Annual Leave Malaysia 2026: Entitlement, Proration & Leave Pay

Under the Employment Act 1955, you're entitled to 8 days of paid annual leave (cuti tahunan) a year if you've worked for the same employer for less than 2 years, 12 days from 2 to under 5 years, and 16 days from 5 years. If you leave part-way through a year, that year's leave is prorated by completed months. Any leave you haven't taken when you leave is paid at your ordinary rate of pay, which is monthly salary ÷ 26 for monthly-paid staff.

This guide covers section 60E: who it covers, how to prorate leave in your final year, how to work out the payout in RM, and the mistakes that cause most disputes. To check your monthly take-home pay, use the salary calculator.

Who the annual leave rules cover

The Employment Act 1955 (Act 265) applies in Peninsular Malaysia and the Federal Territory of Labuan. Sabah and Sarawak have their own Labour Ordinances, so check those if you work there.

A common myth is that leave rights stop once you earn more than RM4,000. They don't. The First Schedule lists only a few provisions that don't apply to people earning above RM4,000 a month, mainly overtime and rest-day/holiday pay rates and termination benefits. Section 60E is not on that list, so the minimum annual leave applies whatever your salary.

Domestic employees are the main group excluded from section 60E (First Schedule, paragraph 2(5)).

The Act sets a minimum. Your contract or company handbook can give more days, but not fewer.

How many days you get

Your entitlement depends on how long you've worked for the same employer:

• Less than 2 years: 8 days for every 12 months of continuous service
• 2 years to less than 5 years: 12 days for every 12 months
• 5 years or more: 16 days for every 12 months

Three rules sit around these numbers:

• Annual leave is on top of rest days and paid public holidays (s.60E(1A)). A public holiday that falls during your leave shouldn't be deducted from your leave balance.
• If you fall sick or go on maternity leave while on annual leave, the sick or maternity leave is granted instead. Those days count as not taken as annual leave (s.60E(1B)).
• If you're absent without permission and without a reasonable excuse for more than 10% of the working days in the 12-month period, you lose that period's annual leave.

Unpaid leave also matters. If your unpaid leave adds up to more than 30 days in a 12-month period, that period doesn't count towards your length of service for annual leave (s.60E(3B)).

Use it within 12 months

Section 60E(2) says the employer must grant, and you must take, your leave no later than 12 months after the end of each 12 months of continuous service. If you don't take it within that window, you lose the entitlement.

There's one exception. If your employer asks you not to take some or all of your leave and you agree in writing, you're entitled to be paid for those days instead.

Many companies run leave on a calendar year and allow a set number of days to be carried forward. That's fine as long as the result is no worse than the Act's minimum.

How to prorate annual leave in your final year

If you haven't completed 12 months of service in the year your employment ends, your leave for that year is in direct proportion to the completed months of service:

1. Find your full-year entitlement (8, 12 or 16 days).
2. Multiply by the completed months of service in that year.
3. Divide by 12.
4. Round the result: a fraction below half a day is dropped, and half a day or more counts as a full day.

For example, 8 days × 5 months ÷ 12 = 3.33 days, which becomes 3 days. But 8 days × 7 months ÷ 12 = 4.67 days, which becomes 5 days.

When your contract ends, s.60E(2A) lets you take, before you leave, the leave still due from the previous 12 months of service plus the leave accrued for completed months in the final year.

How unused leave is paid out

If your contract ends, whether you resign or the employer ends it, before you've taken the leave you're entitled to, the employer must pay your ordinary rate of pay (ORP) for every unused day (s.60E(3A)).

For a monthly-paid employee, section 60I(1A) fixes the ORP as:

ORP = monthly rate of pay ÷ 26

So the payout is monthly rate of pay ÷ 26 × unused leave days.

There's one exception. The payout isn't owed if you're dismissed for misconduct under section 14(1)(a) after a due inquiry.

While you're still employed, annual leave pay works simply: if you get your normal monthly salary with no deduction for the days you were on leave, you've been paid for that leave (s.60E(3)).

Worked example 1: resigning in the second year (RM3,500)

Aina joined on 1 February 2025 on a basic salary of RM3,500. She resigns, and her last day is 31 August 2026.

• Entitlement tier: at the end she has worked about 1 year 7 months, so less than 2 years: 8 days a year.
• First service year (Feb 2025 – Jan 2026): 8 days. She took 6, so 2 days are left. They're still within the 12-month window, so they count.
• Final year (from 1 Feb 2026): 7 completed months → 8 × 7 ÷ 12 = 4.67 → 5 days. She took none.
• Unused leave: 2 + 5 = 7 days.
• ORP: RM3,500 ÷ 26 = RM134.62 a day.
• Payout: RM3,500 × 7 ÷ 26 = RM942.31.

If Aina takes those 7 days during her notice period instead (and her employer agrees to the dates), there's nothing to pay out. The leave is simply used up.

Worked example 2: six years' service on RM5,200

Daniel has worked for the same company since 2019 and earns RM5,200 a month. His company runs leave on the calendar year, and his last day is 30 September 2026.

• Entitlement tier: more than 5 years: 16 days a year. He earns over RM4,000, but section 60E still applies.
• 2026 entitlement: 9 completed months → 16 × 9 ÷ 12 = 12 days.
• Taken in 2026: 4 days, so 8 days are unused.
• ORP: RM5,200 ÷ 26 = RM200 a day.
• Payout: RM200 × 8 = RM1,600.

If Daniel's contract gives 20 days a year, his employer should use 20 instead of 16: 20 × 9 ÷ 12 = 15 days. The Act's figure is the minimum.

Common mistakes

• Dividing by 30, 31 or 22 working days. For leave pay, the Act fixes the monthly-paid ORP at monthly salary ÷ 26. Dividing by calendar days is the rule for prorating a part-month salary under s.18A, which is a different calculation. See the prorated salary guide.
• Assuming staff earning over RM4,000 aren't covered. The RM4,000 exclusions in the First Schedule don't include annual leave.
• Rounding every fraction up (or down). Below half a day is dropped. Half a day or more becomes a full day.
• Deducting public holidays or medical-certified sick days from annual leave. Both are separate entitlements.
• Forfeiting leave the employer asked you not to take. If the employer asked you to skip leave and you agreed in writing, you're owed payment for those days.
• Forgetting last year's balance at resignation. Leave still inside its 12-month window counts as well as the prorated final-year leave.

Sick leave is separate

Paid sick leave under section 60F is a separate entitlement and doesn't come out of your annual leave. You need a medical certificate (from a registered doctor or a dental surgeon), and you must inform your employer within 48 hours:

• Less than 2 years' service: 14 days a calendar year
• 2 to less than 5 years: 18 days
• 5 years or more: 22 days
• Hospitalisation: up to 60 days a calendar year in total

Unused sick leave isn't paid out under the Act when you leave.

Quick checklist before your last day

1. Confirm your service start date and which tier (8, 12 or 16 days) applies, or your contract's higher figure.
2. Count the completed months in your final leave year, prorate and round.
3. Add any leave from the previous 12-month period that hasn't expired.
4. Subtract the days already taken.
5. Multiply the balance by monthly salary ÷ 26, or plan to take the days during notice.

The leave payout is separate from any termination benefits you're owed. If your employer is ending your job, read how termination benefits are calculated as well.

If your employer won't pay out unused leave you're owed, you can file a complaint with the Labour Department (JTKSM).