For employees who are employed on a monthly rate of pay and have not completed a whole month of service, their salary would be calculated based on calendar days, which is in line with section 18A of Employment Act and Labour office’s advice. This is regardless of your business method of calculating ordinary rate.
Below are scenarios where an employee has not completed a whole month of service:
(a) where he commenced employment after the first day of the month;
(b) where employment was terminated before the end of the month;
(c) where he took leave of absence without pay for one or more days of the month.
For example, an employee starts employment on 12th June 2023, has monthly salary of RM 5000 and works standard 8 hour per day. There are 30 calendar days in June and 19 calendar days between start date and end of month.
The employee’s June salary is calculated as below
Hourly rate in June: RM 5000 / (30 days x 8 hours) = RM 20.83333
Working hours in June: 19 days x 8 hours = 152 hours
June salary: RM 20.83333 x 152 hours = RM 3166.67
For example, an employee finishes employment on 12th June 2023, has monthly salary of RM 5000 and works standard 8 hour per day. There are 30 calendar days in June and 12 calendar days between start of the month and termination day.
The employee’s June salary is calculated as below
Hourly rate in June: RM 5000 / (30 days x 8 hours) = RM 20.83333
Working hours in June: 12 days x 8 hours = 96 hours
June salary: RM 20.83333 x 96 hours = RM 2000
The same employee, who has monthly salary of RM 5000 and works standard 8 hour per day, took 2 days leave without pay in June 2023.
The employee’s LWOP deduction is calculated as below
Hourly rate used for LWOP deduction: RM 5000 / (30 days x 8 hours) = RM 20.83333
LWOP unit: 2 days x 8 hours = 16 hours
LWOP deduction : RM 20.83333 x 16 hours = RM 333.33
The system will use calendar day to work out the proportion of old and new rate. It will then use the employee’s standard hours to calculate the actual hours worked before and after rate change.
For example, an employee has monthly salary of RM 5000 and works standard 8 hour per day. The employee has salary increate to RM 7000 effective from 17 June 2023.
The employee’s June salary is calculated as below
Hourly rate before salary increase: RM 5000 / (30 days x 8 hours) = RM 20.83333
Hourly rate from salary increase: RM 7000 / (30 days x 8 hours) = RM 29.16667
Working hours before salary increase (01/06/2023 - 16/06/2023): 16 days x 8 hours = 128 hours
Working hours from salary increase (17/06/2023 - 30/06/2023): 14 days x 8 hours = 112 hours
June salary: RM 20.83333 x 128 hours + RM 29.16667 x 112 hours = RM 5933.33
The calculation used in the above context panel is the following:
(Monthly gross rate of pay) / (Total number of calendar days in that month) x Total number of calenar days the employee actually worked in that month.
A few things of note in regards to the 'incomplete month' context panel:
- It only displays when the employee joined or was terminated during the month and they have been paid pro-rata earnings for the month;
- It will not display where an employee has:
- advanced hours
- split earnings
- a pay rate change during the pay period
- The context panel will include the following:
- Base rate of pay
- Working days in month - number of calendar days in the month
- Working days in month converted to hours - employee's standard hour per day x working days in month
- Days actually worked in month - based on calendar days and employee’s first/last day
- Days actually worked in month converted to hours - employee's standard hours per day x Days actually worked in month
- Hourly rate used for current period - Base rate of pay / Working days in month converted to hours
For an employee on a monthly rate pay and advanced work week pattern, their incomplete month salary would be calculated based on the advanced work week hours.