Employees covered by the Employment Act 1955 are entitled to paid annual leave and paid sick leave, subject to the applicable statutory conditions. Annual leave entitlement is generally 8, 12 or 16 days for every 12 months of continuous service, depending on length of service. Paid sick leave is generally 14, 18 or 22 days a year, with a separate hospitalisation leave entitlement of up to 60 days, subject to the law's conditions.
Who is entitled to annual leave and sick leave?
The Employment Act 1955 provides minimum employment protections for employees within its scope in Peninsular Malaysia and the Federal Territory of Labuan. Different labour legislation applies in Sabah and Sarawak, so employers should check the applicable state law.
For employees covered by the relevant provisions, annual leave and sick leave are separate entitlements. Annual leave allows employees to take planned time off, while sick leave applies when an employee is unwell and meets the relevant certification and notification requirements.
Employers should distinguish statutory minimum entitlements from any more generous benefits offered under an employment contract, collective agreement or company policy. Where the employer provides better benefits, the applicable terms should be reviewed before leave balances are calculated.
The relevant provisions are found in sections 60E and 60F of the Employment Act 1955. Employers can consult the official Employment Act 1955 text.
How much annual leave is an employee entitled to?
Under section 60E, the statutory minimum annual leave entitlement for each 12 months of continuous service with the same employer is generally as follows.
| Length of continuous service | Annual leave per 12 months |
|---|---|
| Less than 2 years | 8 days |
| 2 years or more but less than 5 years | 12 days |
| 5 years or more | 16 days |
These figures represent the statutory minimum for the relevant service period. An employment contract or company policy may provide a greater entitlement.
For example, an employee with three years of continuous service generally qualifies for 12 days of annual leave for each completed 12-month service period. An employer should not automatically apply the eight-day entitlement once the employee has moved into the two-to-five-year service category.
If an employee's contract terminates before completing 12 months of service in the relevant year, section 60E provides for annual leave to be calculated in proportion to the completed months of service, subject to the statutory rules on fractions of a day.
How much paid sick leave is available?
Section 60F provides different minimum paid sick leave entitlements based on the employee's length of service.
| Length of continuous service | Ordinary paid sick leave per calendar year |
|---|---|
| Less than 2 years | 14 days |
| 2 years or more but less than 5 years | 18 days |
| 5 years or more | 22 days |
Employees may also qualify for paid hospitalisation leave of up to 60 days in a calendar year, subject to the applicable legal conditions. The hospitalisation entitlement is separate from ordinary sick leave under the amended provisions.
Sick leave is not the same as annual leave. Employers should record the correct leave type and follow the requirements concerning medical certification, notification and the circumstances in which hospitalisation leave applies.
Employees should notify their employer promptly when they are unwell and follow the company's absence-reporting process. Employers, in turn, should assess the absence in accordance with the law rather than automatically deducting every sick day from annual leave.
Example: calculating annual leave entitlement
Assume an employee has completed three years of continuous service and is entitled to the statutory minimum annual leave of 12 days for each 12-month service period.
- Annual leave entitlement for the completed service period: 12 days.
- Annual leave already taken: 5 days.
- Remaining annual leave: 12 − 5 = 7 days.
The employee therefore has seven days remaining for that entitlement period, assuming there are no additional adjustments, carried-forward days or more favourable company benefits.
A separate example applies when employment terminates before the end of the relevant service year. If the employee has completed six months of service in that year and the applicable annual entitlement is 12 days, a proportional calculation would begin with 12 × 6 ÷ 12 = 6 days, subject to the statutory rules and the precise circumstances of termination.
Employers should verify the completed service months, applicable entitlement and any rounding requirements before finalising the employee's leave balance.
Common leave management mistakes
Poor leave administration can create disputes, incorrect payroll adjustments and inconsistent treatment of employees. Common mistakes include:
- Applying the same annual leave entitlement to every employee regardless of length of service.
- Confusing annual leave with ordinary sick leave or hospitalisation leave.
- Failing to record leave already taken.
- Calculating a termination-related leave balance without checking completed months of service and statutory rounding rules.
- Applying a company policy that falls below the applicable statutory minimum.
- Failing to retain medical certificates or other relevant supporting records where required.
Employers should periodically reconcile leave balances with attendance records, approved applications and payroll data. When an employee resigns or is dismissed, HR should review any outstanding annual leave and determine the appropriate treatment under the law and the employment contract.
Managing leave through an HR system
A structured leave management process helps employers maintain consistent records, identify available balances and review applications before approving time off.
At hrmsystem.my, employers can manage leave entitlements based on the Employment Act, leave coverage groups and public holidays. The staff portal also supports leave applications, helping HR teams organise employee records and reduce manual administration.
System settings should reflect the employer's actual policy and the applicable legal requirements. HR should review eligibility, service dates and any special circumstances rather than relying on a software balance without verification.
For additional information, visit the HR and payroll guides and review the net salary calculator when assessing the wider payroll implications of employee absences.
Frequently asked questions
How many days of annual leave are employees entitled to in Malaysia?
Under section 60E of the Employment Act 1955, the statutory minimum is generally 8 days for employees with less than two years of continuous service, 12 days for two to less than five years, and 16 days for five years or more.
Is hospitalisation leave included in ordinary sick leave?
Under the amended provisions applicable to covered employees, hospitalisation leave of up to 60 days is a separate entitlement, subject to the law's conditions. Employers should distinguish it from ordinary paid sick leave when maintaining records.
Can an employer deduct sick leave from annual leave automatically?
No blanket assumption should be made that every sick day must be deducted from annual leave. Employers should assess the employee's eligibility, certification and notification requirements, and apply the relevant statutory provisions and employment terms.
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