Annual leave sounds like the simplest entitlement in the Employment Act — until you're actually building a roster around it. Most shift-based businesses get the day counts roughly right and then quietly get the eligibility rules, the encashment rules, and the "leave taken during notice period" rules wrong. Here's what the Act actually specifies.
Who qualifies, and when
Since the 2022 amendments, annual leave under Section 60E applies to all employeesregardless of salary — unlike overtime, rest-day, and public holiday pay, which are capped at the RM4,000 threshold. An employee only becomes entitled once they've completed 12 months of continuous service with the same employer; leave accrues proportionately for a partial year worked before that milestone.
The actual day counts by tenure
| Years of service | Annual leave days |
|---|---|
| Under 2 years | 8 days |
| 2 to under 5 years | 12 days |
| 5 years or more | 16 days |
Part-timers run on a genuinely different scale — 6/8/11 days on the same tenure bands, not a proportional cut of the full-time numbers. See the full Part-Time Staff Scheduling Rules guide.
What breaks continuity of service — and what doesn't
Rest days, public holidays, and approved leave taken within the leave year don't interrupt continuous service or count against the entitlement. What most rosters get wrong is treating an unpaid leave stretch or an unauthorised absence as neutral — under Section 60E(2), any day an employee is required to work but is absent without the employer's permission, or without reasonable excuse, does not count toward completing the qualifying period.
Cashing out unused leave on termination
If employment ends before an employee has taken all their earned annual leave for the year, Section 60E(3) requires the employer to pay out the untaken portion in lieu — calculated at the ordinary rate of pay. This applies regardless of who initiated the termination, and it's a separate line item from any notice pay or final wages owed.
Employer sets the timing, within reason
The employer decides when annual leave is taken (Section 60E(1)), which in practice means a roster manager can require staff to schedule leave around business needs — but this is also exactly where a documented, fairly-applied leave policy matters if a dispute ever comes up about why one employee's leave request was approved and another's wasn't.
The practical takeaway
Two checks worth running on your own roster: whether you're correctly applying the 8/12/16-day scale by actual tenure rather than a flat number for everyone, and whether your offboarding process actually pays out untaken leave rather than letting it quietly lapse — that second one is a real Section 60E(3) obligation, not a courtesy.