Leave entitlement under the Employment Act 1955

Who the Act covers

The Employment Act 1955 applies in Peninsular Malaysia and the Federal Territory of Labuan. Sabah has the Sabah Labour Ordinance and Sarawak the Sarawak Labour Ordinance, which are similar in shape but separate statutes with their own figures. If you employ across the country, you are working with more than one regime.

Amendments effective in 2023 substantially widened the Act's coverage, so it now reaches employees who were previously outside it. A number of specific provisions, notably around overtime, remain limited to employees below a wage threshold. Do not assume an old summary of who is covered still holds.

The Act is a minimum. A contract or handbook may give more leave, and if it does, the better term applies. It cannot give less.

Annual leave

Paid annual leave is tiered by completed years of service with the same employer. The tiers are commonly stated as:

• Less than 2 years of service: 8 days per year
• 2 years but less than 5 years: 12 days per year
• 5 years or more: 16 days per year

Employees who have not completed a full year of service earn leave in proportion to the months worked, so a joiner in September has a part-year entitlement rather than nothing.

Entitlement is generally forfeited if not taken within twelve months of the year it was earned, unless the employee was not given the chance to take it. Many employers allow a limited carry-forward as a contractual benefit, which is fine, as long as the policy is written down and applied consistently.

Verify the current tiers against the text of the Act and its amendments before you set them in a system.

Sick leave and hospitalisation

Paid sick leave, certified by a registered medical practitioner or dental surgeon, is also tiered by service. The tiers are commonly stated as 14 days a year for less than 2 years of service, 18 days for 2 to less than 5 years, and 22 days for 5 years and above, where hospitalisation is not necessary.

Where hospitalisation is necessary, the Act provides a much larger allowance, commonly stated as up to 60 days in aggregate per year. The critical word is aggregate. The 60 days is not on top of the ordinary sick leave, it is the combined total, so ordinary sick days already taken count towards it.

Sick leave requires certification, and the employee must inform you within a reasonable period. An unreported absence is not automatically sick leave just because an MC appears later.

Maternity leave

The Act provides paid maternity leave, extended by the 2022 amendments to 98 consecutive days. Entitlement to maternity allowance is subject to conditions on length of service before confinement and on the number of surviving children.

The Act also restricts terminating a female employee during her maternity leave, and includes protections against dismissal on grounds connected with pregnancy. Treat any termination that overlaps a pregnancy as a matter to take advice on before acting.

Paternity leave

Paid paternity leave was introduced by the 2022 amendments, commonly stated as 7 consecutive days per birth, subject to conditions including a minimum period of employment before the birth and the employee having notified the employer of the pregnancy.

It is capped at a limited number of births, so it is not an unlimited entitlement. Check the current conditions before you approve.

Public holidays, and why they differ by state

Employees are entitled to a set number of paid gazetted public holidays each year, commonly stated as 11 days, of which several are compulsory and the remainder are chosen by the employer from the gazetted list. The compulsory ones typically include National Day, the birthday of the Yang di-Pertuan Agong, the birthday of the Ruler or the Federal Territory Day for the relevant state, Labour Day, and Malaysia Day.

Here is the part that catches multi-state employers. Public holidays in Malaysia are gazetted at two levels. Some are national. Many others are declared by individual states, including the Ruler's birthday, state-specific religious and cultural observances, and Thaipusam or Nuzul Al-Quran in the states that gazette them.

So your Selangor office and your Penang office genuinely do not share a holiday calendar, and neither matches Johor. If you run one company-wide calendar, you will either give some staff holidays they are not entitled to or, more seriously, fail to give holidays that others are.

There is also ad hoc gazetting. Special public holidays get declared during the year, sometimes at short notice and sometimes only in certain states. Your calendar needs to be editable, not hardcoded at the start of the year.

If an employee works on a gazetted public holiday, the Act sets a higher rate of pay for that day. Handle it as a pay rule, not as an informal arrangement.

Other leave the Act touches

Beyond the categories above, employers commonly maintain unpaid leave, compassionate leave, marriage leave and study leave. These are contractual rather than statutory, which makes them entirely your policy to set, and entirely your responsibility to apply evenly.

Record every leave type against the same employee ledger regardless of whether it is statutory or contractual. Disputes are almost always about the balance, not about the policy.

What this means for your payroll

• Drive annual and sick leave tiers off each employee's service date, and re-evaluate on the anniversary rather than at the start of the calendar year.
• Model the hospitalisation allowance as an aggregate cap, so ordinary sick days consume it.
• Attach a state to every employee or work location, and build the public holiday calendar per state.
• Keep the holiday calendar editable during the year so ad hoc gazetted days can be added.
• Pay public holiday work at the statutory rate through a pay rule, so it does not depend on someone remembering.
• Prorate leave for joiners and leavers, and settle unused entitlement on exit according to your written policy.