Final Salary Deduction

Can you deduct overtaken annual leave from the final salary payout when an employee resigns?

Reply by HRAI

In Singapore, employees are entitled to their full annual leave balance upon resignation. That means that any untaken annual leave days should be paid out to the employee as part of their final salary payout.

Employers are not allowed to deduct overtaken annual leave days from the final salary payout unless there is a mutual agreement between the employer and employee.

Therefore, it is important for employers to ensure that employees take their annual leave balance before resignation to avoid any disputes over salary payout.

Additionally, employers can also consider implementing policies and processes to encourage employees to take their annual leave throughout the year to avoid accumulation.

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There are companies that allow confirmed staff to take eligible annual leave for the year even though the staff had not earned the annual leave yet; after all, should the staff resigns during the year, his or her annual leave will then be adjusted to prorated basis. Hence, recovery of any over-consumed leave is normal protocol. – Kelvin

Undertaken AL yes have to be paid when an employee resigns, however, the question is for overtaken AL? overtaken AL meaning not earned AL taken should be as well deducted when an employee resigns. – Ju

Yes but need to inform the employee of this deduction. It will be better to inform employees during leave application it will consider as advance and will be deducted salary if resign. So it is better to let employees take what they “earn”.

Just wondering what “overtaken annual leaves” meant in the scenario. Is it the annual leaves that he/she is not entitled to, or the staff took more than his/her entitlement or forfeited annual leaves? If it is both cases, then the employer should be able to deduct the taken annual leaves in terms of cash from the staff’s final salary. If it is the latter, then the employee will be entitled to the current year’s annual leaves numeration in cash term. – Tony

Types of deductions allowed For overpaid salary and unearned employment benefits, your employer can recover the full amount from you. – Doris

Employees are entitled to their annual leave entitlement based on a prorated basis for the year, including any annual leave carried forward from the previous year unless otherwise stated in the company policy. Whether unused leave is to be encashed to the resignee is depending on the company policy and mutual agreement between employer & employee. – Theresa

If the employee takes more annual leave than entitled to, the excess leave is treated as unpaid leave, and the employer can deduct salary accordingly. Records of all leave applications (paid or unpaid) should be kept. – Diona

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