Introduction
Navigating payroll for incomplete months of work is a fundamental task for every employer and HR professional in Malaysia. To standardize this process and ensure fairness, the Employment (Amendment) Act 2022 introduced a specific, legally-mandated formula under Section 18A of the Employment Act 1955. This guide provides a clear explanation of this law and how to apply it correctly to calculate salaries for unpaid leave and other partial-month scenarios.
Statutory Leave Entitlements
98
Maternity Leave Days
16
Max Annual Leave Days
60
Hospitalization Leave Days
11
Public Holidays
These statutory leave entitlements are based on Section 60E of the Employment Act 1955 — see the full text of the Employment Act 1955 (Act 265)
The Legal Foundation: What is Section 18A?
Gazetted in 2022 and effective from 1st January 2023, Section 18A provides a uniform calculation method for employees on a monthly rate of pay who do not complete a full month of service. This law eliminates guesswork and ensures consistent payroll practices across Malaysia.
When Must You use This Calculation?
You are legally required to apply the Section 18A formula in the following four situations:
| Situation | Description |
|---|---|
| Late Commencement | Employee starts work after the first day of the month. |
| Early Termination | Employee's contract is terminated before the last day of the month. |
| Unpaid Leave | Employee takes one or more days of leave without pay. |
| National Service | Employee is on leave for mandatory national service. |
To learn more about how unpaid leave affects statutory deductions and employer reporting, refer to our guide on Statutory Payroll Reporting in Malaysia
The Official Formula
The standardized formula prescribed by law is:
Breaking Down the Components:
- Monthly Wages: The employee's total fixed monthly remuneration, including basic salary and any fixed allowances.
- Number of Days in the Wage Period: The total number of calendar days in the specific month (e.g., 31 for January, 30 for April, 28 for February).
- Number of Days Eligible: The total number of calendar days the employee was employed and entitled to pay. This includes days worked, rest days, and public holidays falling within the employment period.
Step-by-Step Calculation Guide
Let’s apply the formula to the most common scenario: Unpaid Leave.
Scenario: An employee with a monthly salary of RM 4,000 takes 3 days of unpaid leave in July 2024 (31 calendar days).
Step 1: Determine ‘Days Eligible’
- Total Calendar Days in July: 31
- Unpaid Leave Days: 3
- Days Eligible for Pay = 31 - 3 = 28 days
Step 2: Apply the Formula
- Final Salary = (RM 4,000 / 31) × 28
Step 3: Perform the Calculation
- RM 4,000 / 31 = RM 129.032 (Daily Rate)
- RM 129.032 × 28 = RM 3,612.90
Result: The employee’s final salary for July is RM 3,612.90
Quick-Reference Calculation Table
| Scenario | Monthly Salary | Month & Days | Key Information | Calculation | Final Salary |
|---|---|---|---|---|---|
| New Joiner | RM 2,800 | January (31 days) | Started on Jan 16 Paid Days: 16 |
(RM 2,800 / 31) × 16 | RM 1,445.16 |
| Early Resignation | RM 3,300 | April (30 days) | Last Day: Apr 20 Paid Days: 20 |
(RM 3,300 / 30) × 20 | RM 2,200.00 |
| Unpaid Leave | RM 3,600 | June (30 days) | 2 Days Unpaid Leave Paid Days: 28 |
(RM 3,600 / 30) × 28 | RM 3,360.00 |
To understand how each salary component is calculated, including overtime, unpaid leave, and allowances, check out our detailed guide on Payroll Components & Calculation Formulas Explained
Paid Leave in Malaysia
Under the Employment Act 1955 (EA 1955), certain paid leaves are mandated. Here are key types:
- Annual Leave
- Based on years of service:
- Less than 2 years: 8 days/year
- 2–5 years: 12 days/year
- 5+ years: 16 days/year
Important: Must be used within 12 months or entitlement may be lost.
- Sick Leave
- Based on years of service:
- Less than 2 years: 14 days
- 2–5 years: 18 days
- More than 5 years: 22 days
Hospitalization: Up to 60 additional days
- Maternity Leave
98 days paid maternity leave for private sector employees.
Protection against termination due to pregnancy.
- Paternity Leave
7 consecutive days paid paternity leave per confinement (up to five confinements).
Must be employed for at least 12 months.
Note: After the 2022 amendment of Employment Act, hospitalization leave (60 days) is in addition to ordinary sick leave.
Unpaid Leave in Malaysia
Under the Employment Act 1955 (EA 1955), certain paid leaves are mandated. Here are key types:
- Legal Status
Not explicitly covered under EA 1955. No statutory right to unpaid leave.
- Negotiation
Unpaid leave is generally by mutual agreement between employer and employee
- Impact of Unpaid Leave
- Leave accrual may be affected if service calculation excludes unpaid absences
- EPF (Employees Provident Fund) and SOCSO contributions may be impacted
- Salary deduction calculated by daily rate
Comparison between Paid Leave & Unpaid Leave
Here’s a comparative breakdown to help you understand the differences:
| Dimension | Paid Leave | Unpaid Leave |
|---|---|---|
| Legal Basis | Statutory under Employment Act | Not guaranteed by Employment Act |
| Entitlement | Fixed by law | Based on employer’s policy |
| Payment | Full ordinary rate of pay | No salary provided |
| Accrual | Annual leave continues to accrue | Accrual may pause during unpaid leave |
| Impact on Benefits | Usually minimal impact | May affect EPF, SOCSO contributions |
| Approval | Follows company policy + statutory rules | Based on mutual employer-employee agreement |
| Risk | Protected under labour law | Possible career or appraisal impact |
Discover how AutoCount Cloud Payroll natively supports prorated salary, unpaid‑leave processing, leave approvals, and more
Leave Encashment (Payment in Lieu of Leave)
Leave encashment constitutes additional taxable income and is subject to EPF, SOCSO, and EIS contributions.
Example: RM 2,600 salary, 5 unused days ->(2,600/26) x 5 =RM500
Calculation of Wages, ORP, Annual Leave & Unpaid Leave
| Incomplete of the Month (Unpaid Leave) | Leave Encashment |
|---|---|
|
Monthly Wages =
Monthly Wages
Total Calendar Days in That Month
|
Monthly Wages =
Monthly Wages
26 (fixed)
|
Autocount HRMS provides several options for defining the number of working days used to calculate unpaid leave, paid leave, and partial-month salary.
The screenshot below shows the actual payroll setting interface.
Disclaimer
The information contained in this article is for general guidance and informational purposes only and does not constitute legal or professional advice. While every effort has been made to ensure the accuracy of the information, the laws and regulations in Malaysia may change.
It is strongly recommended that you consult with a qualified HR consultant, legal professional, or refer directly to the latest version of the Employment Act 1955 and its amendments for specific, up-to-date advice tailored to your situation. The author and publisher disclaim any liability for any loss or damage incurred as a consequence of relying on the information provided herein.
Still Unsure About Unpaid Leave and Partial Salary Calculations?
Ensure your unpaid leave and partial month salary calculations are fully compliant with Malaysia’s Employment Act. Our AutoCount experts are here to guide you every step of the way.
