STOP PRORATING SICK LEAVE: THE HIDDEN LEGAL RISKS UNDER SECTION 60F OF THE EMPLOYMENT ACT, 1955
Preface
Employers and HR practitioners often assume that sick leave entitlement grows neatly from the employee’s service anniversary date. Under this common view, employers prorate the entitlement between 14 and 18 days, treating the employee as only entitled to 14 days paid sick leave before completing two years of service, with an “upgrade” to 18 days only from the anniversary date onwards.
This assumption, while administratively convenient, is not supported by the text or structure of Section 60F(1)(aa) of the Employment Act, 1955 (“EA”). When an employee crosses the two-year mark in the middle of a calendar year, the real legal question is whether that employee is entitled to 14 or eighteen 18 days of paid sick leave for that year as a whole.
Using a straightforward hypothetical where an employee joins on 01/06/2024 and reaches 2 years of service on 01/06/2026, this article explains why Section 60F(1)(aa)(ii) EA, read in line with its protective purpose, gives that employee 18 days of sick leave for the whole of 2026. It then highlights the legal and practical risks for employers and HR if they “prorate” sick leave or try to recover “extra” sick leave when an employee resigns before completing 2 years of service.
Statutory Framework and Purposive Interpretation
Section 60F(1)(aa) EA provides as follows:-
“(1) An employee shall, after examination at the expense of the employer –
(a) by a registered medical practitioner duly appointed by the employer; or
(b) if no such medical practitioner is appointed or, if having regard to the nature or circumstances of the illness, the services of the medical practitioner so appointed are not obtainable within a reasonable time or distance, by any other registered medical practitioner or by a medical officer,
be entitled to paid sick leave –
(aa) where no hospitalisation is necessary –
(i) of fourteen days in the aggregate in each calendar year if the employee has been employed for less than two years;
(ii) of eighteen days in the aggregate in each calendar year if the employee has been employed for two years or more but less than five years;
(iii) of twenty-two days in the aggregate in each calendar year if the employee has been employed for five years or more.”
Section 17A of the Interpretation Acts, 1948 and 1967 (“IA”) requires that:-
“In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.”
Where a statutory provision is capable of bearing two or more different meanings, Section 17A IA mandates adopting the construction that best promotes the purpose or object of the Act, provided it does not do violence to the plain meaning of the text. This is affirmed by the Federal Court in All Malayan Estate Staff Union v. Rajasegaran & Ors [2006] 6 MLJ 97.
The EA is recognised as “social legislation” enacted to regulate the relationship between a weaker class (employees) and a stronger class (employers), and to protect employees. In Top Empire Sdn Bhd v. Santhi a/p Rahman & Anor [2021] MLJU 1858, the Court emphasised this protective character. Consequently, its provisions must be interpreted to give maximum protection to employees, as underscored by the Federal Court in PJD Regency Sdn Bhd v. Tribunal Tuntutan Pembeli Rumah & Anor [2021] 2 MLJ 60.
Two Plausible Constructions of Section 60F(1)(aa)(ii)
On the hypothetical facts, two plausible constructions arise regarding the eighteen 18 days sick leave in Section 60F(1)(aa)(ii) EA:-
To resolve this, two critical elements in Section 60F(1)(aa) EA must be read purposively:-
(a) the phrase “in the aggregate in each calendar year”; and
(b) the phrase “has been employed for two years or more”.
“In the Aggregate in Each Calendar Year”
Firstly, Parliament deliberately employed the phrase “in the aggregate in each calendar year”. This reflects that sick leave is allocated as a single, whole quantum per calendar year, rather than accruing monthly or daily.
This contrasts with Section 60E EA, which governs annual leave and contains an express proration provision, namely “… his entitlement to paid annual leave shall be in direct proportion to the number of completed months of service”.
Parliament’s deliberate omission of any proration mechanism in Section 60F EA is significant. Where Parliament intended proration, it expressly stipulated so in Section 60E EA. The omission of any equivalent language in Section 60F EA strongly indicates that sick leave cannot be prorated and it operates on a full year basis.
The logical inference is that sick leave entitlement under Section 60F EA is not intended to be prorated or split within a year. It operates on a full year basis, fixed “in the aggregate in each calendar year”.
“Calendar Year” and “Has Been Employed for Two Years or More”
Secondly, Section 60F(1)(aa) EA ties sick leave entitlement to the “calendar year” instead of “for every twelve months of continuous service” for annual leave under Section 60E EA. Under Section 3 IA, “calendar year” means “a year beginning on 1 January”. The frame of reference is therefore the calendar year, not the employee’s individual twelve-month service cycle.
The legislative choice of “calendar year” instead of a “continuous service” year strongly suggests that Parliament intended a calendar-based allocation system, not a service-anniversary accrual system, and that once the entitlement quantum is determined for a calendar year (beginning 1st January), it remains fixed for the entire year.
Thirdly, the phrase “has been employed for two years or more” is in the present perfect tense, describing a state of affairs that must exist at some point during that calendar year. On the hypothetical facts, the employee will have been employed for 2 years or more during 2026 (on 01/06/2026). It follows that 2026 is properly characterised as a “two years or more” calendar year for the purposes of Section 60F(1)(aa)(ii) EA.
Reading “in the aggregate in each calendar year”, “calendar year” and “has been employed for two years or more” together, and applying the purposive approach mandated by Section 17A IA and the case law on social legislation, leads to the conclusion that:-
(a) Section 60F(1) EA confers a fixed annual entitlement “in the aggregate in each calendar year” that is not subject to proration or mid-year adjustment;
(b) (c) the calendar year in which an employee will complete 2 years of service (even if mid-year) should be treated as a “two years or more” calendar year; and
(c) the calendar year in which an employee will complete 2 years of service (even if mid-year) should be treated as a “two years or more” calendar year; and the employee is therefore entitled to 18 days of sick leave for the entire calendar year 2026, effective from 01/01/2026, even though the two-year milestone is only reached on 01/06/2026.
This construction gives effect to the statutory language, avoids importing an implied proration mechanism that Parliament chose not to enact, and aligns with the principle that social legislation should be construed to afford maximum protection to employees.
Legal Risk of Prorating Sick Leave
Many employers maintain a policy of prorating sick leave entitlement, whereby an employee is treated as only entitled to 14 days of sick leave up to the completion of 2 years of service, and then prorated up to 18 days from the anniversary date for the balance of that calendar year.
Such a policy is less favourable than the entitlement arising from the purposive construction of Section 60F(1)(aa)(ii) EA set out above. It is therefore inconsistent with the EA and exposes employers to material legal risk, including:-
(a) Breach of Section 60F(1)(aa) EA and potential prosecution under Section 100(5) EA, which provides that any employer who fails to grant sick leave, or fails to pay sick leave pay, as provided under Section 60F, commits an offence and may be ordered to pay the sick leave pay recoverable as if it were a fine.
(b) Where the employer is a company, possible joint or several liability of directors, managers or officers under Section 101B EA, which deems them to have committed the offence and allows them to be charged jointly or severally.
(c) Exposure to complaints and monetary claims before the Labour Department and Labour Court for under-granted sick leave entitlement.
(d) Exposure to complaints before the Industrial Relations Department and Industrial Court, including constructive dismissal claims, where the unlawful withholding or reduction of statutory benefits may be treated as a fundamental breach of the employment contract.
(e) Reputational harm, employee morale issues and a multiplier effect where a non-compliant policy is applied across the workforce.
From a risk management perspective, persisting with this policy in the face of the statutory wording and the protective approach to social legislation is difficult to justify.
Can Employers Recover “Excess” Sick Leave on Early Resignation?
A further question arises where an employer, without conceding statutory entitlement, allows an employee to utilise 18 days of paid sick leave from the start of 2026 but seeks to recover 4 days as “excess” if the employee resigns before 01/06/2026.
In principle, there is no “excess” if the employee is statutorily entitled to 18 days of paid sick leave for the entire calendar year 2026 from 01/01/2026. The employee would simply be exercising a statutory right, and a later resignation cannot retrospectively convert a lawful entitlement into an unlawful overpayment.
Even on the assumption that the 4 days constitute an “overpayment”, any attempt to recover that amount by deducting from wages is governed strictly by Section 24 EA, which states “No deductions shall be made by an employer from the wages of an employee except as authorised under this Act.”
This excess recovery does not fall within any of the permitted categories of deduction under Section 24 EA, namely:-
(a) recovery of overpayment of wages made during the immediately preceding three months from the month in which deductions are to be made, by the employer to the employee by the employer’s mistake;
(b) deductions for payment in lieu of notice under Section 13(1) EA;
(c) deductions for advances of wages made under Section 22 EA;
(d) deductions authorized by other written law (example EPF, SOCSO and tax);
(e) payments to registered trade union or co-operative;
(f) payments for sale of employer’s shares to employee;
(g) rental, services, food and meals;
(h) payments into superannuation schemes, provident funds, welfare schemes;
(i) payments to third parties on behalf of employee;
(j) repayments of wage advances under Section 22 EA (where interest
charged); and
(k) purchase of goods from employer.
Sick leave is not a “wage advance” within Section 22 EA. Section 22 contemplates monetary advances (loans) provided by the employee that are repayable by deduction from future wages. Sick leave is a statutory benefit under Section 60F EA. When an employee takes sick leave and is paid accordingly, they are utilising a statutory entitlement, not receiving a repayable loan.
In Lim Hwa Tian v. Simple Farm Sdn Bhd [2024] CLJU 1146, the High Court held that merely describing a deduction as an “advance” on a payslip does not make it an advance within Section 22 EA if there was no real wage advance. Such a deduction falls outside Section 24(2)(c) EA and is unlawful. The Court further held that employee consent does not validate a deduction which is not expressly permitted by Section 24 EA, because statutory compliance overrides informal arrangements and the EA is a protective statute that cannot be contracted out of.
By analogy, sick leave already taken cannot be re-characterised as a “wage advance” simply because the employee resigns early, and any attempted deduction to “recover” such leave would be unlawful. Even a written agreement by the employee to repay the 4 days would not legalise a deduction that does not fall within Section 24 EA.
Accordingly, an employer has no legal standing to recover the 4 days of “excess” sick leave pay from an employee who resigns before completing 2 years of service, whether by salary deduction or otherwise.
Conclusion
On a purposive construction of Section 60F(1)(aa) EA, read with Section 17A IA and the established approach to social legislation:-
(a) An employee who completes 2 years of service during a calendar year (e.g. on 01/06/2026) is entitled to 18 days of sick leave for the entire calendar year, effective from 1st January of that year.
(b) Any policy which prorates sick leave by granting only 14 days until the service anniversary and then increasing the entitlement on a prorated basis to 18 days thereafter presents material legal risk, including potential criminal liability under Section 100(5) EA and exposure to claims before the Labour and Industrial Courts.
(c) Employers have no legal right to recover “excess” sick leave from employees who resign before completing 2 years of service. Any deduction for this purpose would contravene Section 24 EA and amount to an unlawful deduction of wages.
As at the time of writing, there is no binding decision of the Malaysian superior courts that directly addresses Section 60F in the specific context of employees who complete 2 years of service mid-calendar year. The analysis above is grounded in statutory interpretation principles and Federal Court guidance on the purposive reading of social legislation.
Authored by: Bong Lep Siong
