KUALA LUMPUR – Amid Malaysia’s ongoing productivity crunch, the proposal to grant every worker 16 days of annual leave, regardless of their tenure, has sparked debate. Critics say it risks creating a system that is unfair to both employers and employees.

That’s the prevailing sentiment of a business group opposing the recommendation to overhaul paid time off policies in the country.

The Small and Medium Enterprises Association of Malaysia (Samenta) has voiced strong concerns over the plan to standardise paid annual leave at 16 days for all employees, irrespective of their length of service.

Datuk William Ng, president of Samenta, argues that this one-size-fits-all approach could backfire, hitting employers’ wallets and employees’ prospects alike.

Ng says many companies already offer between 18 and 21 days of leave to long-serving staff, and the current tiered system under the Employment Act – which allocates 8 days for those with one to two years’ service, 12 days for two to five years, and 16 days for more than five years – acts as an incentive, rewarding loyalty and encouraging retention.

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Imposing a flat 16-day policy, Ng warns, would squeeze profit margins and turn up the heat on businesses already treading water, particularly in the retail sector, where staffing challenges are already a thorn in the side.

“Most retailers are already struggling to break even and find workers to operate during festive seasons,” Ng said, as quoted by Free Malaysia Today.

The proposal – introduced by Pasir Puteh MP Nik Zawawi Salleh – seeks to amend the Employment Act to grant all workers 16 days of paid annual leave, no matter how long they’ve been with their employer.

Nik Zawawi believes such a measure would light a fire under employees, boosting efficiency and overall morale.

Currently, Malaysia’s leave entitlements lag behind those of its neighbours. Workers with less than two years of service receive a modest eight days, leaving many feeling short-changed. Critics argue that these figures are woefully inadequate, particularly in a climate where 50% of employees are reportedly ready to walk away for better leave benefits.

Proponents of standardisation argue that 16 days would simplify policies across the board, creating a level playing field. However, detractors point to Malaysia’s already abundant public holidays – ranging from 21 to 25 days annually, depending on the state – as a compensatory factor.

Striking the right balance, then, is the tightrope that policymakers must walk. Here’s a closer look at the pros and cons of standardising annual leave at 16 days:

Advantages

Better employee morale. Introducing 16 days of annual leave for all employees could serve as a shot in the arm for job satisfaction and morale, potentially paving the way for higher productivity.

Streamlined administration. A uniform policy cuts through red tape, simplifying leave management for HR departments and eliminating potential confusion over entitlements.

Talent magnet. Generous leave policies can serve as a golden ticket for recruitment, attracting top talent and setting companies apart in a competitive market.

Disadvantages

Higher operational costs. Mandating a higher minimum leave for all employees may leave businesses grappling with rising staffing costs. SMEs, in particular, may find themselves burning the candle at both ends, hiring temporary staff to plug gaps.

Erosion of loyalty incentives. The current tiered system, which doles out leave as a reward for loyalty, could become a relic of the past, potentially denting employee retention rates.

Strain on SMEs. Small and medium-sized enterprises, often running on a shoestring budget, might find themselves caught between a rock and a hard place, struggling to balance increased entitlements with operational efficiency.

Ripple effects on service industries. Sectors like retail and hospitality, which thrive on consistent staffing, could face an uphill battle, particularly during peak seasons, if employees are entitled to longer leave periods.

Leave credits in neighbouring countries

Compared to its neighbours, Malaysia’s leave policies often feel like slim pickings. In Indonesia, employees receive 12 days after one year of service, while Thailand offers six days but compensates with numerous public holidays. Singapore provides between 7 and 14 days, depending on tenure, and Vietnam guarantees 12 days.

Coupled with additional public holidays, these leave entitlements often paint Malaysia as the poor relation, prompting calls for reform to enhance work-life balance and boost the country’s appeal to top talent.

This issue highlights the age-old tug of war between employee welfare and business viability. The devil, as always, lies in the details. A well-thought-out policy could create a win-win scenario, while a rushed decision risks opening Pandora’s box, leaving businesses and employees to pick up the pieces.