Published On: 25/09/2025By

Unpaid leave is one of the most common concerns among employers in Malaysia. While employees may request time off beyond their entitled paid leave, many employers still ask:

👉 How long can staff actually take unpaid leave, and what should companies do to manage it fairly?

This guide breaks down what Malaysian employers need to know about unpaid leave, the legal framework, and best practices for managing it effectively.

What Is Unpaid Leave?

Unpaid leave is when an employee takes time off work without receiving salary for the period of absence. Unlike statutory entitlements such as annual leave, sick leave, or maternity leave, unpaid leave is not automatically provided under the Employment Act 1955.

Instead, it depends entirely on:

  • The company’s HR policies, or

  • Employer’s discretion and approval.

This means employers have the right to allow or reject unpaid leave requests, as long as decisions are fair and consistent.

Is There a Legal Limit to Unpaid Leave in Malaysia?

The Employment Act 1955 does not specify a maximum number of days for unpaid leave. In other words, there is no fixed legal limit.

Most companies therefore set their own guidelines, such as:

  • Limiting unpaid leave to a certain number of days per year.

  • Requiring employees to use up paid leave before applying for unpaid leave.

  • Allowing unpaid leave only for special cases (e.g., medical emergencies, family matters, or further studies).

📌 Employer Tip: Having a transparent policy helps avoid disputes and ensures consistency across all employees.

Employer’s Rights in Managing Unpaid Leave

Employers in Malaysia are allowed to:

  • ✅ Approve or reject unpaid leave applications.

  • ✅ Adjust benefits if staff take extended unpaid leave (e.g., prorating annual leave entitlement).

  • ✅ Take disciplinary action, including termination, if unpaid leave is excessive and disrupts operations — provided it is handled fairly and in compliance with labour laws.

Why a Clear Policy on Unpaid Leave Matters

Without clear rules, unpaid leave can lead to confusion, resentment, and even legal disputes. A proper policy ensures:

  • Fair treatment across all employees.

  • Better workforce planning.

  • Legal compliance under the Employment Act 1955.

For example:

  • A company may state in its employee handbook that staff are entitled to apply for up to 15 days of unpaid leave per year for emergencies.

  • Employees must submit written requests (except in emergencies) and obtain managerial approval.

Best Practices for Employers in Malaysia

Here are some recommended practices for managing unpaid leave fairly:

  1. Include unpaid leave terms in the employee handbook
    – Example: “Employees may apply for up to 10 days of unpaid leave annually, subject to management approval.”

  2. Set approval procedures
    – Require written requests and specify notice periods (e.g., at least 2 weeks in advance, except emergencies).

  3. Balance compassion with business needs
    – Approve unpaid leave for genuine cases like family illness but redistribute workload to ensure continuity.

  4. Communicate impact on salary and benefits
    – Clarify whether unpaid leave affects annual leave, increments, or bonus eligibility.

  5. Document everything
    – Keep a proper record of unpaid leave requests and approvals to avoid misunderstandings.

Special Situations Where Unpaid Leave May Apply

  • Medical emergencies: An employee requires long-term treatment.

  • Further studies: Staff may request a semester off for professional certification.

  • Business slowdown: Employers may negotiate unpaid leave during economic downturns to avoid retrenchment.

How Pandahrms Helps Employers Manage Unpaid Leave

Tracking unpaid leave manually can be messy and prone to disputes. With Pandahrms, employers can:

  • Automate leave calculations, including unpaid leave.

  • Set custom policies for different employee groups.

  • Give employees transparency to check their leave balance and requests.

  • Maintain accurate records for payroll adjustments and statutory compliance.

This reduces HR workload and ensures both employers and employees are always on the same page.

Key Takeaway

There is no fixed legal limit on unpaid leave in Malaysia. It is up to employers to decide based on company policies and operational needs.

By setting clear rules, documenting approval processes, and using HR software like Pandahrms to manage records, employers can balance fairness, compliance, and productivity when handling unpaid leave.

FAQs

1. Can an employer force an employee to take unpaid leave?
No. Unpaid leave must be mutually agreed upon, usually with written consent.

2. Does unpaid leave affect EPF, SOCSO, and EIS contributions?
Yes. Since no salary is paid during unpaid leave, there will be no statutory contributions for that period.

3. Can unpaid leave reduce annual leave entitlement?
Yes. Some companies prorate annual leave if employees take extended unpaid leave. This must be clearly stated in the company policy.