Statutory Deductions and Employer Contributions List

Statutory employment income refers to the total taxable earnings an employee receives from their employer, as defined by the tax authorities. In Malaysia, this is governed by Section 13 of the Income Tax Act 1967 and enforced by the Inland Revenue Board of Malaysia (LHDN).

This article explains what falls under statutory employment income.

Statutory employment income includes monetary and non-monetary benefits received through employment. Here are the key remunerations:

1. Basic Salary

This is the fixed monthly wage agreed upon in the employment contract, before any deductions or additional payments.

2. Bonuses and Incentives

Any non-recurring performance-based or profit-sharing bonuses fall under taxable income, including:

• Annual bonuses

• Sales incentives

• Productivity rewards

3. Commissions

Sales commissions or referral-based earnings are fully taxable and must be declared as employment income. In Worksy, commissions are marked as Additional Income due to its irregularity.

4. Allowances and Perks

Most allowances that are considered part of wages are subject to statutory deductions, except for travel allowance

5. Benefits-in-Kind (BIK)

Non-cash benefits provided by the employer are considered taxable unless specifically exempted. These may include:

• Use of company car

• Free or subsidised housing

• Medical coverage (depending on the scope and provider)

6. Gratuity and Compensation Payments

Payments made in connection with:

• Termination

• Early retirement

• Retrenchment or severance

are generally taxable unless specifically exempted under the Income Tax Act.

Summary

The table below provides a quick summary of how different types of remuneration are treated in relation to statutory contributions and deductions in Malaysia. Refer below:

Note: According to Malaysian compliance, travel allowance is exempted from EPF, SOSCO, EIS and HRD because this is considered as actual expenses instead of wages. 

For further info on HRD contribution,  please refer to HRD Levy.

While this table serves as a general guide, our system is not responsible for any misclassification of income types. 

For accurate tax treatment and compliance, please consult with a certified tax consultant, legal advisor, or refer directly to the relevant authorities such as the Inland Revenue Board of Malaysia (LHDN), EPF, SOCSO, or EIS for official guidance.

For fixed and additional income tax base, please refer to Fixed and Additional Income Tax Base.

We hope this explanation clarifies the matter. If you require further assistance, please don't hesitate to contact our support team.