Cuti Tahunan Pekerja Swasta 2025 Explained for HR and Employers

Employees always get excited when they hear about time off. It's a chance for them to take a proper break from work and recharge. In Malaysia, aside from public holidays, private sector employees are also entitled to paid annual leave.

In this article, we’ll walk you through how to manage cuti tahunan pekerja swasta 2025 (annual leave for private sector employees) based on the latest employment laws. If you’re an employer or HR professional, this guide will help you stay compliant and support your team’s well-being.

What Is Cuti Tahunan Pekerja Swasta 2025?

Cuti tahunan pekerja swasta 2025 means paid annual leave for private sector employees in Malaysia. This is the leave they can take for rest, vacation, or personal reasons. It is part of their basic rights under the law.

The rules come from the Employment Act 1955, which covers employees in Peninsular Malaysia and Labuan. For workers in Sabah and Sarawak, different state laws apply.

Annual leave is a legal requirement. Employees earn this leave based on how long they have worked for a company. The longer they stay, the more leave days they get.

Since 1 January 2023, all private sector employees are protected by this rule, no matter how much they earn. The only exception is domestic workers. If a company gives less leave than what the law says, the law will still protect the employee and give them the correct amount.

Entitlement Under the Employment Act

The Employment Act 1955 sets the basic rules for annual leave for private sector employees. Employees become eligible for paid annual leave after they’ve completed 12 months of continuous service with the same employer.

The number of days they get depends on how long they’ve worked:

Years of Service	Minimum Annual Leave Entitlement
Less than 2 years	8 days per year
2 to 5 years	12 days per year
More than 5 years	16 days per year

These are the minimum numbers. If an employment contract gives more leave than this, then the better benefit applies. But if the contract gives less, the employee is still entitled to the minimum leave stated in the Act.

Employees must use their annual leave within 12 months after they complete each full year of service. However, it is up to the employer to decide whether to let employees carry forward any unused leave or convert it into payment.

How to Handle Prorated Leave

Sometimes, an employee hasn’t worked a full 12 months yet but is leaving the company or needs to know how much leave they’ve earned so far. In this case, their annual leave is calculated on a monthly basis, or prorated.

This means their leave entitlement depends on how many full months they’ve worked.

Let’s say the employee is still in their first year and qualifies for 8 days of annual leave per year. If they’ve worked for 6 months, the calculation is:

(6 ÷ 12) × 8 = 4 days

So, they are entitled to 4 days of annual leave.

To make the calculation fair and consistent, here’s how to deal with decimals:

If the result is 0.5 or more, round it up to the next whole number.
If the result is less than 0.5, round it down.

This method makes it easier for HR teams to handle leave balances, especially when dealing with employees who resign before completing a full year.

Who Does This Apply To?

The cuti tahunan pekerja swasta 2025 rules come from the Employment Act 1955. This law applies to private sector employees in Peninsular Malaysia and Labuan.

If your business is in Sabah or Sarawak, different state labour laws apply. These states follow the Sabah Labour Ordinance and the Sarawak Labour Ordinance, which have their own rules for leave entitlements.

So, if your company is based in Peninsular Malaysia or Labuan, and your employees are covered by the Employment Act, then these annual leave rules apply. Make sure you double-check which labour law your business follows before applying the guidelines.

How to Calculate Annual Leave in 2025

To calculate prorated annual leave in 2025, first check how long the employee has worked with your company. Based on that, use the correct tier:

1. Less than 2 years of service

Entitlement: 8 days per year

Example:
Ali joined on 1 May 2025.
By December 2025, he will have completed 8 full months of service.
Calculation: (8 ÷ 12) × 8 = 5.33 → 5 days (rounded down)

2. Between 2 to 5 years of service

Entitlement: 12 days per year

Example:
Sara has been with the company for 3 years. She took unpaid leave and only completed 10 full months of paid service in 2025.
Calculation: (10 ÷ 12) × 12 = 10 days

3. More than 5 years of service

Entitlement: 16 days per year

Example:
Mr. Tan has worked for 6 years but went on extended unpaid leave from October to December 2025. He completed 9 full months of paid service.
Calculation: (9 ÷ 12) × 16 = 12 days

Leave Accumulation and Carry Forward Policies

According to the law, annual leave should be taken within 12 months after the employee completes one full year of service. However, you may give them the option to carry forward their unused leave or even convert it to a payout. This depends on your company’s internal policy.

For example, if an employee completes their 12 months of service in March 2025 and earns 8 days of annual leave, they should use that leave by March 2026. If they don’t use it, and your policy doesn’t allow carry forward, those days can be considered forfeited. But if your company does allow it, you need to decide how many days can be carried forward, and by when they must be used.

Some companies give a grace period (e.g. carry forward a maximum of 5 days, use them by June). Others convert unused days to cash. Whichever route you choose, the key is to make the rules clear in your employee handbook and employment contracts.

It will help prevent confusion or arguments at the end of the year and keep your HR and payroll teams organized when they handle multiple leave requests or payments.

Termination and Unused Leave Pay

When an employee leaves your company, either by resignation, termination, or contract ending, you need to check if they still have any unused annual leave. If they do, you must compensate them by paying out those remaining leave days.

The Employment Act says that this payout must be calculated based on the employee’s ordinary wage rate. This means you divide their monthly salary by 26 (the average number of working days in a month) to get their daily rate. Then, multiply that by the number of unused leave days.

Here’s a simple example:

Monthly salary: RM2,600
Daily rate: RM2,600 ÷ 26 = RM100
Unused leave: 4 days
Leave payout: 4 × RM100 = RM400

This rule applies even if the employee didn’t complete a full year of service. If they worked less than 12 months, their annual leave is calculated on a pro-rated basis (just like we discussed earlier), and you pay them based on the number of leave days they’ve earned but haven’t taken yet.

Include this step in your offboarding checklist and update your payroll records before processing their final salary.

Annual Leave Application and Approval Process

Managing annual leave requests is part of your everyday HR duties, but during peak periods like festive seasons or school holidays, things can get tricky. That’s why it’s important to set a clear and fair system that employees can follow.

Most companies in Malaysia ask employees to submit leave requests through HR platforms or written forms, ideally a few days or weeks in advance, depending on your internal policy. You have the right to approve or reject leave requests, but the process must be fair and based on operational needs, not personal preference.

When too many people apply for leave at the same time, such as during Hari Raya or year-end holidays, you can prioritise based on a “first come, first served” system or rotate leave among departments. Just make sure the rules are consistent and shared with your team.

Some companies also set blackout periods when no annual leave can be taken. For example, during stocktaking, major launches, or audit season. If this applies to your business, make sure it’s clearly stated in the employee handbook or company policies.

To make everything run smoothly:

Use HR software to track leave balances automatically.
Keep proper records of every leave approval and rejection.
Talk to employees if you can’t approve a leave request, and try to find other dates that work.

What HR Needs to Do

To manage properly, HR plays a big role in making sure everything is organised, fair, and follows the law. Here are some key steps you should focus on:

Mention annual leave entitlement clearly in employment contracts and HR policies

It can avoid confusion later on. Employees will know exactly how much leave they’re entitled to and when they can use it. You should also include whether unused leave can be carried forward, and under what conditions it may be forfeited.

Set a clear policy about carry-forward leave

According to the Employment Act, unused leave should be taken within 12 months after the entitlement period ends. Some companies give flexibility to carry it over, while others may offer a payout or ask employees to use it up within a certain time. Whatever your decision, document it clearly.

Make sure your HR or payroll system tracks leave accurately

Whether you’re using software or spreadsheets, keep the records up to date so you can calculate leave balances, handle proration, and process final payments properly. This is not only helpful for planning but also important if there’s an audit or employee dispute.

Maintain proper leave records

Keep all applications, approvals, rejections, and balances on file. This helps if there’s ever a disagreement, and it also shows that your company is following legal requirements.

FAQs

1. Can employers force employees to take annual leave?

Employers can set guidelines around when leave should be taken, especially during company shutdowns or low-activity periods. However, the timing should be communicated early and handled fairly to respect employee needs.

2. Can annual leave be replaced with cash?

Generally, annual leave should be taken as actual time off. But if the employee resigns or is terminated, any unused leave must be paid out based on the standard daily rate.

3. What if the employee refuses to take leave?

If employees don’t apply for their annual leave, it may be forfeited after the 12-month carry-forward window. HR should remind them regularly to take their entitled rest and explain company policy clearly.

4. Are part-time or contract employees eligible for cuti tahunan?

Yes, if they are working under a contract of service and fall under the Employment Act, they are eligible for pro-rated annual leave based on their completed months of service.

5. What is the difference between public holiday and annual leave?

Public holidays are fixed dates gazetted by the government or chosen by the employer. Employees don’t need to apply for them. Annual leave, on the other hand, is part of the employee’s personal time off and must be requested and approved.

6. Can employers restrict annual leave during busy periods?

Yes, companies can block out certain peak times or festive seasons where business needs are high. But these blackout periods should be written in the company leave policy and communicated early to avoid confusion.

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