Rundown On Malaysia Labour Law [2023 Updated]

In the context of Malaysia labor law, the Malaysian government has introduced the Employment Act 1955. However, amendments are made to diversify and improvise the existing regulations. By 2021, the Malaysian Parliament proposed amendments on the 25th of October 2021. To note, the amendment’s enforcement will begin on 1st September 2022. 

In this article, we have summarized the whole Malaysia Employment Act, including its amendment. The crucial key points are listed below.

WHO IS COVERED UNDER THE EMPLOYMENT ACT IN MALAYSIA?

One of the most important things to note about the Malaysian Employment Act (EA) 1995 is that it does not cover all workers. So, who exactly will benefit from this law and its provisions? 

Below is the scope of employees who are covered under the Act:

1. Private sector workers
2. Workers under specified occupations regardless of their salary:
   • Domestic servants 
   • Manual labor workers 
   • Operator, supervisor, or maintenance workers of mechanically propelled vehicles
3. Employees that have a monthly salary not exceeding RM 2,000

WHAT TYPES OF EMPLOYMENT AND WAYS TO START AN EMPLOYMENT CONTRACT IN MALAYSIA?

In Malaysia, there are three most common employment structures for employees. These structures define different types of employment. Workers under these three structures are included within the scope of the Employment Act.

The three structures are:

1. Part-time employment
2. Fixed-term employment
3. Permanent employment

WHAT ARE THE MANDATORY REQUIREMENTS OR TERMS IN AN EMPLOYMENT CONTRACT?

The employment act 1955 also addresses the mandatory requirement in an employment contract. An employment contract is required for contracting employees that work for more than a month in the company or any other private sector. 

The employment contract is mandated to include terms such as:

1. Job title
2. Working hours
3. Location of the workplace
4. Period to get the wage
5. Rate of the working wage
6. Rights for annual leave 
7. Benefits that are given during employment
8. Period of probation
9. Confidentiality and privacy requirements for the company 
10. Notice of termination

Employment contracts are invalid and void if their terms and conditions conflict with the Employment Act requirements. Even if both the employer and the employee consented and signed the employment contract based on their free will, any conditions that do not comply with the Employment Act’s requirements must be changed and replaced to adhere to the regulations. 

WHAT IS THE MALAYSIAN LAW ON HIRING FOREIGN EMPLOYEES?

The law in employment act stated that:

• A local employee’s employment contract cannot be terminated by an employer who wishes to hire a foreign worker.
• Only a few works posts are open to overseas applicants, and they are often highly technical or specialized professions that a local employee does not easily fill. 
• Any employer that hires a foreign worker must notify the nearest Director General’s office within fourteen days with the foreign worker’s information in a way the Director General may specify.
• The employer must also apply to the Immigration Department with a cover letter outlining the need or justification for hiring foreigners to fill the job post. A letter of approval for the employment pass will be sent after it has been granted.
• Any employer must provide returns of particulars related to the employment of a foreign employee in the manner the Director General may specify. 

REASONS OF TERMINATION

The contract of an employee may be terminated by the employer provided that it is fair, justified, and done in good faith.

If the termination is deemed unfair, the court may become involved; therefore, the termination must have just cause and excuse in order to avoid a claim of unfair dismissal.

With just cause and excuse, the employee’s dismissal by the employer is legal. The factors could be:

• Absent from work for more than two days in a row without a valid reason or leave of absence
• Serious violations including theft, sexual harassment, and disregarding safety rulesNegligence in performing duties
• Poor performance
• Redundancy and closing the business
• Retirement
• Death of employees
• Breach of the contract
• Termination at the end of the probation period
• Expiration of fixed-term contract
• Mental disorders
• Bankruptcy
• Criminal offense

WHAT ARE THE REGULATIONS FOR EMPLOYMENT IN MALAYSIA?

Following the Employment Act 1955 in Malaysia, employers must fulfill five (5) crucial matters to maintain a legal workforce for their company.

The five (5) matters are as follows:

Annual Leave

Employees must be granted a certain amount of annual leave. Traditionally, employees are given paid annual leave. Even though they utilized the annual leave, it will not deduct the monthly wage. Employees’ annual paid leave varies depending on their years of service to the employer.

Below we provided you with the table to summarize the amount of annual paid leave for employees:

Special Leave

Employees are also obligated to be granted special leave. In Malaysia, there are four types of special leave as authorized by the Employment Act.

The four (4) types are:

• Sick Leave

An employee is entitled to paid sick leave after being given an examination by the appointed or authorized medical practitioner. Sick leave is given to full-time employees only. Obtaining paid sick leave is similar to the paid annual leave work system.

This means that employees can be entitled to paid sick leave based on their period of service to the employee. The summarization is in the table following table below:

Another essential thing to note is that the amount of paid sick leave in the table above only applies to employees that do not require hospitalization. 

If hospitalization is required, employees are granted 60 days of hospitalization per year along with the amount of paid sick leave in the table above. 

•  Public Holiday Leave

In Malaysia, there are various public holidays. Therefore, employers must grant employees paid public holidays at an ordinary salary rate. In total, eleven (11) paid public holidays are given to an employee. 

The obligatory gazetted five (5) public holidays are:

1. The Birthday of the Yang di-Pertuan Agong)
2. The Birthday of the Ruler of the Yang di-Pertua Negeri 
3. The Workers’ Day – 1st May
4. Malaysia’s Independence Day – 31st August 
5. The Malaysia Day – 16th September

The employer is free to choose the other six (6) public holidays based on the eight (8) gazetted holidays in the list below:

1. Birthday of the Prophet Muhammad (s.a.w)
2. Hari Raya Puasa (Aidil Fitri) (2 days)
3. Hari Raya Haji (1 day, except 2 days in the states of Terengganu and Kelantan)
4. Nuzul Al-Quran – only in Federal Territory of Kuala Lumpur, Putrajaya, Labuan
5. Chinese New Year (2 days, except 1 day in the states of Terengganu and 
6. Wesak Day
7. Deepavali
8. Christmas Day – December 25

• Maternity Leave

Based on the latest amendments to the Employment Act 1955, paid maternity leave is increased from 60 to 98 days. 

• Paternity Leave

Other than the amendments made for maternity leave, male employees are also now entitled to an increase in paternity leave. The Amendments Act provides that a married male employee can now enjoy seven (7) days of paternity leave instead of the previous three (3) days. This amount is also given for up to five childbirths. 

Working Hours

• Employees in Malaysia are subjected to regulated working hours. A worker’s regular working hours in the daytime and nighttime cannot be equal to a total of more than 8 hours per day and 45 hours per week.

Minimum Wage

• According to the Ministry of Human Resources in Malaysia, the minimum salary in Malaysia is RM 1,500 per month as of May 1, 2022.
• The minimum wage is liable to change over time. 

Types of Overtime working hours and their wage regulation 

• Except for overtime, the spread-over duration of labor cannot be more than 10 hours each day (including breaks for rest).
• The wage regulation for overtime work is as follows: 

EMPLOYEES PROVIDENT FUND IN MALAYSIA

Employees provident fund (EPF) is a retirement savings plan for employees in Malaysia that consists of monthly contributions from both the business and the employee.

Within seven days of hiring their first employee, employers are required to register with the EPF and enroll the new hire as a member as well.

Severance payment

For each service year completed, workers who have been engaged for less than two years are entitled to 10 days of pay.

Workers with two to five years of service are entitled to 15 days of pay for each year that has passed, while those with five years or more are entitled to 20 days of pay for each year that has passed.

Workers who are fired for bad behavior, decide to leave their jobs, or retire are not entitled to severance pay.

Offenses and Penalty

According to Section 99A of the Employment Act, anybody proven guilty of violating a provision of the EA or any rules established thereunder or committing an offense for which no penalty is specified is subject to a fine up to RM 10,000.

CONCLUSION

In a nutshell, the welfare of the workers must also be prioritized. Notably, the Employment Act will, in the future, be expanded to encompass additional categories of employees regardless of their salary amount. 

If you have further inquiries about the ins and outs of the Employment Act in Malaysia, do not hesitate to contact us at Relin Consultants.