In Malaysia, it’s common for businesses to shut down for several days during major festive seasons such as Chinese New Year, Hari Raya, or Deepavali. Earlier this year, the Ministry of Human Resources (KESUMA) reminded employers that they cannot force employees to take annual leave or unpaid leave during such closures.
This clarification came after the Ministry received complaints from employees whose companies required them to use annual or unpaid leave for extended closures beyond the official Chinese New Year holidays.
Let’s take a closer look at what the law says and how employers can handle leave planning properly and fairly.
What the Law Says About Forced Annual Leave
According to KESUMA’s official reminder issued in January 2025, employers must not compel employees to use their annual leave or take unpaid leave for company closures extending beyond gazetted public holidays.
The Ministry emphasized that:
“Employees have the right to decide when to apply for annual leave, and employers cannot force employees to take annual leave or leave without pay to reduce business costs.”
This means:
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Annual leave must be applied by the employee, not imposed by the employer.
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Employers cannot automatically deduct annual leave for extra closure days (e.g., additional days after the official Chinese New Year holidays).
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Employers cannot deduct salary if employees refuse to take unpaid leave for closure days.
Employees affected by such practices are encouraged to report the matter to the nearest Labour Office under Section 69 of the Employment Act 1955.
Source: Human Resources Online — Malaysia employers should not force employees to take annual or unpaid leave for extended Lunar New Year closures: KESUMA
https://www.humanresourcesonline.net/malaysia-employers-should-not-force-employees-to-take-annual-or-unpaid-leave-for-extended-lunar-new-year-closures-kesuma
Why Employers Should Avoid Forced Leave Practices
While festive shutdowns may be operationally necessary, forcing employees to take annual or unpaid leave violates Malaysia’s employment laws and could lead to disputes or investigations.
Here’s why employers should avoid it:
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Legal Non-Compliance — Forced leave deductions may lead to employee complaints and legal action.
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Employee Dissatisfaction — Staff may feel unfairly treated when leave is deducted without their agreement.
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Reputation Risk — Non-compliance and unfair practices can damage your company’s image as an employer.
Instead, employers should aim for transparency and fairness by planning leave schedules and communicating clearly with staff.
Best Practices for Employers During Festive Closures
If your business needs to close for several days beyond public holidays, here are some best practices to follow:
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Communicate Early
Inform employees of closure dates in advance and allow them to decide whether to apply for annual leave. -
Set Clear Leave Policies
Make sure your company’s leave policy clearly explains how shutdowns or festive breaks are managed. -
Offer Alternatives
Where possible, provide options such as replacement leave, flexible working arrangements, or remote work. -
Keep Transparent Leave Records
Maintain accurate records of leave applications and approvals to avoid future disputes.
How Pandahrms Helps Employers Manage Leave Fairly and Efficiently
Manual leave tracking can easily lead to confusion — especially during festive or company-wide closures.
With Pandahrms, employers can:
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Automate leave application and approval workflows.
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Set clear leave policies and rules for different employee groups.
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Track leave balances and history accurately in real time.
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Keep digital records for full transparency and compliance.
By using Pandahrms, HR teams can manage employee leave efficiently while ensuring compliance with the Employment Act 1955.
Key Takeaway
Employers in Malaysia cannot force staff to take annual or unpaid leave during company closures. Leave must always be requested and approved voluntarily, not imposed.
Having a clear leave policy and using a reliable HR management system like Pandahrms helps ensure fairness, compliance, and trust within the workplace.
