Final Salary Payout After Resignation in Malaysia: A Complete Guide for Employers

Final salary payout is a crucial part of the employee offboarding process in Malaysia. It ensures that all wages, benefits, and statutory contributions are accurately settled when an employee leaves the company.

Handling this correctly isn’t just about compliance — it’s also about maintaining professionalism and protecting your company’s reputation. A proper final salary calculation helps you close employment records cleanly and avoid unnecessary disputes with departing staff.

What Is Final Salary Payout After Resignation?

The final salary payout (also called last salary payment) is the total amount owed to an employee when they resign or their employment ends.

It typically includes:

• Last month’s wages

• Payment for unused annual leave

• Overtime pay or shift allowances

• Any other contractual entitlements such as bonuses, commissions, or gratuity

Depending on your company’s policies, you may also include pro-rated bonuses or performance incentives if the employee has partially met the eligibility criteria.

Statutory Entitlements Under Malaysian Law

When processing a final payout, employers must comply with the Employment Act 1955 and the terms of the employment contract. Below are the common components you need to review:

1. Annual Leave Pay

Employees are entitled to compensation for any unused annual leave.

• If the employee hasn’t completed a full year of service, annual leave is calculated on a pro-rated basis.

• Fractions of less than half a day are ignored; half a day or more counts as one full day.

• The minimum calculation is based on 26 workdays (monthly wages ÷ 26), but many companies with a 5-day week use 22 or 21.75 days, whichever is more favorable to the employee.

• Leave pay is subject to EPF, SOCSO, EIS, and PCB deductions.

2. Public Holidays

If the employee was entitled to but did not take a public holiday, the value should be compensated based on the agreed daily rate.

3. Overtime and Allowances

Include any unpaid overtime, shift allowances, or other fixed allowances due up to the final working day.

4. Bonus or Commission

If the employee is contractually entitled to a bonus or commission (e.g., sales commission or incentive pay), it must still be included, even if they have resigned.

5. Notice Pay

If the employee resigns but does not serve the full notice period, you may deduct the unserved portion from their final salary — but only if this is clearly stated in the employment contract.

6. Gratuity

Some employers offer gratuity payments as part of long service benefits or upon retirement. Gratuity is exempt from EPF and SOCSO/EIS, and in certain cases (e.g., retirement due to ill health or after 10 years of service at age 55), it may also qualify for PCB tax exemption.

Step-by-Step: How to Calculate Final Salary Payout

Processing the final payout accurately requires a structured approach.

Step 1: Confirm the Last Working Day

Check the employee’s resignation letter and confirm the final day of service based on the notice period.

Step 2: Calculate Pro-Rated Salary

Determine the salary for the final month based on actual days worked. For example, if the employee works 10 out of 30 days, pay 10/30 of their monthly salary.

Step 3: Add Unused Annual Leave Pay

Compute the payment for unused leave using the agreed daily rate (wages ÷ 26 or more favorable calculation).

Step 4: Add Compensable Public Holidays

Include any unpaid public holidays that fall within the employee’s entitlement.

Step 5: Include Other Outstanding Payments

Add any overtime, shift allowances, bonus, commission, or gratuity owed.

Step 6: Deduct Unserved Notice (if applicable)

If the employee failed to serve the required notice, deduct the equivalent value as specified in the employment contract.

Step 7: Apply Statutory Deductions

Make all necessary deductions for EPF, SOCSO, EIS, and PCB, where applicable.

Step 8: Document Everything Clearly

Provide a detailed breakdown in the final payslip and keep records for compliance and transparency.

💡 Tip for Employers:
Using an automated payroll system like Pandahrms makes this process much simpler. The system automatically calculates pro-rated salaries, leave encashment, and statutory deductions, ensuring accuracy and compliance with Malaysian regulations.

How to Process the Final Payout

Once the calculations are done:

1. Generate the final payslip — showing all payments and deductions clearly.

2. Process payment through your payroll system or bank transfer.

3. Issue a termination or offboarding acknowledgment letter confirming that all dues have been paid.

✅ With Pandahrms, HR teams can manage the entire process seamlessly — from generating the final payslip to closing the employee’s record. All statutory contributions (EPF, SOCSO, EIS, PCB) are automatically updated based on the latest rates.

Common Employer Mistakes to Avoid

Even experienced HR teams can make errors when handling final salary payouts. Here are the most common ones:

❌ Forgetting to Pay for Unused Leave

Failing to compensate employees for accrued annual leave is a violation of the Employment Act and can lead to complaints at the Labour Department.

❌ Missing Statutory Deductions

Some employers forget to apply EPF, SOCSO, EIS, or PCB on certain components of the payout, such as leave pay — which can cause compliance issues or backdated penalties.

❌ Delaying Payment

Although there’s no fixed legal deadline, best practice is to settle the final salary on or before the last working day, or within 7 days after termination. Any delay can create dissatisfaction and hurt your company’s reputation.

❌ Not Providing a Clear Breakdown

A missing or unclear final payslip can lead to disputes or mistrust. Always provide a written breakdown — automated systems like Pandahrms make this easy.

Why Final Salary Accuracy Matters

A well-managed final salary payout reflects your company’s integrity and professionalism. It:

• Prevents unnecessary legal or HR disputes

• Builds goodwill with departing employees

• Protects your company’s image and employer brand

• Ensures compliance with Malaysian labour laws

By managing offboarding correctly, you also help your HR team maintain clean records and prepare for smooth transitions.

FAQs

1. What should I pay an employee who resigns without serving full notice?
You may deduct the unserved notice period from their final salary, provided your employment contract includes this clause.

2. Can I deduct excess leave taken by the employee?
Yes. If the employee has taken more leave than their entitlement, you can deduct the equivalent value from their final pay.

3. When must I pay the final salary?
While the Employment Act doesn’t specify a deadline, best practice is to pay on or before the last working day, or within seven days after termination.

Simplify Your Final Payout Process with Pandahrms

Final salary calculations can be tedious — especially when you’re juggling notice pay, leave balances, and statutory deductions.

With Pandahrms, you can:

• Automatically calculate final salary and deductions

• Encash unused leave instantly

• Auto-update EPF, SOCSO, EIS, and PCB contributions

• Generate detailed payslips for transparency

• Close employment records in one click