Punctuality matters — but can employers legally deduct an employee’s salary for being late?
This is a question many Malaysian HR professionals and business owners often ask, especially when dealing with recurring lateness.

Let’s break down what the Employment Act 1955 says, when deductions are allowed, and how to handle lateness fairly (and compliantly).

What the Employment Act 1955 Says About Salary Deductions

Under Section 24 of the Employment Act 1955, employers cannot simply deduct salary unless it falls under specific permitted reasons.

Legally allowed deductions include:

• ✅ Statutory deductions (EPF, SOCSO, EIS, PCB/MTD income tax)

• ✅ Deductions with the employee’s written consent

• ✅ Deductions due to absence from work without valid reason

This means:
If an employee is present but arrives late, you cannot directly deduct part of their basic salary unless it is:

• clearly stated in your company’s employment contract or handbook, and

• the employee has agreed to it in writing.

Common Mistake: Treating Lateness as Absence

Some employers think coming late = being absent, and deduct wages based on hours or minutes missed.

However, the law makes a clear distinction:

• Late arrival ≠ Absence

• Absence means failing to work for a full day or half day, depending on company policy.

If an employee still works the remaining hours that day, it does not qualify as absence — and automatic salary deduction could be seen as unlawful wage deduction.

What Employers Can Do About Lateness

Lateness still disrupts productivity, so employers do have the right to take disciplinary action — just not arbitrary pay cuts.

You can:

• Issue verbal or written warnings for repeated lateness

• Record lateness in performance appraisals

• Implement loss of allowance (if specified in policy and agreed by employee)

• Mark unworked time as unpaid leave only if the employee didn’t work those hours and agreed to it

💡 Pro Tip: Any wage-related penalty must be supported by clear internal policies and acknowledged by employees in writing.

How Payroll Systems Like Pandahrms Can Help

Managing lateness manually can be messy — and can lead to payroll errors or non-compliance.
With an all-in-one HR system like Pandahrms, employers can:

• Track attendance and lateness records digitally

• Apply company lateness policies consistently

• Automatically calculate payable hours and allowances (without breaching wage laws)

• Generate accurate payroll reports to support audits and resolve disputes

This not only ensures legal compliance but also builds trust and transparency between employer and employees.

📲 Want to manage attendance and payroll without the headaches?
Use Pandahrms to streamline your HR processes and stay compliant — from clock-in tracking to payroll calculation.

Key Takeaways

• Salary deductions are not allowed just because an employee is late — unless supported by written policy and employee consent.

• The Employment Act 1955 only allows deductions for statutory contributions, consented deductions, or absence without valid reason.

• Employers should use proper disciplinary processes for habitual lateness, not salary deductions.

• Automated HR systems like Pandahrms can help ensure accurate payroll, prevent errors, and enforce policies fairly.

Final Thoughts

Lateness can affect productivity — but mishandling it can cause legal trouble.
Always align your policies with the Employment Act and communicate them clearly to your team.

By combining clear policies + the right HR tools, employers can create a workplace that is both fair and compliant — without risking penalties.