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Malaysian Employment Law

Malaysian Employment Law

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05/17/2013

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INTRODUCTION Malaysian Employment Act 1955 and Malaysian Labour Law provide a minimum standards guides to Malaysian employers and foreign investors in Malaysia. BEING A LABOUR CONSULTANT TO SIMPLIFY THE EMPLOYMENT ACT 1955. however its provisions and regulations could be regarded as the minimum standard applicable to everyone under employment. SEEKS YOUR ASSISTANCE.MODULE 2: MALAYSIAN EMPLOYMENT LAW QUESTION: A FOREIGN INVESTOR. The Employment Act is applicable to lower income group. PLANNING TO INVEST IN A LARGE MANUFACTURING PLANT IN SENAWANG. Both employer and employee can however execute an employment contract with terms and conditions higher than that provided in the act. DISCUSS THE PERTINENT AREAS OF EMPLOYMENT ACT 1955 FOR THE INVESTOR TO UNDERSTAND. 2 .

or (e) he is engaged as a domestic servant 3 .EMPLOYMENT ACT 1955 First Schedule Section 2(1) EA 1955- 1] any person. (c) he supervises or oversees other employees engaged in manual labour employed by the same employer in and throughout the performance of their work. irrespective of his occupation. ii] is not the holder of a local certificate as defined in Part VII of the Merchant Shipping Ordinance 1952. who has entered into a contract of service with an employer under which such person’s wages do not exceed RM 1500 per month 2] any person who irrespective of the amount of wages he earns in a month. 1952. has entered into a contract of service with an employer in pursuant of which :(a) he is engaged in manual labour including such labour as an artisan or apprentice: provided that where a person is employed by one employer partly in manual labour and partly in some other capacity. (b) he is engaged in the operation or maintenance of any mechanically propelled vehicle operated for the transport of passengers or goods or for reward or for commercial purposes. such person shall not be deemed to be performing manual labour unless the time during which he is required to perform manual labour in anyone wage period exceeds one-half of the total time during which he is required to work in such wage period . or iii] has not entered into an agreement under Part III of the Merchant Shipping Ordinance. (d) he is engaged in any capacity in any vessel registered in Malaysia and who:i] is not an officer certificated under the Merchant Shipping Act of the United Kingdom as amended from time to time.

The provisions relate to contract of service. protection of female employees. annual and sick leave. rest days. The provisions relate to termination. priority of wages. APPLICATIONS OF THE ACT There are three general circumstances under which this Act may be applicable ➢ Where an organization commence business and hire the first employee. merger and acquisition. and relocation.OBJECTIVES The objectives of the Employment Act are. To provide for administration or enforcement of the Act and punishment of offenders. maternity benefits. To provide an avenue to employees or employers to claim or settle the amount due under the contract or the Act. public holidays. • • • To protect employees in respect of payment of wages in legal tender. The laws relate to the retrenchment benefit and priority of payment. lay-off and retirement benefits ➢ Where an organization is put under receivership by the financial institution or has been wound up by the court. payment of wages.  not more than five consecutive hours with a period of rest not less than 30 minutes 4 . TERMS & CONDITIONS STIPULATED UNDER EMPLOYMENT ACT 1955 ➢ Hours of work Agreed hours of work should be as followings. • To provide minimum standards in respect of hours of work and overtime. termination and lay-off benefits and others. and the minimum benefit due to the employee ➢ Where an organization under restricting. deductions.

attitude.  not more than 48 hours in a week.1 ½ time the normal hourly rate of pay   Overtime on Rest Days– 2 time the normal hourly rate of pay Overtime on Public Holidays– 3 time the normal hourly rate of pay However. Rates for overtime work are as follows. emergency work allowed only for . co-operation. overtime could not exceed . If the employee is found to be lacking in a few of the above attributes. with a view to improving him. not more than 8 hours in one day  not more than 10 hours in a “spread-over” period  if the work is of a continuous nature.  104 hours per month.  urgent work to be done to machinery or plant  an interruption of work impossible to foresee ➢ Overtime Overtime means work done in excess of the “normal hours of work”. it is advisable for the employer in a cordial manner. 5 . The employer may test the aptitude. conduct. and responsibility of the employee. However. actual or threatened.  in case of accident. termination of employment or wages in lieu The probationary period is for the employer to test the suitability of the employee for the job assigned to him. it can be 8 consecutive hours with a period of rest (paid) of not less than 45 minutes. ability or adaptability of the employee for the job.  Overtime on normal working days. unless exempted by the Minister under Section 2B  Not more than 12 hours of work (including normal hours in a day) ➢ Notice of probationary period. He may also take into consideration other factors like behaviour.

at least 6 weeks  5 years or more. notice of his intention to terminate such contract of service.at least 4 weeks  2 years or more. an employer may terminate an employee’s services for any of the following reasons:  Retirement 6 . Whereas termination contract Of Service is where either party to a contract of service may at anytime give to the other. He should also be informed of the specific areas where improvement is expected. In the absence of a provision for period of notice made in the contract.An employer may extend the initial probationary period to a further period of 1-3 months. The employer could terminate the services of an employee on probation. that his probationary period is being extended. even without waiting for the end of the probationary period. In such an event. An employee may also quit the job if he dissatisfies with the job. he may seek reinstatement under Section 20 of the Industrial Relations Act. If an employee on probation has reasons to believe that terminations of his service was mala fide. But the satisfaction must be reasonable. in writing. if the employee does not measure up to the employer’s satisfaction.at least 8 weeks However. The period of notice required by either party is usually in accordance with the provision in the contract of employment. before the end of the probationary period. the employee should be informed. the period of notice of termination shall be based on the provision of the Employment Act as follows: less than 2 years.

 Section 14(1) IRA. 7 . However. If he fails to do so. ➢ Entitlement of annual leave An employee is entitled to annual leave only after 12 months of continuous service.    < 2 years of service – 8 days for each year > 2 years or more but < than 5 years – 12 days for each year > than 5 years – 16 days for each year The paid annual leave does not include public holidays and an employee must take his annual leave not later 12 months after the end of every 12 months of continuous service. An employee’s annual leave also can be forfeited if he absents himself from work without permission. his annual leave will be forfeited. he is entitled to the ordinary rate of pay in lieu for the completed months of service. If an employee’s service is terminated (for reasons other than misconduct) or if he resigns by giving due notice.misconduct  Wilful Breach of Contract  Retrenchment  Criminal Offence  Frustration of Contract  Repudiation of Contract  Effluxion of time [contract of service for specific period]  Termination for poor performance Dismissal after due inquiry can be done when an employer may on the ground of misconduct dismiss an employee. The whole or part of the untaken annual leave may be substituted for payment at the request of the employer and with the written consent of the employee. or without any reasonable excuse for more than 10% of the total number of working days during the twelve months of continuous service for which his entitlement is accrued. it should be noted that the dismissal is valid only after due inquiry has been done.

However. or is on maternity leave. in case of emergency (when the company appointed doctor is not readily available or the clinic is too far away) the employee can seek treatment from any registered medical practitioner. the amount of paid sick leave can be extended by up to 60 days per calendar year. If there is a company appointed doctor or panel of doctors.If an employee who is on annual leave falls sick. The number of days of paid sick leave which an employee is entitled to in each calendar year is as follows:    < than 2 years – 14 days >2 years but < than 5 years – 18 days >5 years or more – 22 days If hospitalization is necessary. ➢ Entitlement of Sick Leave An employee is entitled to paid sick leave only under the following circumstances:  he has obtained a certificate from a registered medical practitioner duly appointed by his employer. or  he has obtained a certificate from a dental surgeon. the employee is entitled to sick leave or maternity leave as the case may be and the annual leave already taken by him/her becomes cancelled. or  if no such medical practitioner is appointed. All such 8 . and  he has informed or has attempted to inform the employer of his sick leave within 48 hours of the commencement of the sickness. then other registered medical practitioners or government medical officers will be accepted. or the services of such a practitioner are not obtainable within a reasonable time or distance. the employee should seek medical treatment from such doctors.

➢ Public Holiday Every employee is entitled to 10 out of any of the following gazetted public holidays and any day declared as a public holiday by the Federal or State Government under section 8 of the Holidays Act 1951 in any one calendar year:Federal Public Holiday  Hari Raya Puasa  Chinese New Year  Workers’ Day  Wesak Day  Birthday of YDPA  Hari Raya Haji  Awal Muharram  National Day  Birthday of Prophet Muhammad  Depavali  Christmas Day State Public Holidays  New Year’s Day  Federal Territory Day  Thaipusam  Israk & Mikraj  Nuzul Quran  Good Friday  Pesta Keamatan  Hari Dayak  Birthday of State’s Sultans / Rulers 9 .cases are to be decided depending upon the circumstances and nature of the illness or injury.

➢ Duration of wage period Wage period is defined as the period in respect of which wages earned by an employee are payable. CONCLUSION The above serve as the minimum terms that is required to be in writing. if the wage period in a contract is silent. The employment contract may specify the wage period. ➢ Time of payment of wages Every employer shall pay to each of his employees not later than the seventh day after the last day of any wage period the wages. Any contract of service 10 . However. earned by such employee during such wage period. he may.Compulsory gazetted Public Holiday  National Day  The King’s Birthday  Birthday of Sultans/ Head of State or Federal Territory Day  Workers’ Day If any of the ten chosen gazetted public holidays falls within the period during which the employee is absent due to sick leave. depend on the individual organizations. annual leave. temporary disablement under the Workmen’s Compensation Act 1952 or under the Employees’ Social Securities Act 1969. It is important to note that no employer can enter into an agreement with his employee to contract out of the minimum provision of the EA. extend the time of payment by such number of days as he thinks fit. the employee is entitled to another day as a paid holiday in substitution for such public holiday. however additional terms may be included. but it cannot specify a wage period exceeding one month. on the application of the employer. less lawful deductions. professional firms or institutions. But if the Director General is satisfied that payment within such time is not reasonably practicable. then the wage period will be taken as one month.

or participating in the activities of a registered Trade Union or organizing the formation of a Trade Union.com/MALAYSIAN LABOUR Lw. However. employers and employees are free to agree upon more favorable terms than those in the EA. Source: 1) http://www. either directly or through the process of collective bargaining which will eventually lead to the compilation of a Collective Agreement whereby an employer cannot in any way restrain an employee from joining a Registered Trade Union.azminias.ilo.which contains terms and conditions of service less favorable than those stipulated in the EA is null and void to the extend and the relevant provisions of the EA will automatically substitute the less favorable terms (Section 7 & 7A).investmentinmalaysia.doc 3) http://www.com/search/label/malaysian%20labour%20law 2) www.org/dyn/natlex/docs/WEBTEXT/48055/66265/E55mys01. htm#c18 11 .

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