Incomplete Month Salary & Unpaid Leave in Malaysia (Section 18A)

The statutory formula

Section 18A was inserted into the Employment Act 1955 by the Employment (Amendment) Act 2022 and came into force on 1 January 2023. It applies to an employee employed on a monthly rate of pay who has not completed a whole month of service, and it sets out one formula:

Wages for the month = (Monthly wages ÷ number of days of the particular wage period) × number of days eligible in that wage period.

The "wage period" for a monthly-paid employee is the calendar month, so the divisor is the number of calendar days in that specific month — 31 for January, 30 for April, 28 or 29 for February. It changes from month to month, which is deliberate: the formula pays a constant amount per calendar day of the month in question.

Section 18A is triggered by four situations, and only these four:

• You commenced employment after the first day of the month.
• Your contract of service was terminated before the end of the month.
• You took leave of absence without pay for one or more days of the month.
• You took leave of absence to comply with any written law relating to national service.

Calendar days, not 26 — and why that is in your favour

This is the point that catches out both employees and payroll departments. The Employment Act uses two different divisors for two different jobs, and mixing them up costs money.

The ordinary rate of pay (ORP) under section 60I is monthly wages ÷ 26, and it is the basis for paying you extra — overtime, rest-day work and public-holiday work. Section 18A is the basis for calculating wages actually earned in a short month, and its divisor is the calendar days of that month. Because 26 is smaller than 30 or 31, a daily rate calculated on ÷26 is roughly 15–19% higher than one calculated on calendar days.

Applied to a deduction, that difference works against you. An employer that deducts unpaid leave at monthly wages ÷ 26 is taking out more than section 18A allows. Section 7 of the Employment Act voids any contractual term less favourable to the employee than the Act prescribes, so a ÷26 deduction is not simply an internal policy choice — it is an over-deduction. A more generous method (for example, not deducting rest days that fall inside a period of unpaid leave) is permitted, because that is more favourable, not less.

Worked examples

Three common situations, using the statutory formula. Note that rest days and public holidays falling inside your eligible period are counted as eligible days — the formula runs on calendar days at both ends of the fraction, so you are not penalised for a Saturday you were never going to work.

How much a day of unpaid leave actually costs

Take the third example above. The correct deduction is RM3,000 ÷ 31 × 2 = RM193.55. An employer using the old ÷26 habit would deduct RM3,000 ÷ 26 × 2 = RM230.77 — RM37.22 more than the Act permits, for the same two days off.

The same salary taken in February is worth more per day, because the divisor is smaller: two unpaid days in a 28-day February cost RM214.29, against RM193.55 in a 31-day March. If you have discretion over when to take unpaid leave, a long month is the cheaper month. It is a small effect on two days and a meaningful one on a two-week absence.

What happens to EPF, SOCSO, EIS and PCB

All four statutory deductions follow the wages actually paid, not your nominal salary, so a short month reduces every one of them:

• EPF (KWSP) — contributions are computed from the reduced wages using the Third Schedule, so both your 11% share and the employer's 12% or 13% fall for that month.
• SOCSO and EIS — contributions are read off the PERKESO wage-band tables using the lower actual wage, so you may drop into a lower band. Both are in any case capped at a RM6,000 monthly insured wage.
• PCB (MTD) — the monthly tax deduction is calculated on the lower month's remuneration, so it drops too, often by proportionally more than the salary did because of the progressive bands.

The contribution gap nobody mentions

If unpaid leave runs for a full wage period and you receive no wages at all, there is nothing to contribute on, so no EPF, SOCSO or EIS contribution is made for that month. That gap is invisible until it matters.

For EIS it can matter a great deal: the Job Search Allowance requires a Contributions Qualifying Condition — a minimum number of monthly contributions within a defined look-back period. A stretch of zero-contribution months shortly before a retrenchment can push you below that threshold. For EPF, a missing month is simply a missing month of dividend compounding, which is small in isolation but not nothing over a long unpaid sabbatical. If you are planning an extended period of unpaid leave, consider an i-Saraan or voluntary EPF contribution to keep the account moving.

Who is covered

Since 1 January 2023 the Employment Act 1955 applies to all employees in Peninsular Malaysia and Labuan under a contract of service, regardless of how much they earn — the old RM2,000 wage ceiling for coverage is gone. A handful of provisions (overtime rates, rest-day pay, shift allowance, termination benefits) remain restricted to employees earning RM4,000 a month or less, but section 18A is not one of them. If you are paid a monthly rate, the formula applies to you whether you earn RM1,800 or RM18,000.

Sabah and Sarawak have their own statutes — the Sabah Labour Ordinance and the Sarawak Labour Ordinance — which follow broadly similar principles but are separate law, so confirm the position locally if you are employed there.

Important caveats

This guide explains the standard statutory position under the Employment Act 1955 as amended and is general information, not legal advice. Section 18A sets a floor, not a ceiling: your contract or collective agreement may provide a more generous method, and that more generous method prevails. Disputes over an under-payment can be raised with the nearest Jabatan Tenaga Kerja (Labour Department) office, which handles wage claims under the Act. If you think you have been over-deducted, ask payroll in writing which divisor they used before escalating — it is very often an inherited spreadsheet rather than a deliberate decision. Use the calculator below to work out your normal full-month take-home first, then apply the section 18A fraction to the gross figure.