Can Your Boss Force You to Take Annual Leave in Malaysia? Here's What the Law Says

In October 2017, a flight instructor at a Malaysian aviation company was handed a letter: clear out 56 days of accumulated annual leave, starting immediately. His job as Head of Training quietly went to someone else, and he was told to return his company car and laptop. He asked, in writing, whether he still had a job — nobody replied.

He resigned and sued for constructive dismissal. The Court of Appeal ruled against the company in March 2025 — not because "forcing" leave is automatically illegal, but because the forced leave, the reassignment and the silence together broke the mutual trust the relationship depended on. The company was ordered to pay RM20,000 in costs, on top of back wages the Industrial Court still had to work out.

The everyday version plays out in offices and factories every year. Around Chinese New Year, Hari Raya, or whenever business is slow, someone's boss announces the team has to "habiskan cuti tahunan" to cover an extended closure. In January 2025, KESUMA (the Human Resources Ministry) had to publicly remind employers this isn't allowed, after a wave of complaints.

So which is it? Depends what kind of "forcing" you're dealing with.

1. Does the law actually give employers the right to direct your leave?

Sort of — but not as broadly as most people assume. Section 60E(2) says "the employer shall grant and the employee shall take such leave not later than twelve months after the end of every twelve months continuous service," and any employee who doesn't take it within that window "shall thereupon cease to be entitled thereto."

Notice what this doesn't say: it doesn't hand employers a blanket power to declare "you're on leave starting Monday" whenever convenient. It puts the employer on the hook to ensure leave gets used within 12 months of being earned — where the everyday practice of "scheduling" leave comes from. If you haven't applied and the window is closing, your employer has a real interest in pushing you to take it.

Most contracts also give the company a general right to approve, reject or set leave timing around business needs. Courts respect that, as long as it isn't oppressive.

2. Your actual entitlement, and who it covers

These are legal minimums — employers can offer more, but nobody can contract you down to less. Join partway through the year, and your leave for that stretch is pro-rated: completed months of service divided by 12, times the tier you qualify for.

Here's what trips people up: since the Employment (Amendment) Act 2022 took effect on 1 January 2023, annual leave applies to every employee, no matter what you earn. That's different from overtime, rest-day pay, public holiday allowance and statutory termination/lay-off/retirement benefits, which only apply automatically below RM4,000 a month. Plenty of higher earners assume the whole Act stopped applying past RM4,000 — it didn't.

3. The 12-month rule — "use it or lose it" isn't the whole story

Leave doesn't need to be used within the same calendar year — just within 12 months of when it was earned. Leave accrued in March 2026 is usable until roughly March 2027, depending on how your employer structures the leave year.

Employers also can't impose a carry-forward cap stricter than the Act's own 12-month deadline — a policy capping carry-forward at, say, 5 days sits on shaky ground if it forces forfeiture earlier than the statutory window allows.

The only way unused leave becomes cash instead of time off is if you agree to it in writing, at your employer's request — neither side can unilaterally impose a payout instead of days off, or vice versa. It has to be mutual and written.

4. When "forced leave" turns into constructive dismissal

The flight instructor's case — Sudhir a/l A K Kumaren v Industrial Court of Malaysia & Anor, Court of Appeal, March 2025 — is the clearest recent illustration of where the line sits. Forcing 56 days of leave alone didn't sink the employer; the combination did — leave forced without clarity, duties quietly reassigned, a direct question about job security met with silence.

This isn't new. As far back as 1982, in Dunlop Malaysian Industries Bhd v DMIB Employees Union, the Industrial Court held annual leave "is intended for leisure, enjoyment and travel" and "should not be enforced on the employee merely to suit the company's convenience" — still quoted in Malaysian employment disputes today.

An isolated instance of your employer directing paid leave, with proper notice, is unlikely to support a constructive dismissal claim on its own — forced leave used punitively, or bundled with demotion or deliberate ambiguity about your job, is a different story.

Leave scheduling cuts both ways, though. In a case involving Overseas Assurance Corporation (Malaysia) Berhad (Award 1413 of 2006), the Industrial Court held that an employee who took leave without waiting for approval — "at his own whims and fancies" — committed serious misconduct justifying dismissal, even after two decades of service. Leave is meant to be mutual and communicated, not unilaterally imposed by either side.

5. Factory shutdowns, CNY closures and slow-season leave: what's actually allowed

This is where most real-world disputes happen, and where the law gets genuinely blurry.

In a 2015 case, Kesatuan Pekerja-Pekerja Continental Tyre PJ Malaysia Sdn Bhd v Continental Tyre PJ Malaysia, the Industrial Court dealt with a plant shutdown and held the company couldn't simply push staff onto unpaid leave — workers had to be paid, or the days credited against annual leave instead.

The recurring flashpoint is festive closures. In January 2025, KESUMA stated that "employees have the right to decide when to apply for annual leave," and that employers cannot compel staff onto annual or unpaid leave purely to cut costs when a business extends closure beyond the gazetted CNY holidays. A year earlier, the Ministry issued a similar warning to Penang employers ahead of a scheduled January 2024 water supply disruption, saying businesses that forced workers onto leave or cut wages over the pause could face action under the Act.

The distinction regulators keep drawing is between directing use of your own paid leave (tolerated, especially with reasonable notice for a genuine planned shutdown) and pushing staff onto unpaid leave or reduced pay to dodge wage obligations (repeatedly called out as unlawful). A shutdown eating into more leave than you've accrued has no clean statutory answer — in practice it comes down to your contract, your employer's goodwill, or a complaint to JTK.

6. Can annual leave be used to cover your notice period?

Not automatically. If you resign, Section 12 sets minimum notice (four weeks under 2 years of service, six weeks for 2–5 years, eight weeks for 5 years or more, unless your contract says longer), and either side can pay out the notice period instead of working it.

Using your leave balance to shorten or "cover" your notice period isn't something you're automatically entitled to — it depends entirely on whether your employer agrees. Some employers let outgoing staff run leave against notice; others insist notice be worked in full, with unused leave settled separately. Check your contract and ask HR rather than assuming.

7. What happens to unused leave when you resign or get fired

Section 60E(3A) is unambiguous: if your contract ends — by resignation or by the employer terminating you — before you've taken all the leave you're entitled to, your employer must pay your ordinary rate of pay for every unused day. This applies whether you quit or were let go.

The one carve-out: dismissal under Section 14(1)(a) — without notice, for proven misconduct after due inquiry. Outside that, "you forfeit your leave because you're leaving" is not a legal policy, whatever your exit checklist says.

8. Are the rules different in Sabah and Sarawak?

The Employment Act 1955 only covers Peninsular Malaysia and Labuan. Sabah runs on its own Labour Ordinance (Cap. 67) and Sarawak on its own (Cap. 76) — separate laws, administered by JTK Sabah and JTK Sarawak, not JTKSM.

For years the ordinances lagged behind, capping coverage at employees earning RM2,500 a month or less. That changed with the Labour Ordinance (Amendment) Acts 2025, in force from 1 May 2025, which removed the wage cap entirely and extended maternity/paternity leave and hours-of-work protections to match the Employment Act — explicitly to harmonise both states with the Peninsula.

Sarawak's ordinance sets the same 8/12/16-day annual leave structure as the Employment Act. Sabah's ordinance covers annual leave in its own equivalent provision, and everything about the 2025 harmonisation points the same way — but for a real dispute in Sabah, confirm the current wording with JTK Sabah directly.

What to actually do

If your employer wants you to take leave you didn't ask for:

• Ask for it in writing so there's a record of what was said and when.
• Check whether it's paid annual leave or unpaid — the second is what regulators flag as unlawful for cost-cutting.
• If it leaves you with a negative balance, flag that before the leave starts.

If you're about to resign with unused leave:

• Get your outstanding leave balance from HR in writing before handing in notice.
• Ask explicitly whether leave can offset your notice period, or whether you'll work notice in full with leave paid separately.
• If your final payslip skips payment for unused leave, raise it immediately — it's a statutory entitlement, not a favour.

If you're an employer or handling HR:

• Put shutdown and leave-scheduling rules in writing before you need them.
• Give as much advance notice as possible before directing leave for a closure.
• Never direct unpaid leave to save costs without a genuine legal basis — the practice KESUMA flags most often.
• If restructuring someone's role while directing their leave, get the communication right — that combination is what turned Sudhir into constructive dismissal.