The MAIN legislation governing employment in Malaysia is The Employment Act 1955 [Act 265] (hereinafter referred to as EA). The EA came into force on 1st of June 1957. It has gone through several amendments since, most notably in 2012, when extensive modifications were made to EA to make it up-to-date with current conditions and to provide wider protection to the employees.
NOTE: It was set for another major amendment in 2017 in line with Malaysia’s signing of the TPPA treaty in 2015. However, since the US had pulled out from the treaty, all have been postponed until now.
* This article was last updated on 29th June 2017. Thank you for reading.
The Importance of the Employment Act 1955
The Employment Act 1955:
- regulates relations between employers and employees;
- legislates various terms and conditions of employment;
- set out the minimum terms and conditions that employer and employee can agree upon; and
- penalties for non-compliance
If an employer and employee agree on terms and conditions which are BELOW the minimum standard set out in the EA, then such agreement is INVALID. All provisions in the contract that does not follow the minimum standard will be automatically replaced by the minimum standards set by the EA.
It must be noted here that Employment Act 1955 applies only to West Malaysia and Federal Territories, including Labuan.
Employers and Employees in Sabah & Sarawak are governed by different set of laws, namely Sabah Labour Ordinance [Cap. 67] and The Labour Ordinance (Sarawak Cap 76).
Sub-section 1(2) stated:
This Act shall apply to West Malaysia only.
Scope of Coverage.
This is very important as the Employment Act 1955 and the Labour Ordinance of Sabah & Sarawak apply only to certain categories of employees. We shall deal with the Ordinance later, when we publish an article on them.
As for the EA, it is crucial to check Section 2 of the EA which defines the word ‘employee‘.
Section 2 – Interpretation:
“employee” means any person or class of persons –
(a) included in any category in the First Schedule to the extent specified therein; or
(b) in respect of whom the Minister makes an order under subsection (3) or section 2A;
Now refer to the table below, where we have simplified the First Schedule for your ease of reference:
The left side of the table shows who are covered by the act. The right side is the exclusion clause which means that even if they are covered, there are certain provisions in the EA which are not applicable to them. Generally, employees earning wages of RM2,000 per month and below are covered by the EA and all of its provision.
An employee earning above RM2,000 per month may still fall within the definition of ‘employee‘ under the EA if the employee falls under category i, ii, iii, iv or v above.
For the purpose of this Schedule “wages” means wages as defined in section 2, but shall not include any payment by way of commission, subsistence allowance and overtime payment.
As stated above, although an employee is covered under the act, he/she might not enjoy all the benefits that it provides.
Domestic Servants** do not enjoy protection under PART XII – REST DAYS, HOURS OF WORK, HOLIDAYS AND OTHER CONDITIONS OF SERVICE. Meaning, employers are not bound to pay them OT or give them paid annual leave. They also are deprived of other protections as well. Refer to the above table again.
Domestic Servant means a person employed in connection with the work of a private dwelling-house and not in connection with any trade, business, or profession carried on by the employer in such dwelling-house and includes a cook, house-servant, butler, child’s nurse, valet, footman, gardener, washerman or washer-woman, watchman, groom and driver or cleaner of any vehicle licensed for private use; [Sec 2 of the EA]
Contract of Service
Under the EA, employee refer to those employed under contract of service. Differentiate it with ‘contract for service‘.
“Contract of Service” means any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract;
Foreign Workers, Probationers & Apprentices
The Employment Act 1955 also covers foreign workers, and employees under probation including artisans and apprentices as long as they satisfy the criteria above.
So, please be careful! Before you deny your Indonesian workers their public holidays, do read the provisions in EA again.
The Minimum Wage
Minimum wage is not set under the EA 1955. It is regulated under a different set of law, namely The National Wages Consultative Council Act 2011 (Act 732).
For full background on the Minimum Wage and implementation of Minimum Wage 2016, please refer to my paper published at Academia.Edu here: The Minimum Wage Order 2016.
Presently the minimum wages as set by the government are as follows:
Employees Provident Fund And Socso
Both are MANDATORY but are regulated under different laws. EPF is governed by the Employees Provident Fund Act 1991 and Socso by the Employees’ Social Security Act 1969. Employees who are unsure whether their employers have made the contribution should check with EPF and Socso.
As such any complaints regarding the above should not be made to the Department of Labour but directly to the EPF and Socso office.
The minimum retirement age for public sector is currently 60 as set out by the The Minimum Retirement Age Act 2012 which was gazetted on 16 August 2012 and was enforced on 1 July 2013.
The Act states that the minimum retirement age of an employee shall be upon the employee attaining the age of 60 years. The employers may fix a retirement age for their employees which is higher than 60.
It is well settled that when there exist a ‘retirement age’ clause in a contract of employment, an employee’s contract may be terminated upon him reaching the specified retirement age.
So what happens if it is not stated in the contract?
This omission is often normally caused by the employer’s and employee’s failure to give thought to the latter’s retirement.
Without the clause, the employee may report for unfair dismissal if he is asked to retire upon reaching 60 years old. This is especially when the employer has no track record for retiring employees and retires an employee for the first time.
Read: Colgate Palmolive (M) Sdn. Bhd. v Yap Kok Foong  3 CLJ 9
Minimum Requirement Under Employment Act 1955
As stated above EA set minimum standard/requirement for an employment contract. When drafting an employment contract or setting up terms of employment, the employer cannot give the employee terms that are below than what is stated in the EA.
Employers are not prohibited however to give better terms to their employees.
What are the minimum standards?
The minimum standard can be found in several provisions under the Employment Act 1955 and its Regulations made thereunder. Among the most notable provisions are:-
- Notice of termination [Section 12]
- Wage period [Section 18]
- Hours of Work [Section 60A]
- Rest Day [Section 59]
- Holidays [Section 60D]
- Annual Leave [Section 60E]
- Sick Leave [Section 60F]
An employee shall not be required under his contract of service to work:
- more than 5 consecutive hours without a period of leisure of not less than 30 minutes;
- more than 8 hours in one day;
- in excess of a spread over period of 10 hours in one day (‘spread over period‘ means inclusive of breaks or period of leisure);
- more than 48 hours in one week (not including breaks or period of leisure)
For any overtime work carried out in excess of the normal hours of work, the employee shall be paid at a rate not less than 1.5 times his hourly rate of pay.
Currently, the maximum number of hours of overtime that can be worked is 104 hours per month. Any employer who allows an employee to work overtime than permitted by the law commits an offence.
Every employee shall be allowed in each week a rest day of 1 whole day. Employee who required to work during his rest day will be paid a higher rate as set out in the EA (Refer OT table above).
Every employee shall be entitled to a paid holiday at his ordinary rate of pay on 11 gazetted public holidays in any one calendar year, including:
- the National Day;
- the Birthday of the Yang di-Pertuan Agong;
- the Birthday of the Ruler or the Yang di-Pertua Negeri;
- the Workers’ Day;
- the Malaysia Day
An employee who is required to work on a paid holiday shall be paid a higher rate as set out in the EA (Refer OT table above).
An employee shall be entitled to paid annual leave of:
- 8 days for every 12 months of continuous service with the same employer if he has been employed by that employer for a period of less than 2 years;
- 12 days for every 12 months of continuous service with the same employer if he has been employed by that employer for a period of 2 to 5 years;
- 16 days for every 12 months of continuous service with the same employer if he has been employed by that employer for a period of 5 years or more
The EA does not provide:–
- Procedure to apply for the leave;
- Provision for emergency leave;
- The practice of carrying forward the unused leave.
Any employee who absents himself without permission, commits misconduct.
In a situation where the employee has applied for leave and then was rejected, at the end of the year the employer is required to pay the employee one day’s pay for every day due to him.
Under the EA, the employer is required to pay for the medical bills. The amount, however, is subject to the employers’ discreation as the EA is silent on this matter.
FREQUENTLY ASKED QUESTIONS
Q: If an employee falls sick and gets an MC from the doctor when he is on annual leave, can the annual leave be substituted with the sick leave?
A:The annual leave is considered as not taken.
Sick leave entitlement depends on the length of service.
An employee shall, after examination by a registered medical practitioner at the expense of the employer, be entitled to paid sick leave. Where no hospitalisation is necessary:
- 14 days in the aggregate in each calendar year if the employee has been employed for less than 2 years;
- 18 days in the aggregate in each calendar year if the employee has been employed between 2 to 5 years;
- 22 days in the aggregate in each calendar year if the employee has been employed for 5 years and above
60 days in the aggregate in each calendar year if hospitalisation is necessary, as may be certified by such registered medical practitioner or medical officer.
FREQUENTLY ASKED QUESTIONS
Q: Are employees entitled to paid sick leave when they had an accident?
A: Employees are not entitled to paid sick leave for the period in which they are entitled to disability compensation under the Workmen’s Compensation Act 1952 or the periodic payment for temporary disability under the SOCSO Act 1969.
Every female employee shall be entitled to maternity leave for a period of not less than 60 consecutive days in respect of each confinement. Maternity leave shall not commence earlier than a period of 30 days immediately preceding the confinement of a female employee or later than the day immediately following her confinement.
A female employee shall be entitled to receive maternity allowance if she:
- Has been employed more than 4 months before confinement.
- Is employed more than 90 days during the 9 months immediately before her confinement.
TERMINATION OF CONTRACT
Under the EA, either party to a contract of service may at any time give a termination notice in writing, and the notice period shall not be less than:
- 4 weeks for employment less than 2 years;
- 6 weeks for employment between 2 to 5 years;
- 8 weeks for employment more than 5 year
For employer, it is still subject to the requirement under IRA.
Other provisions in the EA
There are many more important provisions in the Employment Act 1955 that can be read HERE.
NOTE TO EMPLOYEE
If your employer fails to adhere to the minimum standard set by the EA, please make your complaint to the nearest Labour Department (Jabatan Tenaga Kerja).
Nonetheless, it is always a good practice to meet your boss first and discuss the matter internally. In most cases, once the report has been made to the Labour Department, the relationship will turn sour and will affect the employee more than the employer.
For unfair dismissal case, please report to the Industrial Relations Department within 60 days after the termination of your contract.
Read more HERE (in BM).