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.
It is set for another major amendment in 2017 in line with Malaysia’s signing of the TPPA treaty in 2015.
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 standard set by the EA.
It must be noted here that EA applies only to West Malaysia and Federal Territories, including Labuan.
Sub-section 1(2) stated:
This Act shall apply to West Malaysia only.
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).
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;
Generally, employees earning wages of RM2,000 per month and below are covered by the EA.
An employee earning above RM2,000 per month may still fall within the definition of ‘employee‘ under the EA if he’s engaged in manual labour works.
Under the EA, employee must also include those employed under contract of service and does not include ‘domestic servant‘.
“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;
“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;
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.
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.
Employees Provident Fund And Socso
Both are mandatory but were regulated under different laws. EPF is governed by the Employees Provident Fund Act 1991 and Socso by the Employees’ Social Security Act 1969.
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?
These can be found in several provisions in the EA.
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.
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.
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.
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
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
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.
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.
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).