The
Contract of Employment
Employee
-‐
Who
is
an
employee?
Section
2(1)
EA’55
-‐ Any
person
irrespective
of
his
occupation
who
has
entered
into
a
contract
of
service
with
an
employer
under
which
such
person’s
“wages”
does
not
exceed
RM1,500/mth;
or
-‐ Any person whose “wages” exceeds RM1,500/mth AND:
1. he is engaged in manual labour and the time spent on manual labour in any one wage period exceeds one-‐
half of his total working time; or
2.Any person engaged in operation or maintenance of mechanically propelled vehicle for the transport of
passengers or goods for commercial purposes; or
3.Any person supervising or overseeing other employees engaged in manual labour, employed by the same
employer or any person engaged as a domestic servant; or
4.Any person engaged in any capacity in any vessel registered in Malaysia and is not an officer certificated
under the Merchant Shipping Acts of the UK, or the Merchant Shipping Ordinance 1952; or has not entered
into an agreement under the MSO’52;
5.He is engaged as a domestic servant.
Contract OF Service v Contract FOR Service
(D’09 Q2a)
‘OF’ ‘FOR’
-‐ a
contract
between
an
employer
and
an
employee
-‐ Is
essentially
different
from
that
of
the
contract
of
under
which
the
employee
agrees
to
work
for
the
service
or
employment.
employer. -‐ It
does
not
create
and
employer-‐employee
relationship
and
does
not
therefore
come
within
the
purview
of
the
Definition: EA’55
and
the
IRA’67.
-‐ Employment
Act
1955 -‐ It
merely
creates
a
contractual
relationship
between
an
‘any
agreement
whether
oral
or
in
writing
and
whether
employer
and
an
independent
contractor.
express
or
implied,
whereby
one
person
agrees
to
employ
another
as
his
employee
and
that
other
agrees
to
serve
his
employer
as
employee
and
includes
an
apprenticeship
contract’
-‐ Industrial
Relations
Act
1967
Refers
the
contract
as
‘contract
of
employment’.
‘any
agreement
whether
oral
or
in
writing
and
whether
express
or
implied
whereby
one
person
agrees
to
employ
another
as
a
workman
and
that
other
agrees
to
serve
his
employer
as
a
workman’ (J’08
Q3bi)
Section
10(1)
EA’55
It
has
generally
been
accepted
that
there
is
no
‘A
contract
of
service
for
a
specific
period
of
time
distinction
between
the
two
phrases. exceeding
one
month
or
for
the
performance
of
a
specified
piece
of
work,
where
the
time
reasonably
American
International
Assurance
Co
Ltd
and
Dato
Lam
required
for
the
completion
of
the
work
exceeds
or
Peng
Chong
&
Others may
exceed
one
month,
shall
be
in
writing’.
9 -‐ 1 ⓒ Teh Joo Ling All rights reserved
Determine ‘OF’ or ‘FOR’
(D’09 Q2b)
3 Tests
Control
Test Integration
Test Multiple
Test
-‐ Relates
to
the
extent
of
control
-‐ Relies
on
the
extent
to
which
a
(Economic
Reality
Test)
which
the
employer
had
over
the
person
can
be
considered
as
part
and
-‐ Is
more
relied
upon
nowadays.
employee
in
relation
to
the
manner
parcel
of
an
organization. -‐ Takes
into
account
multiple
in
which
the
employee
was
to
do
his
-‐ The
greater
the
integration
with
the
considerations
in
order
to
determine
work. organization
the
greater
the
whether
a
contract
of
service
exists.
-‐ The
greater
the
control,
the
greater
possibility
of
a
contract
of
service. -‐ The
courts
will
take
into
the
possibility
that
there
is
contract
Whittaker
v
M.P.N.I consideration
of
service. a. the
extent
of
control
Yewens
v
Noakes b. the
power
of
selection
and
appointment
-‐ Has
been
seen
as
inadequate
c. the
power
to
suspend
and
especially
in
occupations
of
a
skilled
dismiss
the
employee
or
professional
nature
because
the
d. the
intention
of
the
parties
employer
may
be
unable
to
exercise
e. the
nature
and
contents
of
the
such
control. agreement
between
them.
***
Advantages of the Employer/Employee Relationship
(Contract of Service)
The distinction between employees and independent contractors is important mainly because of the obligations
arising from the employment relationship.
i. Taxation
Employers
make
income
tax
deductions
for
the
employees
whilst
the
independent
contracts
are
directly
responsible
for
their
own
tax
due.
ii.Employment
protection
legislation
The
protection
provided
to
employees
include
minimum
periods
of
notice,
remedies
for
unfair
dismissal,
redundancy
payments
whilst
no
such
protection
is
provided
to
the
self-‐employed.
iii.Tortious
acts
Employers
are
generally
vicariously
liable
for
tortious
acts
of
employees
committed
in
the
course
of
employment
whilst
the
liability
of
a
person
hiring
an
independent
contractor
for
the
contractors’
acts
are
severely
limited.
iv.Implied
rights
and
duties
There
are
rights
and
duties
implied
by
statute
for
employers
and
employees
whilst
these
either
do
not
extend
or
would
not
apply
to
the
same
degree
to
a
contract
for
service.
v.Bankruptcy/Liquidation
In
liquidation,
an
employee
has
preferential
rights
as
a
creditor
for
payment
of
outstanding
salary
and
redundancy
payments
up
to
a
certain
limit
whilst
there
is
no
such
provision
for
an
independent
contractor
who
is
ranked
as
an
ordinary
unsecured
creditor.
vi.Health
and
Safety
There
is
significant
legislation
and
regulation
governing
employers’
duties
to
employees
with
regard
to
health
and
safety
(e.g
Health
and
Safety
Act
1974;
The
Occupational
Safety
&
Health
Act
1994)
9 -‐ 2 ⓒ Teh Joo Ling All rights reserved
Payment of Wages
(J’98 Q8ab; D’03 Q6)
Definition of ‘Wages’
The term, ‘wages’ is defined in Section 2(1) EA’55 to mean basic wages and all other payments in cash payable to an
employee for work done in respect of his contract of service but does not include the following.
1. value of accommodation, or the supply of food, fuel, light, water, medical attendance, amenity, or service.
2.employer’s contribution to pension fund, provident fund, superannuation scheme, retrenchment, termination,
lay-‐off or retirement scheme, thrift scheme, or any other fund/scheme for the employee’s welfare.
3.sum payable to the employee to defray special expenses incurred by nature of his employment.
4.traveling allowances or value of traveling concessions.
5.gratuity upon discharge or retirement.
6.annual bonus.
Latest Date for Payment
-‐ Section 19 EA’55
Every employer is required to pay his employees the wages due to them for a wage period, not later
than the seventh day after the last day of that wage period.
-‐ However, if the DG is satisfied that payment within such time is not reasonably practicable, he may on
the application of the employer extend the time of payment by such number of days as he thinks fit.
What if....
Termination by Termination by either Dismissal
employee w/o notice party with notice Employee is dismissed
Within 3 days from the At the end of the notice by employer -‐ on the last
day of such termination period day of his employment
Wage Period Mode of Payment
-‐ Section 2(1) EA’55 -‐ Section 25 EA’55
Wage period is the period in respect of which wages The wags of an employee must be paid to him in legal tender,
earned by an employee are payable. and wages paid in any other form is illegal, null and void.
-‐ Section 18(2) EA’55 -‐ However,
If no wage period is specified in any contract of service, Section 25A EA’55
the wage period shall be deemed to be 1 month. Payment may be made in the following ways provided the
(A contact of service may specify a wage period which must employee has consented in writing to payment in such
not exceed 1 month) manner;
(i) Payment into an account at a bank in any part of
Malaysia being an account in the name of the
Circumstances -‐ employer may deduct employee’s wages employee, or an account in the name of the employee
-‐ Overpayment by employer during the immediate 3 months jointly with one or more other persons.
due to employer’s mistake
(ii)Payment by cheque made payable to or to the order of
-‐ Deductions for indemnity due e.g. breaking a contract of
service. the employee.
-‐ Repayment of advances of wages.
-‐ Deductions authorized by any written law e.g. EPF, Socso
Contribution, income tax etc. Maximum amount deductible
-‐ Deductions made at the request of the employee in writing. -‐ Must not exceed 50% of the wages earned during the wage period.
e.g. subscriptions. (Limitation does not apply in relation to deduction of indemnity for
-‐ Deductions made with prior permission in writing of the DG breaking contract of service in lieu of notice and may also be
of Labour. increased by another 25% if with regards to a housing loan)
9 -‐ 3 ⓒ Teh Joo Ling All rights reserved
Payment of Wages
(D’03 Q6b)
What is the maximum total amount of advance
that can be granted to an employee?
Advances on Wages
Section 22 EA’55
An employer may not during any one month make advance of wages not already earned by such employee
with exceeds in the aggregate the amount of wages which the employee earned in the preceding month
from his employment with such employer, or if he has not been so long in the employment of such
employer, the amount which he is likely to earn in such employment during one month,
unless such advance is made to the employee:
1. to enable him to purchase a house or to build or improve a house;
2.to enable him to purchase livestock;
3.to enable him to purchase a motorcar, a motorcycle or a bicycle;
4.for any other purpose:
(i) in respect of which an application in writing is made by the employer to the DG;
(ii)which is in the opinion of the DG, beneficial to the employee; and
(iii)which is approved in writing by the DG, provided that in granting such approval, the DG may make
such modifications thereto or impose such conditions thereon as he may deem proper.
5. for such other purpose as the Minister may, from time to time, by notification in the Gazette, specify
either generally in respect of all employees, or only in respect of any particular employee, or any class,
category or description of employees.
Trade
Union
(J’08
Q3bii)
An employer cannot restrict an employee from being
involved in a trade union or trade union-‐related activities.
Section
8
EA’55
‘Nothing
in
any
contract
of
service
shall
in
any
manner
restrict
the
right
of
an
employee
who
is
a
party
to
such
contract:
(i) to
join
a
registered
trade
union;
(ii)to
participate
in
the
activities
of
a
registered
trade
union,
whether
as
an
officer
of
such
union
or
otherwise;
(iii)to
associate
with
any
other
persons
for
the
purpose
of
organizing
a
trade
union
in
accordance
with
the
Trade
Unions
Acts
1959.’
9 -‐ 4 ⓒ Teh Joo Ling All rights reserved
Hours of Work
Section 60A EA’55
(D’98 Q8)
General
Rule
Section
60A(1)
EA’55
-‐
the
time
for
which
an
employee
is
required
to
work
cannot
exceed:
(i) 5
consecutive
hours
without
a
period
of
leisure
of
≥
30
minutes
duration
(ii)8
hours
in
one
day
(iii)a
spread
over
period
of
10
hours
in
one
day
(iv)48
hours
in
one
week.
The
proviso
to
the
sub-‐section
states
that
employees
whose
work
requires
continual
attendance
because
he
is
engaged
in
work
which
must
be
carried
on
continually
may
be
required
to
work
for
eight
consecutive
hours
with
a
break
of
at
least
45
minutes
in
between
to
enable
him
to
have
his
meal.
Further
where
under
his
contract
of
service
with
the
employer
the
employee
is
required
to
work
<
8
hours
in
one
or
more
days
a
week,
the
limit
of
8
hours
may
be
exceed
on
the
other
days
of
the
week
subject
to
a
further
limit
of
9
hours
in
one
day
or
48
hours
a
week.
Exceptions
(where
the
prescribed
limits
may
be
exceeded)
-‐ Section
60A(1A)
EA’55
the
DG,
on
the
application
of
an
employer
may
grant
him
permission
to
enter
into
a
contract
of
service
with
his
employees
requiring
them
to
work
in
excess
of
the
hours
prescribed
in
(i)
-‐
(iii)
of
s.60A(1)
if
he
is
satisfied
that
there
are
special
circumstances
relating
to
the
business
of
the
employer
which
justify
the
granting
of
such
permission.
Such
permission
may
be
granted
subject
to
any
other
conditions
the
DG
may
deem
proper
to
impose.
-‐ Section 60A(2) EA’55
the employer may require the employee to exceed the prescribed limits of hours of work in the case of:
(a) accident, actual or threatened in or with respect to his place of work;
(b) work, the performance of which is essential to the life of the community;
(c) work essential for the defense or security of Malaysia.
(d) urgent work to be done to machinery or plant.
(e) an interruption of work which it was impossible to foresee.
(f) work to be performed by employees in an industrial undertaking essential to the economy of Malaysia or any
essential services as defined in the IRA’67
-‐ Section 60C(1) EA’55
employees who are engaged in shift work may be required to work > 8 hours in one day or > 48 hours a week but the
average number of hours worked over a period of those weeks must not exceed 48 hours per week.
-‐ Section 60C(2) Ea’55
Such employees generally cannot be required to work more than 12 hours in one day.
Payment of Overtime Work
-‐ Section 60A(3) EA’55
the overtime rate cannot be less than one and a half times the hourly rate of pay of the employee, irrespective of the
basis on which his rate of pay is fixed.
9 -‐ 5 ⓒ Teh Joo Ling All rights reserved
Public Holiday and Rest Days
Public Holiday Rest Days
(J’01 Q7)
Section 60D EA’55 Section 59 EA’55
-‐ Every employee is entitled to a minimum of 10 out of -‐ Every employee is entitled to a rest day of one whole
any gazetted public holidays in a year. day in each week as may be determined by the
-‐ 4 out of the 10 are compulsory employer.
1. King’s Birthday -‐ Where the employee is allowed more than one rest day
2.Sultan’s Birthday/Head of State/Federal Territory day in a week the second of such rest days will be
3.Labour Day considered as the rest day for the purposes of the Act.
4.National Day
Section 60(1) EA’55
Section 60D(3) EA’55 -‐ Payment -‐ An employee cannot be compelled to work on a rest
In the case of an employee who is required to work on day unless he is engaged in work which by reason of its
any paid gazetted public holiday and who is on a nature requires to be carried on continuously or
(i) monthly, weekly, daily, hourly or such similar rate of continually by ≥ 2 shifts.
pay, then he shall be paid as follows:
-‐ 2 days’ wages at his ordinary rate of pay, in addition Section 60(3) EA’55 -‐ Payment
to his holiday pay he is entitled to for that day. In the case of a
-‐ at least 3 times his hourly rate of pay of work if he (i) daily or hourly rated employee, he must be paid:
works for more than his normal number of hours of -‐ 1 day’s wages at the ordinary rate of pay if the period
work. of work does not exceed half his normal hours of
work; or
(ii)“piece” rate basis, then he shall be paid as follows: -‐ 2 day’s wages at the ordinary rate of pay if the period
-‐ 2 times his ordinary rate per piece, in addition to the of work exceeds half his normal hours of work (but
rate of pay he is entitled to for that day. does not exceed his normal hours of work).
-‐ 3 times his ordinary rate per piece if he works in
excess of his normal working hours. (ii)monthly rated employee, he must be paid:
-‐ half the ordinary rate of pay for work done on that day
if the period of work does not exceed half his normal
hours of work; or
-‐ 1 day’s wages at the ordinary rate of pay for work
done on that day if the period of work exceeds half his
normal hours of work (but does not exceed his normal
hours of work).
Where
work
is
carried
out
in
excess
of
the
normal
hours
of
work,
both
the
above
categories
of
employees
are
entitled
to
a
rate
of
not
less
than
twice
their
hourly
rate
of
pay.
In the case of an employee employed on piece rates
who works on a rest day, he must be paid twice his
ordinary rate per piece.
9 -‐ 6 ⓒ Teh Joo Ling All rights reserved
Annual Leave
Section 60E EA’55
No of days of entitlement per year Forfeiture of AL
Year(s) of completed service Annual Leave entitlement in Possible if:
with the same employer aggregate in each calendar year 1. He absents himself from work w/o permission; or
(no. of years) (no. of days)
2.W/o reasonable excuse for > 10% of total number of working
days during the 12 months for which his entitlement is accrued.
1 ≤ x < 2 8
Can AL be substituted for payment?
2 ≤ x < 5 12 Yes, at the request of the employer and with the employee’s
written consent.
x > 5 16 Sick leave while on AL?
Employee will receive additional leave (likewise if employee goes
*if worked < 1 year, then will only be entitled to annual leave on maternity leave)
in proportion to the no. of completed months.
Sick
Leave
Section
60F
EA’55
(J’96
Q5d)
Employee will be entitled to sick leave if a
certificate from a registered medical practitioner is
obtained AND has informed his employer within 48
hours of the commencement of his sickness
Max Number of Days
1. Where no hospitalization is necessary:
Year(s) of completed service Sick Leave entitlement in
with the same employer aggregate in each calendar year
(no. of years) (no. of days)
x < 2 14
2 ≤ x < 5 18
x > 5 22
2.Where hospitalization is necessary:
60 days in aggregate in each calendar year.
9 -‐ 7 ⓒ Teh Joo Ling All rights reserved
Employment of Women
Conditions of employment for female employees Maternity Leave
1. Not allowed to work in any industrial or 1. No. of days entitled?
agricultural venture between 10pm -‐ 5am 60 consecutive days of paid maternity leave.
2.Must have had a period of 11 consecutive hours 2.What if the female employee dies?
free from work. Her nominee or legal personal representative will
receive the maternity leave allowance up to the the
dat of her death.
3.When should the leave be taken?
Exceptions Entitled to up to 30 days paid maternity leave before
-‐ For females engaged in shift work, condition no.1 may confinement and 30 days after confinement.
be waived with the approval of the Minister of HR; 4.What is the rate payable?
-‐ Females employed and licensed as a conductor of a Calculated at the ordinary rate of pay or at the rate of
public service vehicle may work between 10pm -‐ 1am RM6 per day whichever is greater.
5.What is the minimum rate of maternity allowance
per day?
Minimum rate is RM6/day
6.What if she absents herself after the 60 days
maternity leave?
She cannot be terminated until such absence exceeds
90 days if she is still medically unfit for work. THe
employer may grant her unpaid leave for the period
exceeding 60 days r request her to treat the excess
period as annual leave.
7.When can the maternity pay be suspended?
If the female employee does not inform her employer
of the date of her commencement of the maternity
leave within a period of 60 days preceding her
expected confinement.
9 -‐ 8 ⓒ Teh Joo Ling All rights reserved
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