Ask a few HR people how to work out a day’s pay and most will say the same thing: “salary ÷ 26.” It’s the go-to formula — for overtime, for unpaid leave, for a staff member who joins mid-month. But here’s the catch: ÷26 is only correct for one purpose. Use it for the wrong calculation and you’ll over- or under-pay your employee — and risk a dispute or a breach of the Employment Act 1955. Here’s exactly when ÷26 is right (the Ordinary Rate of Pay) and when it isn’t (incomplete-month wages), checked against the Act.
The ÷26 Myth
÷26 is not a universal payroll formula. Under the Employment Act 1955, the number 26 belongs to one specific calculation — the Ordinary Rate of Pay (ORP) under Section 60I. A different situation, like an employee who didn’t work a full month, is governed by a completely different formula under Section 18A. Same RM3,000 salary, two different formulas, two very different answers.
When ÷26 IS Right: Ordinary Rate of Pay (Section 60I)
For a monthly-rated employee, the Ordinary Rate of Pay — the daily rate used to price things like overtime, rest-day and public-holiday work — is set by Section 60I as:
Two things to note. First, the 26 is a fixed statutory divisor — it does not mean your company actually works 26 days a month. Second, overtime and these rate-based provisions mainly apply to employees earning RM4,000 a month or less (and certain manual workers), so confirm the employee is eligible. (For the detail, see our guides on calculating the hourly rate and overtime pay under Sections 60A & 60C.)
When ÷26 Is WRONG: Incomplete-Month Wages (Section 18A)
When an employee doesn’t work a full month — they join after the 1st, resign or are terminated mid-month, or take unpaid leave — you’re no longer pricing a daily rate. You’re pro-rating a month’s wages, and that’s governed by Section 18A (in force since 1 January 2023):
So for an employee on RM3,000 who takes 2 days’ unpaid leave in a 31-day month (29 days eligible):
RM3,000 ÷ 31 × 29 = RM2,806.45
Notice the divisor is 31 (the actual days in that month), not 26. If you had wrongly used ÷26 here, you’d deduct the wrong amount. (For worked examples, see our full guide on calculating salary for incomplete months.)
Same RM3,000 — Different Purpose, Different Formula
| ORP (Section 60I) | Incomplete month (Section 18A) | |
|---|---|---|
| What it calculates | A daily/hourly rate (for OT etc.) | That month’s actual wages |
| Formula | ÷ 26 | ÷ days in the month × days eligible |
| RM3,000 example | RM115.38 / day | RM2,806.45 (2 days unpaid, 31-day month) |
One is a rate; the other is a month’s wages. They’re not interchangeable, and you can’t compare the two figures as if they measure the same thing.
Why Using the Wrong Formula Is Risky
Default to “÷26 for everything” and sooner or later you’ll over-deduct or under-pay someone — most often on unpaid leave or a mid-month joiner/leaver. That means payslip disputes, unhappy staff, and a payroll that doesn’t line up with the Employment Act. The fix isn’t memorising one magic number; it’s asking the right question first.
Ask These 3 Questions Before You Calculate
- What am I calculating? A rate (ORP/HRP) or a month’s actual wages? That decides the formula.
- What’s the wage period? How many days are in this month, and how many is the employee eligible for?
- Which rules apply? Is the employee within the overtime-eligible band, and what’s included in “wages”?
Where Pandahrms Helps
This is exactly the kind of thing a payroll system should get right every time. Pandahrms applies the correct formula for the correct purpose automatically — ÷26 for the Ordinary Rate of Pay and overtime, and the Section 18A pro-ration for incomplete months and unpaid leave — so you don’t have to remember which divisor goes where. Set the salary and the system calculates the rate, the OT, and the incomplete-month wages correctly, every pay run.
Final Thoughts
÷26 isn’t wrong — it’s just not the answer to every payroll question. Use it for the Ordinary Rate of Pay; use the Section 18A formula (÷ the actual days in the month) for incomplete-month wages. Get the purpose right first, and the maths — and your compliance — follows.
Frequently Asked Questions (FAQs)
- Is salary always divided by 26 in Malaysia?
No. ÷26 is the Section 60I formula for the Ordinary Rate of Pay (a daily rate, used for overtime etc.). It is not used for incomplete-month wages, which follow Section 18A. - How do I calculate the daily rate (ORP)?
Monthly rate of pay ÷ 26. For RM3,000, that’s RM115.38 a day; divide by the normal daily hours (e.g. 8) to get the hourly rate, RM14.42. - How do I deduct for unpaid leave?
Use Section 18A: monthly wages ÷ the number of days in that month × the number of days eligible. For RM3,000 with 2 days unpaid in a 31-day month: RM3,000 ÷ 31 × 29 = RM2,806.45 — not ÷26. - Why 26 and not the actual working days?
26 is a fixed statutory divisor set by Section 60I for the Ordinary Rate of Pay; it doesn’t represent how many days your company actually works in a month. - Does this apply to all employees?
Sections 60I and 18A are in the Employment Act 1955 (Peninsular Malaysia and Labuan). Overtime and rate-based provisions mainly cover employees earning RM4,000 or less a month and certain manual workers. Sabah and Sarawak have separate labour laws.
Source: Employment Act 1955 (Act 265), Section 60I (Ordinary Rate of Pay) and Section 18A (wages for incomplete month, effective 1 January 2023). This article is general information, not legal advice; confirm the applicable law and figures for your situation.
