How to Calculate Your Take-Home Pay in Malaysia: A Complete Guide

For employees in Malaysia, understanding your take-home pay is crucial for financial planning, budgeting, and making smart career decisions. This guide breaks down exactly how to calculate your net salary, what mandatory deductions you’ll face, and how to use this information effectively.

Whether you’re a recent graduate, a seasoned professional considering a new job offer, or an expat starting a new role, this guide will help you understand the difference between your gross salary (the number on your offer letter) and your net salary (what you actually receive).

Understanding the Key Deductions from Your Malaysian Salary

To calculate your take-home pay, you need to subtract four main statutory contributions from your gross salary. These are mandatory for all private-sector employees.

1. Employee Provident Fund (EPF / KWSP): This is a mandatory retirement savings scheme. The employee contribution is typically 11% of your monthly salary (for those under 60). Your employer also contributes a percentage on your behalf.
2. Monthly Tax Deduction (MTD / PCB): This is your income tax, deducted monthly. The amount is based on a progressive tax system, and it is calculated on your monthly income after considering various tax reliefs and rebates.
3. Social Security Organization (SOCSO / PERKESO): This provides social security protection for employees in case of workplace injuries, disabilities, or death. The contribution is a small, tiered percentage of your salary, with a monthly salary ceiling.
4. Employment Insurance System (EIS / SIP): This system provides temporary financial assistance to employees who lose their jobs. Both the employee and employer contribute 0.2% of the employee’s monthly salary.

Real-Life Examples: From Gross to Net

Here’s how these deductions impact your monthly salary with two practical examples.

Example 1: A fresh graduate earning RM3,500 per month

• Gross Salary: RM3,500
• EPF (11%): RM385
• SOCSO: Approximately RM18.00 (based on official contribution table)
• EIS: RM7.00 (0.2% of RM3,500)
• MTD (PCB): RM0 (Due to tax reliefs, a person at this income level may have a low or zero monthly tax deduction).
• Net Salary (Take-Home Pay): RM3,500 – RM385 – RM18 – RM7 = RM3,090

Example 2: A senior manager earning RM15,000 per month

• Gross Salary: RM15,000
• EPF (11%): RM1,650
• SOCSO: RM24.75 (based on the capped salary ceiling)
• EIS: RM8.00 (0.2% of the capped salary of RM4,000)
• MTD (PCB): Approximately RM1,800 (This amount can vary significantly based on individual tax reliefs, such as those for spouse, children, and lifestyle expenses).
• Net Salary (Take-Home Pay): RM15,000 – RM1,650 – RM24.75 – RM8 – RM1,800 = RM11,517.25

These examples highlight why a six-figure annual salary doesn’t mean a six-figure amount in your bank account. The higher your gross salary, the larger the proportion taken by your income tax.

How to Easily Calculate Your Net Pay

Calculating your net pay, or take-home pay, is a simple process once you understand the basic formula and the different types of deductions. Your net pay is what’s left after your employer subtracts mandatory and voluntary deductions from your gross pay.

Here’s a step-by-step guide to easily calculate your net pay:

1. Start with Your Gross Pay

Your gross pay is the total amount of money you earn before any deductions. This includes your:

• Base salary or hourly wage
• Overtime pay
• Commissions
• Bonuses

Formula: Gross Pay = Base Salary + Bonuses + Overtime + etc.

2. Subtract Pre-Tax Deductions

These are deductions taken from your paycheck before taxes are calculated. They reduce your taxable income, which can lower the amount of income tax you owe. Common examples include:

• Health and dental insurance premiums
• Contributions to a 401(k) or other retirement plans¹¹
• Health Savings Account (HSA) or Flexible Spending Account (FSA) contributions

3. Deduct All Mandatory Taxes

This is often the most complex part of the calculation, as taxes vary based on location and income. Key taxes include:

• Federal Income Tax: The amount withheld is based on your taxable income, filing status (e.g., single, married), and the information you provided on your W-4 form.
• State and Local Income Tax: Not all states and localities have an income tax, so this may not apply to you.
• FICA Taxes (Social Security and Medicare): These are federal taxes that fund social security and healthcare. As of 2025, the Social Security tax is 6.2% of your gross pay (up to a wage base limit), and the Medicare tax is 1.45% of all earnings.

4. Subtract Post-Tax Deductions

These are deductions taken from your pay after taxes have been calculated.¹They don’t affect your taxable income. Examples include:

• Roth 401(k) contributions
• Garnishments (court-ordered deductions)
• Union dues
• Some types of insurance premiums

The Final Formula

The simple equation to calculate your net pay is:

Net Pay = Gross Pay – Pre-Tax Deductions – Mandatory Taxes – Post-Tax Deductions

The Easiest Way to Calculate It

While you can do the math yourself, the simplest and most accurate way is to use an online paycheck calculator. Websites like PaycheckCity or SmartAsset offer free, user-friendly tools that are updated with the latest tax laws. Simply input your gross pay, filing status, and any deductions, and they’ll instantly provide a detailed breakdown of your net pay.

Frequently Asked Questions (FAQ)

1. What is the difference between my gross and net salary?

Your gross salary is the total amount you earn before any deductions. Your net salary, or take-home pay, is the amount you receive in your bank account after mandatory deductions like EPF, SOCSO, EIS, and income tax are removed.

2. How do I reduce my monthly tax deduction (MTD)?

You can reduce your MTD by informing your employer about any applicable tax reliefs you qualify for, such as those for a spouse, children, or medical expenses for parents. You can also claim lifestyle-related reliefs when filing your annual tax return.

3. What is the EPF contribution rate for employees in Malaysia?

The employee EPF contribution rate is 11% of your monthly salary. For employees aged 60 and above, the rate is lower. The employer’s contribution rate is 12% or 13% depending on your monthly wage.

4. Why is SOCSO and EIS deducted from my salary?

SOCSO provides coverage for work-related injuries and disabilities, while EIS provides temporary financial aid if you lose your job. These are mandatory social safety nets designed to protect employees.

5. Can my employer choose not to deduct these contributions?

No. It is a legal requirement for all employers to deduct and remit EPF, SOCSO, EIS, and MTD from their employees’ salaries. Failure to do so can result in penalties and legal action from the government bodies.

6. Does my bonus get taxed?

Yes, bonuses are considered part of your total income and are subject to income tax. Your employer will include the bonus amount in the calculation for your monthly tax deduction (MTD) in the month it is paid.

7. Can I check my MTD and EPF contributions myself?

Yes, you can check your MTD history on the MyTax portal by the LHDN. For EPF, you can view your contributions and account balance through the KWSP i-Akaun portal or mobile app.