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Everything You Need to Know About Annual Leave

Mohamad Danial bin Ab. Khalil
by Mohamad Danial bin Ab. Khalil
Sep 17, 2020 at 5:13 PM

What is Annual Leave (AL)?

Annual leave is paid time off given by employers to employees to be used for whatever the employee wants. Depending on the employer's policies and the Employment Act 1955, differing number of days may be allowed.

The employee is expected to give a certain amount of advance notice. They may also have to coordinate with the employer to be sure that staffing is sufficiently covered during the employee's absence, and other requirements may have to be met. 


Employment Act 1955

Employees are entitled to paid AL in the following manner:

  • Less than two years of service: 8 days;
  • Two or more but less than five years of service: 12 days;
  • Over five years of service: 16 days.

The paid AL adds to the employee's rest days and paid holidays. The employer is required to pay the employee the ordinary rate of wage for every day of paid AL.

If the employee has not worked 12 months of continuous service with the same employer during the year in which the contract terminates, they are entitled to paid AL in direct proportion to the number of completed months of work.

If the fraction of a day of AL is less than one-half of a day, then it shall be disregarded. If the fraction of a day is one-half or more, then it shall be deemed as one day.

employee vacation pier
If an employee works with the same company for over 5 years, they are entitled to 16 days of AL.

If an employee who's on paid AL is entitled to sick leave or maternity leave while, they shall be granted the sick leave or the maternity leave, as the case may be. The AL will not count in respect of the days for which sick leave or maternity leave is granted.

The employer has to give and the employee has to take such leave under twelve months after the end of every twelve months of continuous service. Any employee who did not take such leave at the end of that period is no longer entitled to such leave. They are entitled to payment if, at the request of their employer, agree in writing not to avail themselves of their AL entitlement. 

If either party terminated the contract of the service before an employee has taken the paid AL to which they are entitled, the employer shall pay the employee their ordinary rate of pay in respect of every day of AL.



Best practices

For employees under the Employment Act 1955 (those who earn less than RM 2,000 or engaged in manual labour), a statutory minimum of 8 days leave is confirmed. For employees who are not under the Employment Act, there is no minimum even though AL quotas are usually 12 days and above. 

The Employment Act does not give the right for an employer to ask employees why they are going on leave. Employees are also not expected to provide reasons for their leave requests. Contracts of employment for employees who are not under the Employment Act generally also do not allow a similar right to employers or responsibility on employees.

three employees on vacation
The employer cannot ask employees why they are taking annual leave.

However, the Employment Act does say that an employee shall be deemed to have broken their contract of employment if they are continuously absent from work for more than 2 consecutive working days without prior leave from their employer unless they have “a reasonable excuse” and has notified or tried to inform their employer at the earliest opportunity.


Frequently Asked Questions

1. Can an employee offset the notice period for resignation with the balance of annual leave?

The employee is entitled to utilise the AL entitlement during the notice of resignation.

2. How does one calculate the payment in lieu of annual leave?

​Calculation of payment in lieu of annual leave is based on wages at the ordinary rate of pay (ORP) for instance:
           Monthly Rate of Pay 
           ----------------------    =   1 ORP  
                    26 days

3. Are probationary employees entitled to paid annual leave?

According to section 60E(1), an employee (including probationer) is not entitled to take annual leave during the first year of their service. But, if the employee quits or is terminated/not confirmed before the end of the first year of service, they are entitled to utilise or be paid in lieu of AL which shall be in direct proportion to the number of completed months of service.


4. Is an employee entitled to payment in lieu of annual leave not taken at the time of termination of service?

​The employee who quits or terminated (except for misconduct) is entitled to paid annual leave in direct proportion to the completed months of service during the year in which termination takes place. The employer shall also pay the annual leave wages in respect of its balance.


5. Can an employer force an employee to take annual leave?

According to AskLegal, an employer forcing to take AL may not be legal in Malaysia. In their article, the Human Resource Ministry said “...An employer cannot force his employee to take annual leave on the...employer’s own accord.” 


6. Can an employer reject an employee's leave application?

Employers have the right to reject leave applications, based on these grounds:

  • Insufficient notice was given to take AL. 
  • The application did not comply with the company policy.
  • Other employees are going on leave during that period.
  • There is urgent work that needs to be completed and the employee needs to be at work.


7. Is it compulsory for an employer to allow carry forward of annual leave?

It is not compulsory. The company may have a different policy regarding carrying forward leave. This matter can be stated in the appointment letter or company's handbook in a separate instruction.

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Sources: Replicon, MEF, Donovan & Ho, AskLegal

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