Malaysian employers are once again reminded that salary payments must be made through bank accounts, as required under the Employment Act 1955. The Ministry of Human Resources (MOHR) has stressed that cash salary payments are not allowed unless prior approval is obtained from the Labour Department.
This reminder comes amid ongoing inspections and enforcement actions against employers who continue to pay wages in cash without valid reasons.
Salary Payments Must Be Made Through Banks
Under Malaysian labour law, employers are required to pay employees’ wages directly into their personal bank accounts. This applies to both local and foreign workers, regardless of industry.
The rule aims to:
- Ensure transparency in wage payments
- Prevent underpayment and wage disputes
- Protect employees’ rights and income records
Paying salaries in cash without approval is considered a violation of labour regulations.
When Are Cash Payments Allowed?
Cash wage payments are only allowed in limited circumstances, such as:
- Employees working in remote areas without access to banking facilities
- Exceptional situations approved by the Labour Department
Employers must apply for and receive written approval before making any cash payments. Without approval, cash payment is deemed illegal even if the employee agrees to it.
Penalties for Non-Compliance
Employers who fail to comply with wage payment regulations may face:
- Fines imposed by the Labour Department
- Court action under the Employment Act 1955
- Orders to repay unpaid or improperly paid wages
Repeat offenders may be subject to heavier penalties and closer monitoring by authorities.
Employers Advised to Review Payroll Practices
MOHR advises employers to review their payroll systems and ensure:
- All employees have valid bank accounts
- Salary payments are properly documented
- Payslips and records are accurately maintained
Employers are also encouraged to educate their HR and payroll teams on current labour law requirements to avoid unnecessary legal risks.
Conclusion
Paying salaries through bank accounts is not just a best practice — it is a legal obligation. Employers who continue to rely on cash payments without approval risk enforcement action and financial penalties.
Businesses are urged to comply fully with wage payment regulations to protect both their employees and their operations.