How To Calculate Prorated Bonus: A Simple Guide For Malaysian Employers

Bonuses play a key role to keeping employees motivated thereby increasing retention rates! But what do you do when someone doesn’t work the whole bonus period—maybe they started mid-year or quit before the ended? That’s where prorated bonuses come into play.

Malaysian companies need to figure out prorated bonuses for employees who work part of the year or on contracts. Yet many HR teams still find it tough to get this right. In this guide, we’ll break down everything you need to know about prorated bonus calculations—without the jargon.

What Is a Prorated Bonus?

A prorated bonus has a partial value. Companies give it to employees who qualify but didn’t work the whole time for which the bonus applies. It’s based on the actual duration the employee worked during the bonus cycle.

Here’s an example:

If your company gives a yearly bonus and an employee started in July, they’d get 6/12 (or 50%) of the full-year bonus.

Prorating makes sure things are fair for the employees and the company. It avoids overpaying or under-rewarding staff and supports proper financial planning.

When Should You Apply a Prorated Bonus?

You use prorated bonuses in these cases:

Each company can create its own internal bonus policy. But fairness and consistency matter most—if you aim to keep your workforce’s trust.

To learn more about bonus types and policies, read our article on Understanding Performance Bonuses and Prorated Bonuses

How To Calculate Prorated Bonus (With Examples)

Let’s imagine your worker’s total bonus is RM6,000 for the year. If they put in 9 out of 12 months here’s how to figure it out:

Formula:

Prorated Bonus = (Months worked ÷ Total bonus period) × Full bonus amount

Example:

= (9 ÷ 12) × RM6,000

= 0.75 × RM6,000

= RM4,500

That’s all there is to it. The numbers are simple to calculate, but the real test lies in keeping tabs on exact employment dates—for teams that are expanding.

If you want to make this process easier many payroll software systems—like Info-Tech’s HRMS—have bonus calculators built in. These tools helps reduce mistakes that can happen when doing manual calculations.

Should You Calculate Bonuses Using Calendar Days or Months?

People often ask about this. Some businesses use full months, while others prefer to be more exact with daily calculations.

Here’s a comparison:

Basis	Calculated	Works Best For
Monthly Basis	1 month = full bonus month	Simpler bonus plans
Daily Basis	Bonus amount ÷ 365 × number of days	More precise used in contract situations

Example (Daily Breakdown):

Your choice depends on internal policy and consistency—but daily calculations are ideal for high-turnover or contract-heavy environments.

Does Malaysia Require Prorated Bonuses?

The Malaysian Employment Act 1955 states that companies don’t have to give bonuses by law unless a contract or collective agreement says so. But if a company promises bonuses—in job offers or employee guides—they must follow through.

If your rules include prorated bonuses, be transparent and consistent in its application. Unfair practices could lead to employee disputes or even legal claims.

Tip: Always have written records of bonus policies in writing acknowledged during the hiring process.

Mistakes You Should Avoid

Companies often stumble when it’s time to give out bonuses. Here are the most common errors:

• Ignoring the start/resignation date – Even a few days can make a huge difference.
• Getting the working months wrong – Double-check for unpaid leave, no-pay leave, or long MCs.
• Unclear communication – Employees should be informed from the start if bonuses will be prorated.
• Errors in manual calculations – This happens a lot with Excel where you can’t track audit trails.

Looking to steer clear of these traps? Think about using a cloud-based payroll system like Info-Tech’s HR Software that manages bonus proration, tax deductions, and payslip generation in one place.

Do Bonuses Get Taxed in Malaysia?

Yes, cash bonuses are all treated as taxable income. LHDN rules say they need to be part of the employee’s monthly pay and taxed under the Monthly Tax Deduction (MTD/PCB) plan.

This shows why having a reliable e-invoicing and payroll system matters.

If you’re getting ready for the 2026 e-Invoicing mandate, ensure your bonus calculations show up on payslips and income records for which Info Tech’s E-Invoicing Software would be the best option you can choose.

HR Software Automates Prorated Bonus Calculations

Doing bonus calculations manually, especially prorated ones—can cause errors and leave employees dissatisfied. Info-Tech’s HR software helps you:

• Calculate prorated bonuses based on when employees join or resign
• Create payslips that comply with tax rules
• Cut down on errors
• Speed up payroll processing at year-end

Whether you’re in charge of a small group or a company with multiple locations, automation allows your HR teams to concentrate on strategy instead of spreadsheets.

Final Thoughts

Prorated bonuses aren’t just about numbers—they show how fair and professional your company is.

When handled efficiently, they build trust and retain good employees. When mismanaged, they can cause confusion and payroll errors.

By grasping when and how to figure out prorated bonuses using the right method, and switching to automation, when possible, your business can stay compliant and keep morale high at the same time.