Published On: 26/07/2025By

Earned leave (EL) is one of the most valuable benefits employees enjoy — it’s paid time off meant to promote rest, family time, and better mental well-being. However, not all leave entitlements last forever. Many Malaysian companies implement carry-forward policies that limit how long unused leave can be kept, and this often surprises employees when their long-saved leave suddenly disappears.

Let’s take a closer look at how carry-forward leave works, what employers should communicate clearly, and how employees can avoid losing their hard-earned days off.

Scenario: Saved Up Leave Expired Without Notice?

Jackson had been with his company for over three years. He rarely took time off, choosing to save most of his earned leave with the hope of taking a long-awaited two-week overseas vacation with his family in January.

But when he applied for leave at the start of the year, HR informed him that a portion of his unused leave from the previous year had expired on December 31st, as per company policy. Jackson was shocked — he wasn’t aware of any expiry rule and assumed all leave would carry over into the new year.

Understanding Carry-Forward Leave: What It Means

Carry-forward leave refers to unused earned leave that employees are allowed to bring into the next calendar year. However, this flexibility usually comes with conditions, such as:

  • A maximum number of days that can be carried forward

  • A deadline by which carried leave must be used (e.g. within 6 months)

  • Automatic forfeiture if unused by the expiry date

These policies vary by company, and if not properly communicated, they can lead to misunderstandings — as seen in Jackson’s case.

Is Carry-Forward Leave Required by Malaysian Law?

Under the Malaysian Employment Act 1955, there is no mandatory provision requiring employers to allow leave to be carried forward. However:

  • Section 60E(2) states that earned leave must be used within 12 months after the end of each year of service, failing which it may be forfeited (unless the employee was prevented from taking it due to service requirements).

This means:
✅ Employers can choose to implement a more flexible policy
⚠️ But they are not legally obligated to let leave roll over endlessly

Common Carry-Forward Policies in Malaysia

Here are some examples of how companies structure their policies:

Why Employers Set Expiry Rules

While it may seem strict, these rules serve practical purposes:

  • Avoid leave hoarding which causes year-end staffing issues

  • Encourage regular rest, improving employee health and productivity

  • Simplify payroll calculations and reduce accumulated liabilities

  • Ensure fairness across all employees with consistent policies

Tips for Employers: How to Manage Carry-Forward Policies Effectively

  • Clearly Document Your Policy
    Include carry-forward rules in the employee handbook and employment contracts. Define:

    • Maximum days allowed

    • Validity period (e.g., use within 6 months)

    • What happens to expired leave

  • Send Reminders Before Expiry
    Use HR systems or email to notify employees of unused leave and upcoming expiry — ideally 1–2 months in advance.

  • Use HR Software for Tracking
    Platforms like Pandahrms can:

    • Auto-calculate leave balances

    • Flag upcoming expiry

    • Send reminders

    • Avoid manual tracking errors

  • Encourage Leave Planning Throughout the Year
    Don’t wait until December! Help employees space out their leave to maintain productivity and avoid end-of-year bottlenecks.

Tips for Employees: Don’t Lose Your Leave

If you’re an employee, here’s how to avoid a situation like Jackson’s:

  • Know Your Company Policy: Check your employee handbook or ask HR if unsure.

  • Track Your Leave Regularly: Know how much leave you’ve used, what’s left, and when it expires.

  • Plan Ahead: Submit leave requests early to avoid clashes or rejections during peak periods.

  • Don’t Assume All Leave is Forever: Some companies auto-expire unused leave without rollover — always double-check.

Final Thought

Unused leave doesn’t always stay available — and it’s not automatically carried forward forever. Whether you’re an HR professional or an employee, it’s essential to understand how carry-forward rules and expiry policies work to avoid miscommunication and frustration.

Transparent policies, proactive reminders, and the right HR system can prevent situations like Jackson’s — ensuring employees get the rest they’ve earned, and companies maintain order and fairness in leave management.