In a new step toward fair and transparent wage practices, the Malaysian Ministry of Human Resources has tightened wage payment regulations to ensure that all salary transactions are transparent and properly recorded. Employers can no longer pay employees in cash unless they have obtained prior approval from both the employee and the Director-General of the Department of Labour Peninsular Malaysia (JTKSM).
This move, the minister said, is crucial in preventing employers from manipulating salary payments and ensuring that every worker receives their rightful compensation in a traceable manner. Under the Labour Act 1955 (Act 265), employers who fail to comply with this rule could face fines of up to RM 50,000.
What employers need to understand
With this latest directive, employers are reminded that salary payments must be made through employees’ bank accounts, unless both the worker and the Labour Department approve another method. The purpose is to maintain transparency, improve wage traceability, and ensure that employees can easily verify their payments.
Employers who fail to comply with these rules risk severe penalties under the Labour Act, including fines up to RM 50,000. The ministry has made it clear that enforcement operations will continue across sectors to ensure every company follows the law.
Key takeaways for Malaysian employers
- Compliance is mandatory, not optional
Paying salaries in cash is now strictly regulated. Employers must seek formal approval before doing so, ensuring that both the worker and JTKSM consent to it. - Fines can reach RM 50,000
Violations under Sections 25 and 25A of Act 265 can result in heavy financial penalties and potential legal consequences. - Authorities are actively inspecting
The ministry continues nationwide enforcement operations, particularly in high-risk sectors such as wholesale markets and construction. - Wider focus beyond wages
Inspections also target issues like working hours, minimum wage compliance, and worker accommodation — showing that employers must uphold multiple aspects of labour law. - Alignment with global standards
The directive supports Malaysia’s labour rights commitments under ILO conventions, improving the country’s reputation for fair employment practices.
Recommended actions for businesses
- Switch to bank-based payments – Ensure all employee wages are paid through bank transfers.
- Audit your payroll system – Identify any remaining cash payment practices and update them immediately.
- Update HR policies – Include clear documentation on how wages are paid, and when (if ever) cash payments may be approved.
- Educate your HR and finance staff – Make sure they understand the legal implications and required documentation.
- Maintain proof of payments – Keep salary slips and transaction records for at least three years for inspection purposes.
What this means for employees
Employees also benefit from this new enforcement. When wages are paid through banks, it ensures every payment is properly documented — protecting workers from disputes over unpaid or delayed salaries. If an employer insists on paying cash without consent or proper approval, workers can report the issue directly to JTKSM.
Final thoughts
This development is a positive step for Malaysia’s labour landscape. By enforcing stricter payroll transparency, the government aims to protect workers, promote fair business practices, and ensure that every ringgit earned is traceable and secured.
For employers, this is a timely reminder to review payroll operations and strengthen internal compliance processes. Staying ahead of regulations isn’t just about avoiding penalties — it’s about building a responsible, trustworthy business culture that supports real progress for everyone.
