A Proposed Framework to Address The Deduction Stagnation of Income Zakat in Payroll Systems: A Case Study of IIUM Staff at IIUM Gombak

Abstract

This paper examines the deduction stagnation of income zakat deductions within the payroll system at the International Islamic University Malaysia (IIUM) Gombak Campus, located in Selangor. Despite regular adjustments in staff salaries due to annual increments, promotions, and changes in statutory salary from the government, the monthly zakat deduction amounts have remained largely unchanged for many employees each year. Drawing on payroll data, zakat deduction records, and guidelines under the Lembaga Zakat Selangor (LZS), the study identifies systemic, behavioral, and procedural factors contributing to the non-adjustment of zakat deductions. This case study adopts a qualitative document analysis approach supported by quantitative descriptive statistics to trace patterns and inconsistencies in income zakat deductions over changes in income for two (2) periods. The findings suggest that limitations in the payroll system’s automation, lack of periodic zakat reassessment protocols, and insufficient staff engagement are key contributors to the issue. To address these challenges, this study adopts the principles of Behavioral Economics, specifically Thaler and Sunstein’s Nudge Theory (Thaler & Sunstein, 2008) and the concept of the Default Effect to propose a new mechanism. This study underscores the need for a dynamic zakat deduction framework that aligns with actual income fluctuations, in accordance with Shariah principles and contemporary best practices in Islamic Social Finance.