How to Pro-Rate Annual Leave

How to Pro-rate Annual Leave for new employees and resignees?

In accordance to Employment Act,

  • An employee who has served an employer for a period of not less than 3 months but who has not completed 12 months of continuous service in any year shall be entitled to annual leave in proportion to the number of completed months of service in that year.

There isn't any mandatory method or formula used to calculate the Annual Leave, it is all depends on the company practices and policies to ensure the "number of completed months of service in that year" is define sound, logic and clear.

The following are the common practice to recognize months of service and calculate the Annual Leave:

(1) Go by Calendar Days
Based on the joined date of the new employee, calculate physically the number of calendar days he is in service with the company, and then divided by the number of calendar days (365 or 366) of that year.

For example, if the employee joined on 1 June, his Annual Leave entitlement is 14 days 1 year, his pro-rated Annual Leave will be
30 (June) + 31 (July) + 31 (August) + 30 (Sept) + 31 (Oct) +30 (Nov) +31 (Dec) / 365 x Annual Leave Entitlement
= 214 / 365 x 14

(2) Go by Month of Service
It is simple, to use the number of months of service / 12 x Annual Leave entitlement per year.

However, the tricky part is that you need to specific the definition of the completed month and make it transparent in your policy.

One common example, only if employee joined on or before 15th, that particular month will be treated as completed month. If employee joined on 14-June-2008, he will be entitled to 7 months of completed month (June included), but if he joined the company on 16 June, he will be only entitled to 6 months (June excluded)