A restaurant in Kuala Lumpur went viral on social media not too long ago for implementing a penalty system for their employees. The restaurant made headlines for fining employees RM100 for absence despite having medical certificates and RM500 for taking toilet breaks during peak hours. While this particular case caught public attention, many companies in Malaysia have similar systems, cutting pay for tardiness, breakages, or not meeting targets. As an HR professional, we need to ask ourselves, can employers legally deduct money from employees' salaries?

The Employment Act 1955 clearly states in Section 24(1) that no deductions shall be made by an employer from the salaries of an employee otherwise than in accordance with the Act. Employers can only make specific deductions without employee consent. These include recovering overpayments made within the last 3 months, deducting payment in lieu of notice, recovering salary advances without interest, and making statutory deductions like EPF and SOCSO. For any other type of deduction not covered by these categories, employers must get consent from the employee.

The employee's misconduct and their right to be paid for work performed are separate issues. Even though it seems to be a common practice among many companies, it is completely unlawful to make such deductions. It's important to understand that even if an employee is caught stealing red-handed, employers cannot deduct their earned salary to recover these losses. No matter what disciplinary situation arises or what misconduct an employee commits, their earned salary cannot be touched.

Many companies still try to justify salary deductions as a response to misconduct, but this fundamentally misunderstands the purpose of disciplinary procedures in the workplace. These processes should focus on reprimanding, correcting behaviour and providing opportunities for employees to learn from their mistakes rather than serving as punishment mechanisms.

Even in scenarios where salary deductions might technically be allowed with consent, as an HR professional, you should ask yourself, is this approach truly beneficial for talent retention and building a positive workplace culture? Even if certain deductions might be obtained with consent, consider how such practices affect employee morale and your organization's reputation as an employer. Companies that implement fair, growth-oriented disciplinary systems rather than punitive measures are more likely to retain valuable talent and foster environments where employees feel respected and motivated to improve.