Can Employers Deduct Salary for Employee Lateness in Malaysia?
An employee arrives late repeatedly despite several reminders. Can the employer deduct RM10 every time the employee is late, or reduce the employee’s salary according to the number of minutes missed?
The employer may take disciplinary action against repeated lateness. However, deducting salary is a separate legal issue.
At a Glance
| Situation | General position |
|---|---|
| Employee arrives late | The company may address it through its attendance and disciplinary policy |
| RM10 penalty for every late arrival | Not automatically lawful merely because it appears in company policy |
| Deducting more than the time missed | Likely to be treated as a penalty rather than payment for time not worked |
| Deducting salary according to minutes missed | Should not be treated as automatically permitted; the Employment Act does not provide a specific minute-based formula for monthly-paid employees |
| Repeated lateness after warnings | May be handled as misconduct through a fair disciplinary process |
| Dismissal for repeated lateness | Possible only where the circumstances justify it and proper process has been followed |
Employers Can Manage Employee Lateness
Employees are expected to comply with their agreed working hours. A company may therefore establish reasonable attendance requirements, including:
- Official working and grace-period rules
- Clock-in and attendance procedures
- Requirements for employees to explain lateness
- Counselling or verbal reminders
- Written warnings
- Escalating disciplinary action for repeated offences
The policy should clearly explain what constitutes lateness, how attendance is recorded and the disciplinary steps that may follow.
However, putting a salary penalty inside the Attendance Policy does not automatically make that deduction lawful.
What Does Section 14 Cover?
Section 14 of the Employment Act 1955 deals with misconduct.
Where misconduct is established after due inquiry, the employer may:
- Dismiss the employee without notice
- Downgrade the employee
- Impose another lesser punishment considered just and appropriate
If suspension without wages is imposed as a punishment, it cannot exceed two weeks.
Repeated lateness may amount to misconduct, especially where the employee knows the working hours, has received warnings and continues to arrive late without a satisfactory explanation.
However, an employer should not jump directly from one late arrival to dismissal. The response should be proportionate to the seriousness and frequency of the conduct.
“Due inquiry” means the employee must be informed of the allegation and given a fair opportunity to explain before serious disciplinary punishment is imposed. The process required will depend on the circumstances and seriousness of the proposed action.
What Does Section 24 Cover?
Section 24 deals specifically with deductions from wages.
Its starting rule is clear: an employer must not deduct money from an employee’s wages unless the deduction is permitted under the Employment Act or another written law.
Examples of recognised deductions include:
| Deduction | Main condition |
|---|---|
| Recovery of accidental salary overpayment | Limited to overpayments made during the immediately preceding three months |
| Indemnity in lieu of notice owed by the employee | Must fall within Section 13(1) |
| Recovery of a permitted salary advance | Subject to the requirements of the Act |
| Statutory deductions | For example, deductions authorised under other written laws |
| Certain employee-requested payments | Written employee request and, for some deductions, prior approval from the Director General of Labour may be required |
| Other specified deductions | May require permission from the Director General under Section 24(7) |
A deduction does not become lawful simply because:
- It appears in the employee handbook
- The employee signed the handbook
- The company has followed the practice for many years
- Other employers use the same method
Company policy must still comply with the law.
“Late for Five Minutes, Deduct RM10”
A fixed RM10 deduction for arriving five minutes late is not merely a calculation of time not worked. It is a financial penalty.
Section 24 does not specifically list a lateness fine as an ordinary lawful wage deduction. Therefore, employers should not assume that such a penalty is lawful simply because it has been included in the Attendance Policy.
The company may still record the lateness and take appropriate disciplinary action. That is different from automatically taking RM10 from the employee’s wages.
“Late for 15 Minutes, Deduct 15 Minutes’ Salary”
This situation must be distinguished from a fixed fine.
The employer may argue that the employee should not be paid for time not worked. However, for monthly-paid employees, the Employment Act does not provide a specific statutory formula for deducting salary minute by minute due to lateness.
Section 18A provides an incomplete-month salary formula in limited situations, including where an employee takes one or more days of unpaid leave. It does not expressly provide a formula for several minutes of lateness.
Employers should therefore avoid treating a minute-for-minute reduction as automatically authorised. Before implementing this method, the company should obtain specific advice or clarification from the Labour Department based on its employment terms, wage structure and attendance arrangement.
In any event, the company should not deduct more than the actual time missed and describe the excess amount as a penalty.
What Can the Company Do About Repeated Lateness?
A practical disciplinary process may look like this:
| Stage | Recommended action |
|---|---|
| First or minor incident | Speak to the employee and record the explanation |
| Repeated lateness | Issue counselling or a documented reminder |
| Continued non-compliance | Issue a written warning |
| Further repetition | Request a written explanation or issue a show-cause letter |
| Serious or persistent case | Conduct a formal disciplinary process |
| Misconduct established | Impose a proportionate disciplinary outcome |
The company should keep proper records of:
- Scheduled working hours
- Clock-in records
- Dates and duration of lateness
- The employee’s explanations
- Previous counselling and warnings
- Whether the rule has been applied consistently to other employees
The purpose is to correct the attendance problem and establish a fair record—not to create an informal system of salary fines.
HR Checklist
Before taking action, HR should confirm:
- The employee’s working hours are clearly documented
- Attendance records are accurate
- The employee was informed of the attendance policy
- The employee has been allowed to explain the lateness
- Any medical, emergency or approved flexible-working circumstances were considered
- Warnings and disciplinary action are proportionate
- The company is not treating an internal policy as automatic legal authority to deduct wages
- Payroll does not process a lateness penalty without a proper legal basis
Key Takeaway
Employers may discipline employees for repeated lateness, but a company policy does not automatically authorise salary fines or minute-based deductions.
Scope Note
The Employment Act 1955 applies in Peninsular Malaysia and the Federal Territory of Labuan. Sabah and Sarawak are governed by their respective Labour Ordinances and should be checked separately.