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Different formulas in calculating compensation / deduction

Tue, 13 Oct 2015 04:06:04 PM  (Last updated: Wed, 14 Oct 2015 08:19:03 AM)

Upon tendering resignation and started notice period, there are options to either provide written notice in advanced, or make payment in lieu of basic salary, or to contra with annual leave balance. This has always been a common knowledge among working people.

Now here comes the case, I have just discovered that in this peculiar company, there is an unwritten policy which stated that you can't fully contra your notice period with your annual leaves, this is due to the differences in the way they calculate the compensation rate and the deduction / penalty rate.

For example:

1) I have 10 days of leave balances, which I choose to cash out. 
HR's calculation:

Your annual pay / 365 x 10 days (compensation by company)

2) I have no leave balance, and I choose to pay in lieu to reduce the notice period by 10 days, HR will make me pay:

Monthly salary / 22 days x 10 days (deduction from employee's end)


3) I have 10 days of leave balances, I opted to contra it to reduce the notice period. 

HR will:

Your annual pay / 365 x 10 days = A
Monthly salary / 22 days x 10 days = B

C = Final month salary + A - B

Of which C would be the amount for my final payslip at the company, before deducting EPF and income tax. 

Ok, for TLDR, you think you can settle for early release of 1 day by contra your 1 day AL, but in this peculiar company, you can't, due to the difference of the calculations above, which means, your 1 day doesn't equate "their" 1 day, after contra with your AL, you still need to pay the penalty. 

This is the first in my life time to encounter such company, please share if you have similar experiences, and is this even legal under Malaysian law? 

I did not ever come across any such clause written explicitly in the employment letter.

KL Siew
Tue, 13 Oct 2015 05:02:21 PM

For payment of indemnity in lieu of notice, section 13 of the Employment Act may offer some guidance.

"13. (1) Either party to a contract of service may terminate such contract of service without notice or, if notice has already been given in accordance with section 12, without waiting for the expiry of that notice, by paying to the other party an indemnity of a sum equal to the amount of wages which would have accrued to the employee during the term of such notice or during the unexpired term of such notice."

So, if you want to be released 10 days earlier, you pay an indemnity equivalent to 10 days salary. As you mentioned, you have two choices to use leave balance. In that case, both parties can try to work out a sum that is closer to 10 days salary as indemnity will do I suppose.

Tue, 13 Oct 2015 09:13:36 PM

However, the indemnity the HR calculate is clearly in favor of them. (Refer formula B above)

Meanwhile the calculation for leaves compensation is using formula A

Which means, one way or another, there will certainly be a shortfall in the final payment, regardless of how you use the remaining leave balances.

KL Siew
Wed, 14 Oct 2015 08:19:03 AM

Ya, why not consult the Labour Department and get an official opinion about this matter?

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