Unpaid leave, or leave without pay, also known in Malay as Cuti Tanpa Gaji (CTG), refers to periods where employees are absent from work without receiving any wages.
This article covers:
- Obtaining Unpaid Leave
- Who is Eligible for Unpaid Leave?
- Why Do Employees Take Unpaid Leave?
- How to Calculate Unpaid Leave?
- What is the Impact of Taking Unpaid Leave on the Employee?
- What are Alternative Options to Unpaid Leave?
Obtaining Unpaid Leave
The Employment Act 1955 (EA), which serves as the primary employment legislation in Malaysia, does not specifically mention the process or eligibility for taking unpaid leave.
Typically, the main ways unpaid leave would occur are:
- Request by Employee: Employees have the option to request unpaid leave, which employers may approve based on operational requirements of the business or company policy.
- Unpaid Leave by Force: On occasion, unforeseen circumstances such as the COVID-19 pandemic or financial constraints may compel employers to place employees on unpaid leave.
Who is Eligible for Unpaid Leave?
There are various factors that might contribute to an employee’s eligibility to take unpaid leave. These factors may include:
- Employment Tenure: The duration of an employee’s tenure may serve as a criterion for determining eligibility for unpaid leave approval.
- Number of leaves taken: The total number of leaves an employee has already taken may also be considered.
- Employer policies: Such policies may outline the allowable number of unpaid leave days and the criteria for eligibility. They may be set out in the contract of service or employer’s manual.
Why Do Employees Take Unpaid Leave?
Unpaid leave can be taken for a wide variety of reasons – here are a few of them:
- To attend to a personal matter: Employees urgently needing to attend to a personal or family matter may be directed to apply for unpaid leave instead of annual leave, if they are not giving sufficient notice for the leave or if they have exhausted all their annual leave.
- Prolonged illness: An employee may have exhausted all their sick leave but may need to take additional time off to recover from an illness or operation.
- Death of a family member: Compassionate leave may be taken as paid or unpaid leave in the event of the death of a loved one, depending on the employer’s policy.
- Leave to take care of a newborn child: Parents may want to take extra leave once their parental leave has been exhausted.
- Taking time off to study or follow a spouse overseas: Employees may need to take extended leave to study for qualifications or follow a spouse temporarily employed overseas.
How to Calculate Unpaid Leave?
No method for unpaid leave calculation was specified in the EA prior to 1 Jan 2023 and the introduction of the Employment Act Amendments 2022. Section 18A includes unpaid leave as one of the instances when the formula for calculation of wages for an incomplete month’s work apply.
The formula for calculating wages for an incomplete month’s work is:
Monthly wages / Number of days of the particular wage period * Number of days eligible in the wage period.
The Labour Office has confirmed that the number of days in the wage period refers to calendar days.
Example:
Panda, who has a monthly salary of RM 3,000, took 2 days of unpaid leave in March 2024. Their March wage period is 1 to 31 March.
Panda’s wages in March 2024 are calculated as:
RM 3,000 / 31 (number of calendar days in March) * 29 (number of eligible days) = RM 2,806.45.
Panda’s unpaid leave can be calculated as:
RM 3,000 / 31 (number of calendar days in March) * 2 (number of unpaid leave days) = RM 193.55.
You can automate unpaid leave and other payroll calculations in PayrollPanda, ensuring a hassle-free process.
What is the Impact of Taking Unpaid Leave on the Employee?
Although taking unpaid leave may provide much needed time off from work to attend to personal matters, care for newborn babies, or grieve the death of a loved one, the following considerations should be weighed before applying:
- Financial losses: Unpaid Leave means no pay, as well as paused contributions to the Employees’ Provident Fund (EPF) and the Social Security Organisation (SOCSO), as these are calculated based on the wages received by an employee.
- Loss of trust in the employee: Extended periods of unpaid leave may lead to a loss of trust from the employer.
- Career stagnancy: An employee on a longer period of unpaid leave may face career stagnancy, with no growth in skills, which could lead to decreased job security.
- Mental health concerns: Financial uncertainties and responsibilities on such an employee may increase stress levels and anxiety. Family relations may suffer due to the added financial pressure on other family members.
What are Alternative Options to Unpaid Leave?
The following working arrangements can benefit both the employee and their employer by providing alternatives to unpaid leave, in allowing employees to continue working while being able to meet their personal commitments such as childcare, study or an overseas move:
- Flexible Working: In recent years, employers are becoming increasingly open to allowing employees to vary their working days or hours, as well as their place of work. Section 60Q of the EA, also introduced under the Employment Act Amendments 2022, makes it mandatory for employers to consider applications for flexible working arrangements made by their employees and to even state the grounds in case of refusal.
- Part-Time Work: Employers may be willing to reduce an employee’s working hours so the employee can still receive an income and develop their skills during a transition period.
Important Cautionary Note
When making this article we have tried to make it accurate but we do not give any guarantee that the information provided is correct or up-to-date. We therefore strongly advise you to seek advice from qualified professionals before acting on any information provided in this article. We do not accept any liability for any damages or risks incurred for the use of this article.
