The Story

Siti works in the marketing department of a small trading company. She is known for her creativity and attention to detail. One day, she was tasked to prepare a leaflet for a new product launch. The product price was RM830, but in her rush, Siti mistakenly typed it as RM83. The leaflets were printed and distributed before the error was noticed.

When the mistake was discovered, her manager was furious. The company claimed it lost money because customers had already seen the RM83 price. The boss then told Siti: “This is your mistake. We will deduct the cost from your salary.”

Siti was devastated. She admitted her mistake but wondered: Is it even legal for the company to deduct my pay for this error?

The Law

The answer lies in the Employment Act 1955 (Act 265), Malaysia’s main labour law.

1. Section 24 – Restrictions on Deductions

• Section 24 of the Act strictly limits when an employer may deduct wages.
• Lawful deductions include:
  • Statutory contributions (EPF, SOCSO, EIS, income tax).
  • Recovery of salary advances.
  • Deductions authorised in writing by the employee (e.g., loan repayment).
  • Deductions permitted by the Director General of Labour.
• Employers cannot deduct wages for losses, damages, or mistakes at work unless very specific conditions are met.

2. When Losses Are Involved
If an employee’s action causes financial loss, Section 24(2)(c) provides that deductions are only allowed if:

• The loss is directly attributable to the employee’s neglect or default.
• The employee has been given an opportunity to explain.
• The total deduction does not exceed one-quarter (25%) of wages for that month.
• The deduction is authorised in writing by the Director General of Labour if the employee disputes it.

3. Ordinary Human Error vs. Misconduct

• The law distinguishes between ordinary mistakes and serious misconduct.
• A typo in a leaflet is usually treated as human error, not gross negligence or fraud.
• Unless the mistake was deliberate or reckless, it is unfair to shift the entire cost to the employee.

4. Director General’s Role
If a company insists on deductions, it must often seek approval from the Director General of Labour (JTK). Employees who disagree can file complaints, and the Director General will decide if the deduction is lawful.

Case Analysis

In Siti’s case:

• She typed the wrong price (RM83 instead of RM830). This is a mistake but not deliberate fraud.
• The company may claim financial loss. However, they cannot automatically deduct her salary.
• To recover any cost, the company would need to:
  1. Conduct an inquiry to prove the mistake was due to her negligence.
  2. Limit any deduction to a maximum of 25% of her wages in a month.
  3. Obtain approval from the Director General if Siti disputes the deduction.

Thus, a unilateral deduction without process is illegal.

Lessons

For Employees:

1. You have the right to full wages. Employers cannot simply deduct your salary for mistakes unless authorised by law.
2. Know Section 24. This section protects you from unfair financial penalties.
3. Speak up. If your boss makes unauthorised deductions, lodge a complaint at the Jabatan Tenaga Kerja (JTK).
4. Learn and improve. While you cannot be fined illegally, repeated mistakes may affect your performance appraisals.

For Employers:

1. Do not deduct wages unilaterally. Doing so breaches the Employment Act and risks enforcement action.
2. Treat mistakes fairly. Distinguish between negligence and human error. Mistakes happen, and operational costs are part of running a business.
3. Use performance management. Address recurring errors with training, supervision, or formal appraisals—not illegal wage deductions.
4. If recovery is justified, follow the law. Seek written consent or approval from the Director General. Respect the 25% limit.

For HR Practitioners:

1. Educate managers. Many line managers mistakenly think they can penalise staff by docking pay. HR must stop such practices.
2. Create clear policies. Define procedures for dealing with errors—warnings, retraining, or, in serious cases, domestic inquiry—not wage deductions.
3. Protect industrial harmony. Deducting wages illegally creates resentment and risks labour disputes. Fair processes build trust.

Wider Context

Errors at work are unavoidable. The law acknowledges this by protecting employees from unfair deductions. Otherwise, workers would live in fear of losing wages for every slip of the keyboard or small oversight.

At the same time, the law also balances employer rights. In cases of gross negligence, dishonesty, or deliberate misconduct, employers can take disciplinary action, including termination after a proper inquiry. But financial recovery through wage deductions must always follow strict legal safeguards.

This ensures that punishment is fair, proportionate, and subject to oversight.

Conclusion

So, can the company deduct Siti’s salary for her mistake in typing RM83 instead of RM830? The legal answer is no, not automatically. The Employment Act 1955 prohibits unauthorised deductions. At most, the company can seek partial recovery if it proves negligence, follows due process, and respects the statutory safeguards.

For employees, the lesson is to know your rights and not accept unlawful deductions. For employers, the lesson is to handle mistakes professionally, not punitively. Human error is part of every business—discipline must be fair, not exploitative.

In short: mistakes should be corrected with guidance, not with illegal salary cuts. The law protects wages because they are the lifeline of every worker. Employers who respect this build trust, while those who ignore it risk not only penalties but also the loyalty of their staff.