Wednesday

Proration of Annual Wage Supplements (AWS) for Unpaid Leave / AWS Computation

If an employee has taken several days of unpaid within the year, do we prorate the employees 13th month pay. Is prorating 13th month pay due to unpaid leave a normal organisation’s practice.

May I know the formula of how to prorate?

Annual Wage Supplements (AWS) is not mandatory in the Employment Act, the payment subjects to company’s discretion and unless it is indicated in the Letter of Employment. Always refer to the company policy. If it mentions the proration of AWS for unpaid leave, you may proceed accordingly.

Again, there isn't any mandatory or standard formula used for AWS computation, it depends on the company practices and policies. For your reference, the followings are the common practice to recognize months of service for AWS computation:-

(1) 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 AWS will be
30 (June) + 31 (July) + 31 (August) + 30 (Sept) + 31 (Oct) +30 (Nov) +31 (Dec) / 365 x monthly salary
= 214 / 365 x monthly basic salary

(2) by Month of Service
It is simple, to use the number of months of service / 12 x monthly basic salary