Leave Entitlement in Malaysia: 2025 Guide for Employers & HR Professionals
Understanding leave entitlements in Malaysia proves paramount for fostering a compliant, fair, and productive workplace. For HR professionals and business owners, a clear grasp of these regulations ensures adherence to the law, thereby contributing to employee satisfaction and well-being. Indeed, misinterpretations or outdated information can lead to disputes and operational disruptions. This comprehensive guide delves into the critical aspects of leave entitlement in Malaysia, reflecting the latest legislative updates, to help you manage this crucial HR function effectively.
Understanding the Foundation: Malaysia’s Employment Act 1955 and Leave Policies in Malaysia
The cornerstone of employment law in Malaysia, particularly concerning leave, remains the Employment Act 1955. This legislation outlines the minimum statutory benefits for employees.
What is the Standard Leave Policy Framework in Malaysia? Understanding Leave Entitlement Malaysia
In Malaysia, a “standard” leave policy fundamentally builds upon the minimums set by the Employment Act 1955. This framework includes entitlements to annual leave, sick leave, maternity leave, paternity leave, and public holidays. While the Act provides a baseline, many companies, especially multinational corporations (MNCs) and progressive small to medium enterprises (SMEs), offer more generous terms as part of their strategy to attract and retain talent. Consequently, a comprehensive company leave policy details these statutory leaves and any additional non-statutory leaves, along with procedures for application and approval.
Scope of the Employment Act 1955 (Post-2023 Amendments) and its Impact on Malaysia Leave Entitlement
Significantly, the Employment (Amendment) Act 2022, effective from January 1, 2023, significantly expanded the scope of the Employment Act 1955. The Act now applies to all employees irrespective of their wages, bringing a larger segment of the workforce under its protection for core benefits like annual and sick leave.
However, for specific monetary entitlements such as overtime pay, payment for work on rest days, payment for work on public holidays, and termination benefits, the Act’s provisions primarily apply to employees whose wages do not exceed RM4,000 per month. For employees earning above RM4,000, their employment contract governs these specific entitlements.
The Importance of Company-Specific Leave Policies for Effective Leave Management in Malaysia
While the Employment Act 1955 sets the minimum standards, employers must develop and clearly communicate their own company-specific leave policies. This policy document should:
- Outline all types of leave offered (statutory and contractual).
- Specify eligibility criteria.
- Detail the application and approval process.
- Explain how leave accrues and calculates.
- Address rules for carry-forward, encashment, or forfeiture of leave.
- Be readily accessible to all employees.
Key Statutory Leave Entitlements in Malaysia for Employers
Malaysian law mandates several types of leave. Understanding each remains key for effective HR management.
Annual Leave Entitlement in Malaysia
Annual leave is paid time off that allows employees to rest, rejuvenate, or attend to personal matters.
How Many Days of Annual Leave Are Employees Entitled To? (Updated Tiers)
The minimum paid annual leave entitlement under the Employment Act 1955 depends on an employee’s length of service:
| Length of Service | Minimum Annual Leave Days |
|---|---|
| Less than 2 years | 8 days per year |
| 2 years to less than 5 years | 12 days per year |
| 5 years or more | 16 days per year |
How to Calculate Annual Leave Entitlement in Malaysia (Proration for Incomplete Year)
For an employee who has not completed twelve months of continuous service with the same employer during the year their contract terminates, their entitlement to paid annual leave directly proportions to the number of completed months of service.
The formula is:
(Number of completed months of service / 12) x Entitled annual leave for the year
Example: An employee with 3 years of service (entitled to 12 days) resigns after completing 7 months in the current year.
Prorated annual leave = (7 / 12) x 12 days = 7 days.
Payment for Annual Leave (Ordinary Rate of Pay)
Annual leave is paid leave. Employees receive their ordinary rate of pay for the days they are on annual leave. The ordinary rate of pay represents the employee’s basic wage plus any fixed allowances.
Can an Employer Reject or Defer Annual Leave?
Yes, an employer can reject an annual leave application or request an employee to defer their leave. However, this must be based on exigencies of service (valid business reasons), such as operational requirements or ensuring adequate staffing. Employers must grant annual leave to be taken within twelve months after the end of every twelve months of continuous service. If an employer does not grant the leave within this period, they must pay the employee their ordinary rate of pay in lieu of such annual leave.
Managing Unused Annual Leave: Carry Forward and Encashment Rules
The Employment Act 1955 stipulates that employees must utilize annual leave within twelve months after the end of the qualifying period. If an employee fails to take their leave within this timeframe, they may forfeit it. However, company policy or contractual agreements may allow:
- Carry forward: A portion of unused leave may be carried over to the next calendar year, often with a deadline for utilization.
- Encashment: Employers generally provide payment in lieu of unused annual leave only upon termination of employment (Section 60D(1A)), unless otherwise agreed in the contract of service or collective agreement, or if the employer failed to grant the leave as required.
Medical Leave (MC Leave / Sick Leave) in Malaysia
Medical leave, or sick leave, is paid time off granted when an employee is medically unfit for work.
How Many Days of MC Leave Are Provided Annually? (Updated Tiers)
The minimum paid sick leave entitlement under the Employment Act 1955 depends on the employee’s length of service:
| Length of Service | Paid Sick Leave Days (Non-Hospitalization) |
|---|---|
| Less than 2 years | 14 days per year |
| 2 years to less than 5 years | 18 days per year |
| 5 years or more | 22 days per year |
Sick Leave During Hospitalization (Clarifying the 60-Day Aggregate)
If hospitalization is necessary, an employee is entitled to a total of 60 days of paid sick leave in aggregate in each calendar year. This 60-day total includes any non-hospitalization paid sick leave already taken during that year. It is not an additional 60 days on top of the standard entitlement; rather, the cap for paid sick leave extends to 60 days if hospitalization is involved. However, some sources suggest hospitalization leave is separate and additional to the general sick leave entitlement since January 1, 2023.
Requirements for Claiming Paid Sick Leave (Notification, MC)
To be eligible for paid sick leave, an employee must:
- Notify their employer of their absence due to sickness within 48 hours from the commencement of such absence.
- Provide a medical certificate (MC) issued by a registered medical practitioner or dental surgeon. If the MC is from a practitioner other than one appointed by the employer (panel clinic), the employer may, at their own expense, require a second opinion from their panel doctor.
Maternity Leave Entitlement in Malaysia
Duration and Eligibility (98 days)
Eligible female employees are entitled to 98 consecutive days of paid maternity leave for each confinement. The Employment (Amendment) Act 2022 increased this from the previous 60 days. Furthermore, pregnant female employees and those with pregnancy-related illnesses receive enhanced protection against termination.
Paternity Leave Entitlement in Malaysia
Entitlement for Eligible Fathers (7 days, up to 5 confinements)
The Employment (Amendment) Act 2022 introduced a statutory entitlement to 7 consecutive days of paid paternity leave for married male employees for each confinement. This is limited to a total of five confinements, irrespective of the number of spouses. To be eligible, the male employee must have been employed by the same employer for at least twelve months immediately before the commencement of such leave and must notify his employer of his spouse’s pregnancy at least thirty days from the expected confinement or as soon as possible after the birth. You can learn more about Parental Leave in Malaysia for a detailed view.
Public Holidays in Malaysia: Employer Obligations
Minimum Entitlement and Selection (5 Compulsory + 6 Employer-Selected)
Employees are entitled to paid holidays on gazetted public holidays. The Employment Act 1955 mandates a minimum of 11 gazetted public holidays in one calendar year. Five of these must be:
- National Day
- Malaysia Day
- The Birthday of the Yang di-Pertuan Agong
- The Birthday of the Ruler or Yang di-Pertua Negeri of the state where the employee wholly or mainly works
- Workers’ Day
The employer can choose the remaining 6 days from the list of gazetted public holidays and must conspicuously exhibit a notice at the place of employment specifying these chosen days before the start of each calendar year. Additionally, employees are entitled to any other day declared as a public holiday under section 8 of the Holidays Act 1951.
For a broader perspective on employee rewards, see Employee Benefits in Malaysia: Everything Employers Need to Know.
Unpaid Leave Policies in Malaysia
What is Unpaid Leave and When Is It Applicable?
Unpaid leave represents time off from work, approved by the employer, during which the employee does not receive their salary. The Employment Act 1955 does not extensively provide for general unpaid leave, except in specific circumstances (e.g., extended illness after exhausting paid sick leave, or under certain conditions related to maternity leave).
Employer Discretion and Policy
Granting unpaid leave is largely at the discretion of the employer, based on company policy. Common reasons for requesting unpaid leave include:
- Extended personal or family emergencies.
- Compassionate grounds.
- Further studies or sabbaticals, if company policy supports them.
Employers should always formally agree upon and document the terms and duration of unpaid leave.
Calculating Leave Pay and Deductions in Malaysia
Accurate calculation of leave pay is crucial for compliance and fair compensation.
Determining the Ordinary Rate of Pay (ORP) for Leave Calculations
For monthly-rated employees, the ordinary rate of pay (ORP) defines the basis for calculating payment for paid leave days and other entitlements. The ORP is determined by dividing the employee’s monthly salary by 26.
ORP = Monthly Salary / 26
“Monthly salary” here typically includes the basic wage and other cash payments an employer provides for work done under a contract of service. However, it does not include:
- Value of accommodation, amenities, or services.
- Contributions paid by the employer to pension funds, provident funds, etc.
- Travelling allowances or concessions.
- Sums payable for special expenses.
- Gratuities or annual bonuses.
The 26-Day Principle for Monthly-Rated Employees and its Application
Employers use the 26-day divisor because a monthly-rated employee’s salary covers all days in the month, including rest days. However, for calculations relating to work (like overtime or pay for a single day’s work/leave), the rate is based on the typical number of working days in a month, excluding one rest day per week.
Calculating Pay for an Incomplete Month or Leave Encashment
When an employee works an incomplete month (e.g., due to joining mid-month or taking unpaid leave), or when calculating pay in lieu of notice or unused annual leave upon termination, employers use the daily rate (ORP).
Salary for days worked = ORP x Number of days worked in the month.
For more complex salary computations, Worksy’s Salary Calculator can be a helpful tool.
Effective Leave Management for Businesses in Malaysia
Efficient and fair leave management marks a hallmark of good HR practice.
Employee Responsibilities in Leave Application Process
Employees play a crucial role in proper leave management. Therefore, they should:
- Timely Application: Submit leave requests in advance as per company policy, especially for planned leave like annual leave.
- Proper Notification: Inform supervisors promptly for emergency or sick leave, following company procedure.
- Understanding Policy: Familiarize themselves with the company’s leave policies.
Employer Responsibilities in Leave Administration and Compliance
Establishing Clear and Compliant Leave Policies
Employers must develop, communicate, and consistently apply a comprehensive leave policy that aligns with Malaysian employment law.
Fair Application and Record-Keeping
Employers must ensure fairness when approving leave and maintain meticulous records of all leave taken, balances, and accruals. This practice remains vital for audits and dispute resolution.
Ensuring Compliance with Latest Labour Laws
Employers should stay updated with amendments to employment legislation to ensure ongoing compliance. Referencing resources on the latest labour laws in Malaysia is advisable.
Streamlining Leave Management with HRMS Solutions in Malaysia
Manual leave management often proves time-consuming, prone to errors, and can lead to compliance risks. Modern Human Resource Management Systems (HRMS) offer robust solutions.
Benefits of Automating Leave Requests and Approvals
An HRMS like Worksy empowers employees to apply for leave online or via mobile apps. Managers then receive notifications and can approve or reject requests efficiently, significantly reducing paperwork and delays.
Accurate Leave Tracking and Balance Management with HRMS
HRMS provides real-time visibility into leave entitlements, balances, and history for employees, managers, and HR. This transparency reduces queries and potential disputes.
Ensuring Legal Compliance with HR Software (e.g., Worksy HRMS)
Companies can configure these systems with Malaysian statutory leave requirements, ensuring calculations and entitlements apply automatically and accurately. An eLeave Management System specifically designs its features for this purpose.
Integration with Payroll Systems for Efficiency
Seamless integration of leave data with payroll software, such as Modern Payroll Software, ensures that paid and unpaid leave correctly reflects in salary calculations, saving time and preventing errors.
Understanding the broader role of HR software in modern businesses can highlight further benefits in streamlining HR operations.
Addressing Common Questions: Leave Entitlement Malaysia FAQ
Q1: What if my employment contract offers more leave than the Employment Act?
If your employment contract or company policy provides more generous leave entitlements (e.g., more annual leave days, additional types of leave) than the minimums stipulated in the Employment Act 1955, then the more favorable terms of your contract will apply. The Act sets the minimum floor, not the ceiling.
Q2: Does an employee’s probation period affect their leave entitlement in Malaysia?
Employees on probation are generally entitled to statutory leave, such as annual leave and sick leave, on a prorated basis according to their length of service from their join date. However, some company policies might have specific rules regarding when employees can actually take such leave during the probationary period. Always refer to the employment contract and company handbook.
Q3: What should an employee do if their employer isn’t granting entitled leave?
If an employee believes their employer is not granting leave to which they are legally entitled, they should first discuss the matter with their immediate supervisor or the HR department, referencing their contract and company policy. If the issue remains unresolved, the employee can seek advice and assistance from the nearest Labour Office (Jabatan Tenaga Kerja).
Q4: Can an employer in Malaysia force an employee to take annual leave?
Yes, an employer can require an employee to take their annual leave under certain circumstances, such as during a planned company shutdown period or if the employee has accumulated excessive leave that needs utilization. This should ideally be communicated clearly, reasonably, and in accordance with company policy or the employment contract.
Q5: Are part-time employees in Malaysia entitled to statutory leave?
Yes, part-time employees are entitled to paid annual leave and paid sick leave. However, employers prorate these entitlements based on their hours of work compared to a full-time employee doing similar work in the same enterprise. For example, if a full-time employee works 40 hours a week and is entitled to 8 days of annual leave, a part-time employee working 20 hours a week would be entitled to (20/40) * 8 = 4 days of annual leave.
Q6: What are the key recent changes to leave entitlements under the Employment Act?
The most significant recent changes, effective January 1, 2023, under the Employment (Amendment) Act 2022 include:
- Expansion of the Act’s scope to cover all employees irrespective of wages for core benefits.
- Increase in maternity leave to 98 days.
- Introduction of 7 days paid paternity leave.
- Changes to working hours and flexible working arrangement provisions (though not directly leave, they are related employment conditions).
Conclusion: Ensuring Fair and Lawful Leave Practices in Malaysia
Navigating leave entitlements in Malaysia requires a thorough understanding of the Employment Act 1955 and a commitment to fair internal policies. For HR professionals and business owners, ensuring compliance is not just a legal obligation but also a key factor in building a positive and motivated workforce.
By establishing clear leave policies, maintaining accurate records, and leveraging modern tools like Worksy HRMS, businesses can manage leave efficiently, reduce administrative burdens, and ensure employees receive their rightful entitlements. This proactive approach to leave management fosters trust, enhances employee morale, and ultimately contributes to the overall success and productivity of the organization.