Earned Leave (EL) in the Workplace: Meaning, Policy, and Management

Every employee in a company is entitled to take earned leave, also known as annual leave. This type of leave is meant to give employees proper time to rest and recharge.

So, how should employers manage earned leave the right way? How is it calculated? And what are the key things to watch out for? Check this article to find out the answers.

What Does “EL” Mean in Work?

The term “EL” stands for Earned Leave. You may also hear it referred to as Annual Leave in company handbooks or HR systems. But regardless of the label, the concept is the same: EL is a type of paid leave that an employee earns over time based on how long they’ve been working at the company.

Unlike sick leave or emergency leave which are often unplanned, earned leave is usually taken for personal time off, holidays, family matters, or rest. It’s pre-approved by the employer and tracked in the HR system as part of official leave records.

Employees don’t get all their earned leave at once. Instead, they accumulate it monthly or quarterly, depending on company policy.

For example, a full-time employee might earn 1 to 1.5 days of EL for every month worked. The longer they stay in the company, the more leave they earn.

Because of this system, EL encourages long-term employment while helping employers manage leave planning and business continuity more effectively.

Why Employers Need to Implement Earned Leave

EL is a system that keeps leave predictable and helps operations run smoothly. By implementing a clear earned leave policy:

You can plan around employee absences more easily since EL is pre-scheduled.
It supports employee well-being by promoting work-life balance and reducing burnout.
Your payroll records will reflect accurate leave balances, which helps with offboarding and end-of-year planning.
It shows employees that the company values fairness, structure, and time off as part of a healthy workplace culture.

How Earned Leave (EL) is Calculated?

Each company may have its own EL formula, but the standard practice is to calculate it monthly. For example:

If your policy provides 18 days of EL per year, and the employee has completed their probation, they will earn 1.5 days per month.
For a new employee who has worked 6 months, they would have 9 days of EL accrued.

Some companies apply a carry-forward rule, letting employees carry a limited number of unused EL days into the next year. Others allow leave encashment, meaning employees can exchange unused EL for cash, especially when leaving the company.

Make sure to define these clearly in your leave policy.

Types of Earned Leave

Earned leave can take a few forms depending on how it’s applied:

Annual Leave

The basic version of EL, used for vacation, travel, or personal rest days.

Leave Encashment

Employees may be allowed to cash out unused EL at the end of the year or when they resign.

Carry Forward Leave

Some policies let employees carry forward a portion of their unused leave to the next year, often with a time limit.

Long-Term Leave

EL may also be saved for longer breaks such as study leave, maternity preparation, or extended family care, if approved.

Difference Between Earned Leave and Other Leaves

Leave Type	Purpose	Accumulated?	Approval Required?	Paid?
Earned Leave	Planned time off (personal/vacation)	Yes	Yes	Yes
Sick Leave	Medical illness or injury	No	Yes (MC required)	Yes
Emergency Leave	Sudden urgent matters	No	Yes	Depends
Unpaid Leave	When no paid leave left	No	Yes	No

How Employers Can Handle EL Management

To manage EL effectively, employers should:

Include EL Policy in Handbook

Set clear rules on how EL is earned, applied, carried forward, or forfeited. Make it accessible to all employees.

Use a Leave Management System

Automate accruals, track balances, and approvals using HR software to reduce admin time and errors.

Align with Labour Laws

Make sure your leave policy meets or exceeds the requirements under Malaysian labour laws and sector-specific rules.

Handle Carry-Forward Wisely

Set a limit on how many days can be carried forward to avoid unused leave building up over time.

How Employees Apply for Earned Leave?

Usually, employees must submit EL requests in advance, often 3 to 7 working days before the leave date. The request goes to their direct supervisor or is submitted through an HR portal. Once approved, the leave is logged, deducted from their EL balance, and reflected in payroll records.

Sample EL Process & Templates for HR

Managing earned leave doesn't have to be complicated as long as there’s a clear, standard process in place. Below is a simple example of how a typical EL request might be handled, followed by a suggested template you can adapt to your company’s needs.

Employee Request

The employee submits a formal earned leave request through your designated HR system, email, or form. Usually 3 to 7 working days in advance. The request includes the leave dates, reason (if required), and total number of days applied.

Supervisor Review

The supervisor checks whether the requested leave overlaps with key projects or other team members' schedules. If the leave is suitable, it moves to approval. If not, the supervisor may ask the employee to adjust the dates.

HR/Manager Approval

Once reviewed, the leave is approved and recorded in the employee’s leave record. The balance is adjusted accordingly in the HR system.

Payroll Sync

The approved leave is factored into payroll calculations, particularly for staff who may have leave encashment or deductions tied to leave balances.

Offboarding (If Applicable)

When an employee resigns or is offboarded, any unused EL should be tallied and reflected in their final payout based on your company policy.

Sample Earned Leave Form (Template)

You can adapt this template for use in digital HR platforms or as a printed form, depending on your company’s setup. It also helps to have an audit trail for each step of the leave approval process in case of disputes or audits.

Earned Leave Form

Employee Name: ___________________________________

Employee ID: ______________________________________

Position/Designation: ______________________________

Department: _______________________________________

Leave Type: □ Earned Leave □ Annual Leave □ Others: __________

Leave Start Date: ____________

Leave End Date: ____________

Total Number of Days: __________

Purpose (optional): ____________________________________________

Remaining Leave Balance (before request): __________ days

Supporting Document (if any): ___________________________

Submitted On: _______________

Supervisor’s Recommendation:

□ Approved □ Rejected
Comments: ______________________________________

Manager/HR Final Approval:

□ Approved □ Rejected
Comments: ______________________________________

Date of Approval: ______________

Signature of Manager/HR: __________________________

Tips for Employers

Having a clear earned leave policy can help employees rest, recharge, and return with better focus. At the same time, it helps employers manage workload, plan ahead, and build a healthier workplace culture.

If your team understands how EL works and sees that their time off is respected, they’re more likely to stay committed and productive.

Below are some tips to make sure the EL is applicable and give good impact to your employee:

Go over EL entitlements during employee onboarding and confirmation.
Avoid situations where employees hoard leave. Encourage them to take breaks regularly.
Train line managers to handle leave requests fairly across teams.
Review your leave policy annually, especially when laws change or employee feedback indicates confusion.

FAQs

Is earned leave mandatory in Malaysia?

Under the Employment Act, annual leave is mandatory for eligible employees. It may be referred to as EL in practice.

What happens to EL if an employee resigns?

Unused EL is typically calculated and paid as part of the final salary.

Can earned leave be carried to the next year?

Yes, but it depends on company policy. Many employers set a cap or expiry date.

How is earned leave different from annual leave or MC?

EL is essentially annual leave. MC (sick leave) requires a medical certificate and cannot be used for personal plans.

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