Annual Leave in Malaysia: The A to Z Guide for Employers
- Lareina
- Mar 26
- 5 min read
Updated: Mar 27
Managing annual leave sounds simple—until peak season hits, requests overlap, or you’re unsure what to do with an employee’s unused leave. Questions like “Do probationers get leave?” or “Can leave be encashed?” can quickly become tricky without clear policies in place.
A well-structured leave policy isn’t just about compliance; it helps you manage workloads, avoid disruptions, and keep your team happy. Here’s everything you need to know to manage leave smoothly.
Understanding Annual Leave Entitlement
Annual leave is a right, not a privilege. Under the Employment Act, here’s what all employees are entitled to:
Less than 2 years: 8 days per year
2–5 years: 12 days per year
More than 5 years: 16 days per year
That said, many employers go above the minimum, with 14 days being a common starting point. Offering more leave can boost talent retention and attract quality hires. Some employers also reward loyalty or seniority with extra days off—a simple yet effective way to keep employees engaged.
Annual Leave During Probation
One common question is whether probationers can take annual leave. The answer? It depends on your policy.
While annual leave starts accruing from the first day of employment, some employers only allow probationers to take leave after confirmation. Others may allow it but on a pro-rated basis. To prevent misunderstandings, it’s best to have a clear policy outlining how annual leave applies to probationers. To learn more about probation policies, check out this article.
How to Calculate Annual Leave Entitlement?
Not every employee joins at the start of the year, and not everyone stays until the end. So, how do you calculate leave for new hires or employees who resign mid-year?
The simplest way is to pro-rate it based on the number of months worked.
Formula: Prorated Leave Entitlement = (Annual Leave Entitlement / 12 months) × Months worked
Example: Alice joins Synergy on 1st January and leaves on 31st October. If Synergy's policy provides 14 days of annual leave, Alice’s entitlement would be:(14/12) × 10 = 11.67 days (rounded up to 12 days)
For rounding, here’s the rule: Less than half a day rounds down, while half a day or more rounds up. This rounding rule is legally required.
Handling Leave Requests
While team members are entitled to annual leave, employers have the right to decide when it can be taken. A clear leave policy is key—it should outline the request process, notice period, and any blackout dates when leave isn’t allowed.
Most employers use simple systems like email, leave forms, or HR platforms to manage requests. Setting a standard 3-day notice period can help things run smoothly.
Handling Leave Requests during Peak Period
The flood of leave requests during festive seasons or peak business periods can be tricky to manage, but clear strategies can make the process smoother.
Here are some practical ways to manage this:
First Come, First Served: Prioritize requests in the order they’re received. This encourages early planning and gives team members a fair shot at securing time off.
Fair Rotational System: Use a rotating schedule to ensure everyone gets a chance to take leave during key periods. For example, if an employee had leave during Hari Raya in 2024, they may have lower priority for Chinese New Year in 2025 to ensure fairness.
Split or Staggered Leave: Encourage split leave days, like alternating half-days or flexible shifts, to keep things running smoothly without major staffing gaps.
It’s also worth revisiting your manpower needs during festive periods. If business demand is lower, reducing the number of staff on-site may create room to approve more leave requests without impacting operations.
What Happens to Unused Annual Leave?
While unutilized annual leave is generally forfeited under the Employment Act, most employers allow employees to carry forward or encash their unused leave. For this to work smoothly, a clear policy is crucial.
Carry Forward Leave:
Some employers allow employees to carry forward unused leave into the following year. If you're thinking of implementing a carry-forward policy, consider these points:
Setting a maximum number of carry-forward days
Defining a deadline by which those days must be used
Encouraging employees to take breaks regularly to maintain productivity and well-being
Encashment of Leave:
Some employers allow team members to cash out unused leave instead.
Formula: (Basic salary / 26) × Unused leave days
Example: If Reina earns RM3,000 per month and has 5 unused days, she’ll be entitled for: (RM3,000 / 26) × 5 = RM576.92
Hot tip: Most employers prefer carry-forward policies over encashment. After all, a well-rested employee isn’t just happier—they’re more productive too!
Annual Leave for Resigned Employees
When an employee resigns, their remaining leave can either be used before their last working day or encashed. Whatever the choice, it’s crucial for both sides to agree on the approach and document it properly. Clear communication is key—it helps employees understand their options, avoids confusion, and ensures a smoother exit process. For more details on handling employee resignations, check out this article.
FAQs
Can company force employees to take annual leave?
No, companies can’t force employees to use their annual leave. Leave should be taken based on the employee’s preference while considering business needs. During festive seasons, some companies opt for temporary closures, but employees shouldn’t be made to use their leave unless they agree to it. Any arrangements like this should be clearly communicated and mutually agreed upon.
Can employers reject an employee’s annual leave application?
Yes, employers can reject leave requests due to short notice, non-compliance with company policy, scheduling conflicts, or business needs. However, it’s best to communicate the reason clearly and offer alternatives when possible.
What is block leave?
Block leave requires consecutive days off, often 5 or 10 days. It's common in banking and finance to reduce fraud risks. Clear policies and reasonable notice ensure teams can plan accordingly.
Take the Stress Out of Leave Management
Managing annual leave doesn’t have to feel overwhelming. With Synergy Outsourcing by your side, you can simplify leave tracking, ensure compliance, and keep your team happy—all within a press of your finger with our HRIS app.
From crafting clear leave policies to handling tricky peak-season requests, we’re here to support you every step of the way. Whether you're a small business or a growing enterprise, we believe that happy teams create thriving workplaces.
If you're feeling unsure about your leave policies or just want to make things easier, why not reach out? Our friendly team is always ready to help—whether it’s guiding you through the process or taking care of it all for you.
Let’s create a smoother, happier work environment together.
