Malaysia's Annual Leave Entitlement Explained

Are you struggling to implement compliant annual leave policies in your Malaysian business? Managing annual leave entitlement Malaysia presents numerous challenges for employers, from staying current with recent Employment Act amendments to balancing operational needs with employee rights. 

Many companies risk non-compliance, employee disputes, and administrative inefficiencies without proper understanding of leave calculation, carry-forward regulations, and mandatory leave procedures. This guide addresses these common pain points to help your business maintain legally sound annual leave entitlement Malaysia practices.

Read next: Navigating HR Compliance in Malaysia

What is the annual leave entitlement Malaysia?

Under the Employment Act 1955, the minimum annual leave in Malaysia is granted to employees based on their length of continuous service with the same employer. This is a statutory right that ensures employees receive adequate rest to maintain well-being and productivity. 

Over the years, annual leave entitlement Malaysia laws have evolved to provide better protection for workers. The latest update came with the Employment (Amendment) Act 2022, which took effect on 1 January 2023. It introduced several key changes to improve employees’ rights in Malaysia. 

While the minimum annual leave entitlements under Section 60E remain unchanged, the amendment:

• Reduced the weekly working hours from 48 to 45.
• Improved provisions for flexible work arrangements.
• Increased maternity and paternity leave entitlements.
• Enhanced employee protections against discrimination.

It’s important for employers to stay up to date with these amendments to ensure compliance with annual leave entitlement Malaysia.

Who is eligible for annual leave entitlement Malaysia?

As of 2025, all employees, regardless of monthly wages, are now covered under the Employment Act 1955 (Amendment 2022). 

However, employees earning more than RM4,000/month are excluded from specific provisions such as: 

• Overtime payments
• Shift work allowances
• Termination and layoff benefits (unless they are manual laborers, supervisors of manual laborers, or similar roles)

Annual leave entitlement Malaysia is also based on an employee’s years of continuous service with the same employer, with the number of leave days increasing the longer they remain employed. These minimum annual leave Malaysia entitlements apply across the board unless exceptions are specified in the Act.

Employers are not limited to the minimum annual leave Malaysia and may choose to offer more generous annual leave as part of their employee benefits package. Doing so can enhance talent attraction and retention while also helping the company stay competitive in the job market. 

Part-time and contract workers are also entitled to pro-rated annual leave based on their actual working days or hours. Unused annual leave may be carried forward to the following year, depending on company policy, with many employers allowing carry-over for up to 12 months. 

In the event of termination, employees are entitled to receive payment for any unused annual leave, calculated on a prorated basis for the current year. It's also important to note that public holidays and sick leave are separate entitlements and do not count against annual leave.

Who may not be fully covered?

• Domestic workers are now entitled to one rest day per week but not covered for annual leave and other benefits under the Act.
• Supervisors and machinery operators are covered for most protections if their salary is less than RM4,000 per month. If more than that, they may be excluded from certain benefits unless involved in manual labor or supervisory roles directly related to it.

How is annual leave entitlement Malaysia calculated?

Full time employees

For full-time employees, annual leave entitlement Malaysia is calculated based on length of service. The calculation is straightforward for employees who have completed a full year of service.

Part time employees

Part-time employees are also entitled to annual leave entitlement Malaysia, but it's typically calculated proportionally based on their working hours compared to full-time employees. 

(Part-time hours worked ÷ Full-time standard hours) × Standard annual leave entitlement

For example, if a part-time employee works 20 hours per week compared to a standard 40-hour work week, they would receive 50% of the standard leave entitlement.

New employees & probationers

New employees typically begin accruing annual leave from their first day of employment.

During probation periods (usually 3-6 months), employers may:

• Allow leave to be taken during probation (less common)
• Require employees to complete probation before taking leave (more common)
• Still calculate leave accrual from day one, even if it can only be taken after probation

The Employment Act doesn't specifically differentiate probationary employees, so they are legally entitled to prorated leave based on their completed months of service.

Unused leave: carry forward vs forfeiture

The handling of unused leave varies by company policy, though it must comply with minimum standards:

Carry forward

This means your unused leave days can be moved to the next year. For example, if you have 5 unused leave days in 2024, they will be carried forward to your 2025 leave balance. Many Malaysian companies allow this but usually with limits (carrying forward no more than 5-10 days) and deadlines (required to use carried-over leave within 3-6 months of the new year).

Forfeiture

This means your unused leave days expire at year-end if not used - also called "use it or lose it." For example, if you have 5 unused leave days on 31 December, you'd lose them completely when the new year starts. Malaysian law allows this practice as long as it's clearly stated in your employment contract.

Rules and Regulations for Annual Leave Usage

Understanding how annual leave is applied, managed, and paid out is essential for both employers and employees. The rules surrounding annual leave entitlements Malaysia help ensure fair treatment and transparency in the workplace.

Applying for annual leave

Under Malaysian employment law, employers generally can direct employees when to take their annual leave. This is supported by Section 60E(1) of the Employment Act 1955, which states that annual leave shall be taken at a time to be appointed by the employer. 

The employer has the right to schedule when employees can take their annual leave, require employees to take leave during specific periods, and determine the process for leave applications and approvals. 

There might be occasions where business needs, operational shutdowns, or cost-cutting measures require the employer to mandate minimum annual leave Malaysia for all or certain employees. In such cases, employers must communicate clearly and in advance, ideally with written notice or through established HR policies, to ensure fairness and transparency.

Learn more: Voluntary Time Off: How a VTO Policy Works

Annual leave during public holidays and sick leave

Public holidays and sick leave do not count against annual leave days. If a public holiday falls during an approved period of annual leave, the day should not be deducted from the employee’s leave balance. 

Similarly, if an employee falls sick during annual leave and provides a valid medical certificate, the sick leave may be recorded instead of annual leave, depending on company policy.

What happens to annual leave upon resignation, dismissal or retrenchment?

Under annual leave entitlements Malaysia, employees are entitled to receive payment for any unused annual leave when they resign, are dismissed, or are retrenched. 

If the employee has not completed a full year of service, the payment will be calculated on a pro-rated basis.

Best HR Practices for Managing Annual Leave Entitlements Malaysia

Set clear leave policy

Establishing clear policies around annual leave entitlement Malaysia is essential because it ensures consistency, transparency, and fairness in how leave is granted and managed. When employees understand how much leave they’re entitled to, how to apply for it, and any restrictions or blackout periods, it reduces confusion and prevents disputes.

Use HR software

Utilizing HR software can be a game changer for annual leave entitlement Malaysia. The software helps in recording, managing, and tracking employees’ time-off requests. Its main objective is to handle leave requests fairly while ensuring that employee absences do not disrupt business operations. 

Relying on paper forms, emails, or spreadsheets to manage leave can result in serious problems such as payroll errors, non-compliance with employment laws, or unexpected staff shortages that impact productivity.

"Omni’s comprehensive time-off module provided enhanced visibility into employees' time-off schedules across the company."
— Karla Dacanay, Sr. Manager, People Operations at iXS

Read how: iXS achieves full visibility on time off with Omni!

Encourage employees to take leave

According to a study by Expedia, Malaysian employees receive an average of 16 days of annual leave per year. However, only 12 days are utilized, indicating a trend of vacation deprivation. 

Your employees may fail to take the minimum annual leave Malaysia due to various reasons, including fear of losing their jobs, a culture of overwork, or a belief that taking leave is a sign of weakness. Additionally, work-related pressures, family commitments, and personal errands can also contribute to this reluctance. 

It is your responsibility as an employer to ensure they take a break from work. When employees delay taking annual leave, it can impact their well-being and performance, which in turn can affect overall business productivity.

Read next: Practical Approaches to Employee Burnout Signs

Plan leave schedules in advance

When managing annual leave entitlement Malaysia, it is crucial to plan leave schedules in advance. This is to ensure adequate staffing, reduce last-minute disruptions, and maintain consistent productivity across teams. 

Proper planning allows managers to balance workloads, coordinate team availability, and avoid overlapping leave that could impact key projects or deadlines.

Frequently Asked Questions

1. Can my company provide more leave than the Employment Act?

Yes, employers can offer more leave than the minimum annual leave Malaysia. This is often part of a company’s benefits package.

2. Can annual leave be converted to cash?

Yes, unused leave can be converted to cash, especially when leaving a job. This is calculated based on prorated entitlement.

3. What happens if my employer refuses to grant my leave?

Employers can postpone leave due to business needs, but they must allow employees to use their entitlement within a reasonable time.

4. Do public holidays count as annual leave?

No, public holidays are separate and do not count against the minimum annual leave Malaysia entitlement.

5. Can I take annual leave during my notice period?

Yes, you can take annual leave entitlement Malaysia during your notice period, but it must be approved by your employer.

Streamline Leave Management in Malaysia with Omni

Effectively managing annual leave entitlement Malaysia requires HR professionals to invest in modern leave management systems and processes.

Omni’s time-off management capabilities help managers and HR teams swiftly navigate employee leave management. Omni’s platform allows you to approve leave applications on the go and keep track of who’s in and out of the office with at-a-glance scheduling.

Our employee self-service portal enables employees to submit their time-off requests, which are automatically routed to the appropriate manager thanks to customizable approval workflows. Our user-friendly mobile application further simplifies the process, allowing employees to apply for time-off requests on the go.

For further leave management ease, Omni seamlessly integrates with common work tools such as Slack, enabling managers to manage time-off approvals with a simple push of a button. With automated calculations, employees and managers can easily view leave balances in real time and track how many vacation days they have left without having to go through HR.

Our localized solutions and interconnected system merge your leave management efforts with payroll processing, facilitating automatic, accurate calculations and compliance with local regulations for various regions.

If you’re ready to take your leave management to the next level, book a demo with us today. We’ll walk you through our platform’s capabilities and demonstrate how Omni can transform your leave management processes, saving you time, reducing administrative burdens, and enhancing overall efficiency.