Annual leave during the notice period in Malaysia: what the Act says

The short answer

• You can take the leave that is due to you before your employment ends. Section 60E(2A) of the Employment Act 1955 says so.
• Leave you have not taken when employment ends is paid, at your ordinary rate of pay (section 60E(3A)). The one exception is dismissal for misconduct under section 14(1)(a).
• Taking leave during your notice does not move the day the notice ends. Ending employment earlier is a separate agreement, covered below.

Which leave you can take before you leave

When a contract of service ends, section 60E(2A) covers two amounts of leave:

• the leave due for the twelve months of service before the year in which employment ends; and
• the leave earned for the completed months of service in the year it ends.

Older leave is a different matter. Under the normal rule in section 60E(2), leave has to be taken within twelve months after the end of each twelve months of service, and leave not taken by then is lost. Section 60E(2A) does not bring that back. Many contracts and leave policies are more generous, for example by allowing days to be carried forward, so check yours.

Working out leave for the final year

The minimum yearly entitlement in section 60E(1) is 8 days for under 2 years of service, 12 days for 2 to under 5 years, and 16 days for 5 years or more. Many contracts give more.

For the final year, if it is not a full twelve months, the entitlement is in direct proportion to the completed months of service. A fraction of less than half a day is dropped, and half a day or more counts as a full day.

• 3 years and 5 months of service, 12 days a year: 12 × 5 ÷ 12 = 5 days for the final year.
• 1 year and 7 months of service, 8 days a year: 8 × 7 ÷ 12 = 4.67, which counts as 5 days.

Section 60E(1) also removes the entitlement for a year in which the employee was absent without permission and without reasonable excuse for more than 10% of the working days.

Using annual leave to offset the notice period

“Offset” is not a word the Act uses, and people use it for three different arrangements. They have different results, so agree in writing which one you mean.

Taking leave during the notice period. The notice still ends on the same day; you stop coming to work earlier. You remain employed until the notice ends. This is the leave section 60E(2A) entitles you to take before employment ends. The Act does not say who chooses the dates, so the request follows your contract and the company’s leave process.

Agreeing an earlier last day of employment. Section 12(2) lets either party waive its right to notice, so an employer can agree to release you early. If you do this, put the new last day and what happens to your leave balance in the same written agreement, because the Act’s rule is that leave not taken when employment ends is paid.

Setting two payments against each other. If you leave before your notice ends without the employer waiving it, section 13(1) means you owe the wages for the notice you did not serve, and section 60E(3A) means the employer owes you pay for leave you did not take. The two can be netted off. They are worked out differently, the first from wages for the unserved period and the second per day of leave, so they rarely cancel out exactly. How the first is calculated is in notice period buyouts in Malaysia.

How unused annual leave is paid

Section 60E(3A) says that if the contract is ended by either party before you have taken the leave you are entitled to, the employer pays your ordinary rate of pay for every day of it. That covers resigning with notice as well as being given notice.

For someone paid monthly, section 60I(1A) sets the ordinary rate of pay as the monthly rate of pay divided by 26. An employer may use a different formula only if it does not give a lower rate (section 60I(2)).

A worked example. A monthly rate of pay of RM 3,900, and 5 days of leave not taken when employment ends: RM 3,900 ÷ 26 = RM 150 a day, so RM 750.

The exception. The payment does not apply where an employee is dismissed without notice for misconduct under section 14(1)(a), which the Act allows only after due inquiry.

Who this applies to

The Employment Act 1955 applies in Peninsular Malaysia and has been extended to Labuan. Sabah and Sarawak have their own labour ordinances.

Section 60E applies whatever you earn: the provisions the First Schedule excludes for employees earning more than RM4,000 a month do not include it. The First Schedule does exclude domestic employees from section 60E.

What this means when you are hiring

A candidate who takes leave during their notice may be free before the notice ends, but they are still employed by their current employer until it does. Unless that employer has agreed to release them early, plan the start date from the day their employment ends, not their last day in the office.

So ask for three things separately: the notice period, the last day of employment, and the earliest realistic start date. The notice period calculator gives the last day of notice, and the questions a first round actually has to answer explains why these belong in the first round. Blue asks every candidate for their notice period and availability in the first-round interview.

Questions people ask

The fine print

This page explains the text of the Employment Act 1955 as published by the Labour Department. It is not legal advice.