Before We Start: What Counts as “Earnings”?
Many beginners think gross pay Malaysia is just “basic salary.”
That’s only half the truth — Gross Pay includes everything an employee earns within a pay period, before any statutory deductions like EPF, SOCSO, EIS, or PCB (tax) are taken out. Here’s a simple rule of thumb:
If the employee earned it, can keep it, and it’s not a reimbursement — it goes into Gross Pay Malaysia.
Want to calculate monthly tax deductions (PCB) with ease? Dive into our step-by-step guide for Malaysia PCB Calculation payroll including bonuses, allowances, and EPF/SOCSO adjustments.
What’s Included in Gross Pay?
Below is a complete list of earnings that form part of Gross Pay Malaysia— especially relevant for HR, payroll, and SME employers in Malaysia.
| Category | Description | Examples (Common in Malaysian SMEs) | Include in Gross Pay? |
|---|---|---|---|
| Basic Salary | Fixed monthly or hourly pay as stated in the employment contract. This is the base amount generally used for statutory calculations like EPF. | RM3,000 monthly salary | ✅ Yes |
| Fixed Allowances | Regular monthly allowances paid consistently. | Transport RM200, Meal RM100, Housing RM300 | ✅ Yes |
| Variable Allowances | Changes each month based on work or performance. | Mileage allowance, field allowance, per diem (no receipts) | ✅ Yes |
| Performance / Project Bonuses | Rewards based on results or milestones. | Sales commission, project incentive, service charge tips | ✅ Yes |
| One-Off Payments | Special or occasional payments. | Festival bonus, sign-on bonus, retention bonus, ex-gratia, “Angpow” | ✅ Yes |
| Adjustments / Arrears | Back pay or salary corrections. | OT underpayment correction, backdated increment | ✅ Yes |
| Role-Based Additions | Compensation for special duties or shifts. | Acting allowance, on-call allowance, hardship allowance | ✅ Yes |
| Overtime / Premium Pay | Payment for extra hours or non-standard workdays. | OT 1.5× weekday, 2× public holiday | ✅ Yes |
| Leave-Related Pay | Salary for paid leave or unused leave. | Annual leave pay, leave encashment | ✅ Yes |
| Stipends / Honoraria | Payment for training or speaking duties. | Internal trainer fee, speaker honorarium | ✅ Yes |
| Sponsorships / Incentive Rewards (Cash) | Cash incentives or cash-equivalent rewards. | Contest prize, sales trip allowance, gift card (cash equivalent) | ✅ Yes |
For a clear breakdown of the pay elements that roll up into gross pay—basic salary, overtime, allowances, commissions, and more—check out our Payroll Components & Formulas guide.
What’s Not Included in Gross Pay
| Item | Description | Examples | Include in Gross Pay? |
|---|---|---|---|
| Reimbursements (with receipts) | Repayment of company-related expenses. | Travel claims, hotel bills, client meals | ❌ No |
| In-Kind Benefits (non-cash) | Non-cash facilities provided by the employer. | Company car, hostel, insurance | ❌ No |
| Advances / Float | Temporary payments later offset against salary. | Petty cash advance, project float | ❌ No |
For a clear explanation of non-cash perks that affect taxable employment income—company car, phone, meals, housing and more—see our Complete Guide to Benefits-in-Kind (BIK) in Malaysia.
Tip: If it’s taxable income or cash the employee can freely use — include it. If it’s reimbursed with a receipt, exclude it.
Gray-Area Items: How to Decide
Per Diem (no receipts): ✅ Include. It’s an allowance, not a reimbursement.
Gift Cards / E-Vouchers: ✅ Include if cash equivalent. Employee can freely spend it.
Non-Cash Gifts (e.g. hampers): ❌ Usually exclude. Not direct cash income.
Trip Sponsorship / Incentive Travel: ✅ Include if paid as cash or a cash-equivalent voucher.
How to Calculate Gross Pay
This is the gross salary formula used in Malaysia. The easiest way to define gross salary for calculation purposes is to treat it as the total of all cash earnings.
General Formula:
Gross Pay = Basic Salary + Allowances + Overtime + Bonuses + Commissions + Leave Pay + Incentives
Prorated Pay Calculation:
If an employee joins or resigns mid-month, you must calculate prorated pay. Note: Most Malaysian payroll systems use the calendar days method (Actual Days in Month) or a fixed 30-day base as per the Employment Act.
Prorated Pay = Monthly Salary / Total Days in Month (or 30) × Days Worked
Example: RM3,000 ÷ 30 × 15 = RM1,500
For correct computation of salary when employees join mid‑month or take unpaid leave—including partial month scenarios—see our Calculate Unpaid Leave & Partial Month Salary in Malaysia guide.
Examples of Gross Pay Calculation
| Example | Details | Calculation | Gross Pay |
|---|---|---|---|
| Monthly Employee with Overtime and Allowance | Basic Salary: RM2,800, Fixed Transport Allowance: RM150, Overtime: 8 hours × RM16/hour × 1.5 = RM192. | RM2,800 + RM150 + RM192 | RM3,142.00 |
| New Joiner (Prorated Salary) | Monthly Salary: RM4,500, Joined on 10 June (worked 21 out of 30 days), Meal Allowance: RM300. | (RM4,500 ÷ 30 × 21) + (RM300 ÷ 30 × 21) | RM3,360.00 |
| Sales Executive with Commission and Bonus | Basic Salary: RM3,000, Sales Commission: RM2,000, Performance Bonus: RM1,000. | RM3,000 + RM2,000 + RM1,000 | RM6,000.00 |
| Daily-Rated Worker with Public Holiday and OT | Rate: RM120 × 22 days = RM2,640, Worked on Public Holiday: RM240, Overtime (5 hours × RM15/hour × 1.5): RM112.50. | RM2,640 + RM240 + RM112.50 | RM2,992.50 |
| Employee with Leave Encashment and Bonus | Basic Salary: RM3,200, Leave Encashment: 4 days (RM426.67), Monthly Bonus: RM500. | RM3,200 + RM426.67 + RM500 | RM4,126.67 |
| Employee Resigning Mid-Month with Incentive | Monthly Salary: RM3,600 (worked 18/30 days), Project Incentive: RM800. | (RM3,600 ÷ 30 × 18) + RM800 | RM2,960.00 |
| Field Staff with Per Diem (No Receipts) | Basic Salary: RM3,800, Field Allowance (Per Diem): RM900, Overtime: RM120. | RM3,800 + RM900 + RM120 | RM4,820.00 |
| Employee with Gift Card Reward | Basic Salary: RM3,000, Gift Card (cash equivalent): RM200, Attendance Bonus: RM100. | RM3,000 + RM200 + RM100 | RM3,300.00 |
Common Payroll Mistakes to Avoid
| Issue | Cause | Solution |
|---|---|---|
| Missing Income Items | Forgot to include allowances or one-off bonuses. | Use a comprehensive payroll checklist based on the categories above. |
| Incorrect OT Rate | Used the wrong multiplier for a rest day or public holiday. | Verify the latest Employment Act rates before calculation. |
| Wrong Proration | Used 31 days in a 30-day month. | Standardize the calculation formula (e.g., always use the 30-day base). |
| Misclassification | Confused a cash allowance vs. a documented reimbursement. | Define income types clearly in your payroll policy. |
| Manual Entry Errors | Simple typing mistakes during data entry. | Use reliable payroll software to automate calculations. |
Want to automate payroll and stay compliant with EPF, SOCSO & PCB? See how AutoCount Cloud Payroll streamlines calculations, self-service payslips, batch reports, and more.
Disclaimer
This article is provided for general informational purposes only and does not constitute legal, tax, accounting or payroll advice. While every effort has been made to ensure the accuracy of the information, regulatory rules (such as EPF, SOCSO, PCB, income tax and labour law) may change, and your particular circumstances may differ. You should seek professional advice before relying on or implementing any payroll calculation or salary-structure decision. AutoCount and its authors are not liable for any loss or damage arising from your use of or reliance on this content.
Frequently Asked Questions
What does Gross Pay mean?
Gross Pay is the total earnings before statutory deductions like EPF, SOCSO, or tax. This is the figure your employer uses to calculate contributions to statutory bodies like EPF and SOCSO.
How do you define Gross Salary?
To define gross salary, it’s the sum of all employee earnings before deductions—covering basic pay, allowances, commissions, and cash incentives.
Is Gross Pay the same as Net Pay?
No. Gross Pay is total income earned, while Net Pay is the take-home amount after statutory deductions. Gross Pay is the “before” figure; Net Pay is the final “after-deductions” amount that appears in your bank account.
Should reimbursements be included in Gross Pay?
No. Reimbursements are expense repayments (usually with a receipt) and are not considered part of the employee’s income.
Are bonuses and commissions included in Gross Pay?
Yes—all bonuses and commissions count as part of Gross Pay as they are forms of employee earnings.
Why is defining Gross Salary correctly important?
It ensures payroll accuracy, guarantees legal compliance with statutory bodies, and ensures fair and transparent employee compensation.
Automate Gross Pay with AutoCount
See how AutoCount calculates gross, overtime & allowances.
