leaves him with RM4,305 as his nett earnings (also known as his take-home pay). 

Where to Find Income Tax Info on Your Payslip?

Your Monthly Tax Deduction (MTD) line tells you how much income tax has been deducted by your employer for that month.

Want to double-check it?

• Head to MyTax Malaysia and register/login
• Use your Tax Identification Number (TIN) to access your account
• Review your monthly tax contributions (e-CP39) online
• Use the LHDN Income Tax Calculator to estimate your total income tax for the year

 

Understanding Gross vs Nett Income – Why It Matters

So far, you’ve seen that payslips will show your gross and your nett income as two separate entries.

To recap, your gross income consists of your basic pay and any additional earnings from overtime, bonuses, and more. Meanwhile, your nett income is the final amount remaining after taking out EPF, SOCSO, and other deductions.

So why does it matter that you know about your gross income, if the nett income is the final amount you receive from your salary?

Well, that’s because each of those two entries is useful for different reasons.

Gross Income (All income before deductions)	Nett Income (Your income after deductions)
Gross income lets you compare your salary against industry standards and market rate.  Based on that, you’ll know if you’re being underpaid, and can make better long-term financial and career plans.	Nett income tells you exactly how much money that you have to spend, save, and invest each month. This helps you budget more effectively and determine the kind of lifestyle you can afford.

 

While understanding your gross and nett incomes separately can benefit you in different ways, looking at them together will give you a more comprehensive understanding of your financial health. For more info on gross and nett income, check out our dedicated article here. 

 

Three Common Payslip Mistakes, And What You Can Do About Them

Employers typically do their best to provide error-free payslips to their employees on time. However, mistakes can still happen occasionally. 

 

That’s why it’s important to check your payslips regularly for common mistakes like:

1. Inaccurate personal or work details: Your name or job title may sometimes be misspelt on your payslip. Don’t ignore them! Remember: your payslip is an important financial document so all your details must be correct.
2. Miscalculated incomes: The income figures on your payslip might also be calculated wrongly, such as for your salary, overtime, or allowances.
3. Incorrect deductions: Lastly, the amounts in your deductions could also be lower or higher than what it should be.

When you notice these or other mistakes, be sure to take action! Let your employer know by speaking to them or to the department that manages your payslip (e.g. the Human Resources Department). That way, they can fix the mistake and issue you with a new payslip to avoid any confusion or headaches later on!

 

The Importance Of Keeping Your Payslips

By now, it should be clear that your payslip is not just a simple piece of paper. Instead, it’s an essential document that outlines the working relationship between you and your employer. As one of the most important financial documents you will ever have, your payslips are worth keeping and organising.

1. Four Reasons Why You Should Keep Your Payslips

Your payslip can be useful to you in many more ways than just as a record of your income. Here are some reasons why you should keep your payslips:

 

2. Keeping Your Payslips: 5 Quick Tips

With so many important uses, here are 5 quick tips for keeping your payslips safe until you need them:

 

Follow these five steps to build an organised and readily accessible archive of your payslips throughout your career.

 

Three Ways You Can Use Your Payslip To Make Career Decisions

A payslip can be a very powerful tool when making important career decisions.

Remember: your payslip tells you a whole story with details like your basic pay, additional income, deductions, and nett income. Examining these details can help you decide if your current job meets your needs or if you have to make a change. 

Three ways your payslips can help you in making career decisions include: 

1. Benchmark your salary: Check if you’re being paid the market rate for your position. Then, decide if you’d like to negotiate with your employer or search for a new job. 
2. Check your career progression: Are you getting the right promotions at the right time, with the right salary, to progress in your career? The records in your payslips can tell you this.
3. Align your goals: Decide if your career progression is in line with your key professional goals. If it’s not, determine the steps that are needed to remedy that. 

Remember: there are plenty of things to consider when making important career decisions like your current income, growth potential, and personal goals. Use your payslip as a critical source of information to help you make such crucial decisions!

 

Final Thoughts

Your payslip is one of the most important financial documents that you own. The information in it tells the full story of your income, from your basic pay to your deductions and the nett amount you receive at the end.

So, take some time to collect, organise, and examine your payslips!

 

15 Frequently Asked Questions About Payslips