In Malaysia, employees covered by the Employment Act 1955 are entitled to paid annual leave based on their length of service. The minimum entitlement is 8 days for employees with less than two years of service, 12 days for two to five years, and 16 days for more than five years. Many employers offer more generous entitlements through individual contracts or collective agreements.

Statutory entitlement

8 days of annual leave for less than 2 years of service. 12 days for 2–5 years. 16 days for more than 5 years. Paid at the employee's ordinary rate of pay.

Eligibility

Employees must have worked for the employer for at least 12 months to be entitled to paid annual leave. For employment lasting less than 12 months, leave is pro-rated based on months worked.

Employer obligations

  • Grant annual leave as per the statutory minimum (8, 12, or 16 days based on service length).
  • Pay the employee's ordinary rate of pay during annual leave.
  • Not deduct pay for annual leave days taken within the statutory entitlement.
  • Pay for unused annual leave on termination of employment.
  • Allow the employee to take annual leave within the calendar year.
  • Inform the employee of their leave entitlement in writing.

Employee rights

  • Right to 8–16 days of paid annual leave based on length of service.
  • Right to be paid at the ordinary rate of pay during annual leave.
  • Right to paid leave payout on termination.
  • Right not to be required to waive annual leave entitlement.

Common pitfalls

  • Not pro-rating leave for employees who have not completed 12 months — the Act provides for pro-rated leave based on months worked.
  • Not paying out unused annual leave on termination — this is a statutory requirement.
  • Applying a uniform policy without checking service length — the entitlement increases with service.

How annual leave is calculated

Annual leave entitlement increases with length of service. For employees who have not completed 12 months, leave is pro-rated at the rate of one-twelfth of the annual entitlement for each month worked.

Public holidays and annual leave

Public holidays that fall during an employee's annual leave must be compensated with an additional day of leave or paid at the ordinary rate. Public holidays are separate from annual leave.

Leave for non-Employment Act employees

Employees not covered by the Employment Act (e.g. managers and executives earning above the threshold) are governed by their individual employment contracts for annual leave entitlements.

Frequently asked questions

Can annual leave be carried forward to the next year?

The Employment Act does not require carry-over of unused annual leave. However, employers may allow it through company policy or employment contracts.

What happens if an employee does not take their annual leave?

Unused annual leave must be paid out on termination of employment. During employment, the employer should encourage the employee to take their leave.

Are part-time employees entitled to annual leave?

Yes. Part-time employees are entitled to pro-rated annual leave based on their hours of work compared to full-time employees.

Sources

This page is provided for general guidance and does not constitute legal advice. Always check the cited primary source for current law before making employment decisions.