Guide to Unpaid Leave Calculation in Malaysia

Guide to Unpaid Leave Calculation in Malaysia

Understanding Unpaid Leave

Unpaid leave is when an employee takes time off work without pay. It’s usually taken for reasons not covered under regular paid leave entitlements, such as personal matters or extended holidays.

Company Policy

Each organization may have its own set of rules regarding unpaid leave, which should be reviewed for specific details.

Application Process

Employees typically need to apply for unpaid leave and receive approval from their employer.

How to Calculate Unpaid Leave in Malaysia

Formula: The amount deducted for unpaid leave is calculated as follows:

Unpaid Leave Amount =

Monthly Salary           x     Number of Unpaid Leave Days
Number of days                 
in the salary period

Important Note: The ‘Number of Days in Salary Period’ usually refers to the total number of calendar days in the month.

Example 1:

Monthly Salary: RM 3,000 Number of Days in Salary Period: 30 days (for a month with 30 days) Number of Unpaid Leave Days: 3 days

Calculation: Daily Rate = RM 3,000 / 30 = RM 100 Unpaid Leave Amount = RM 100 × 3 = RM 300

So, the employee’s salary will be reduced by RM 300 for taking 3 days of unpaid leave.

Example 2:

Monthly Salary: RM 5,580 Number of Days in Salary Period: 31 days (for a month with 31 days) Number of Unpaid Leave Days: 5 days

Calculation: Daily Rate = RM 5,580 / 31 = RM 180 Unpaid Leave Amount = RM 180 × 5 = RM 900

In this case, the deduction for 5 days of unpaid leave would be RM 900 from the employee’s salary.

Example 3:

Monthly Salary: RM 2,500 Number of Days in Salary Period: 28 days (for February, a non-leap year) Number of Unpaid Leave Days: 2 days

Calculation: Daily Rate = RM 2,500 / 28 ≈ RM 89.2857 Unpaid Leave Amount = RM 89.2857 × 2 ≈ RM 178.57

Here, the employee taking 2 days of unpaid leave in February would have RM 178.57 deducted from their salary.

These examples demonstrate how the duration of the month and the number of unpaid leave days taken affect the calculation. The daily rate of pay is crucial in determining the exact deduction for unpaid leave.

Impact on Other Benefits

Unpaid leave may affect other employment benefits such as annual leave accrual, bonuses, EPF (Employees Provident Fund), and SOCSO (Social Security Organization) contributions.

Record Keeping

Both parties should maintain accurate records of unpaid leave for payroll and in case of any disputes.

Advice for Employers

Ensure that unpaid leave policies are fair, clear, and compliant with Malaysian labor laws.

Advice for Employees

Employees should be aware of how taking unpaid leave affects their income and benefits.

Proper understanding and calculation of unpaid leave are essential for both employers and employees in Malaysia to ensure fair practice and compliance with internal policies and legal standards.

Additional Unpaid Leave FAQs

1. Can an employer refuse to grant unpaid leave?
   Yes, an employer can refuse unpaid leave based on business needs or if the request does not align with company policy.
   
   
2. Will unpaid leave affect other employment benefits?
   Unpaid leave can impact benefits that are calculated based on the actual days worked, like bonus eligibility, leave accruals, and sometimes contributions to pension funds.
   
   
3. How do I apply for unpaid leave?
   The process varies by company but typically involves submitting a formal request through your company’s HR system or to your manager for approval.
   
   
4. How does unpaid leave affect annual leave accrual?
   In many cases, unpaid leave does not count towards the period of service used to calculate annual leave accrual.
   
   
5. Can taking unpaid leave affect performance reviews?
   While unpaid leave itself shouldn’t directly impact performance reviews, extended periods of absence may affect overall performance evaluations, depending on the job and responsibilities.
   
   
6. How does unpaid leave impact EPF, SOCSO and PCB?
   Unpaid leave can impact contributions to the Employees Provident Fund (EPF), Social Security Organization (SOCSO), and Potongan Cukai Bulanan (PCB, or Monthly Tax Deduction) in Malaysia.
   
   
7. If an employee applies one month unpaid leave, does he/she entitled for restday and public holidays (PH) during this period?
   Rest days are usually not compensated during unpaid leave. Since the employee is not working and not receiving pay during this period, rest days, which are non-working days, generally do not entail any additional entitlements.
   
   
   In many cases, employees on unpaid leave do not receive additional pay for public holidays, as they are not in active, paid service during this time.
   
   However, specific company policies may have provisions for this scenario, so it’s essential to refer to those.

Get Unpaid Leave Management Right with CentralHR

The CentralHR leave system offers a streamlined and efficient approach to managing unpaid leave within an organization. It simplifies the process of applying for, approving, and tracking unpaid leave, ensuring both accuracy and compliance with company policies. Key features include:

1. Automated Calculations:

CentralHR can automatically calculate the unpaid leave amount based on the provided formula, reducing the risk of errors and saving time for HR personnel.

2. Easy Application and Approval Process:

Employees can apply for unpaid leave directly through the system, and managers can approve or reject applications with just a few clicks.

3. Record Keeping:

The system keeps a detailed record of all leave transactions, including unpaid leave, which is essential for accurate payroll processing and resolving disputes.

4. Customizable Policies:

CentralHR allows companies to customize the leave management system according to their specific unpaid leave policies, ensuring that the system aligns with internal guidelines and legal requirements.

5. Integration with Payroll System:

Eliminates the need for manual calculations and entries, reducing the errors and ensuring accuracy, compliance, and efficiency in payroll management

Contact us today and request a free demo to optimize your annual leave management.