By:
Bryan Lui (Co-Managing Partner) [bryan_lui@luibhullar.com]
Harneshpal Karamjit Singh (Co-Managing Partner) [harnesh_bhullar@luibhullar.com]
Employment Law in Malaysia
The employment law in Malaysia governing the private sector is primarily codified in the Employment Act 1955 (EA), applicable to Peninsular Malaysia and the Federal Territory of Labuan. Alongside this statute, other sources of law such as the Industrial Relations Act 1967 and case law provide additional guidelines.
The Employment Act 1955 is currently undergoing significant amendments, which are in the final stages of public consultation before being tabled in Parliament. This guide outlines the key provisions and statutory rights under the existing framework to ensure clarity before the changes take effect. For the full list of proposed amendments, refer to the Ministry of Human Resources website.
Public vs. Private Sector Employment Law
While the EA governs the private sector, a different framework applies to public sector employees, who fall under the jurisdiction of the Public Service Commission.
Sources of Employment Law in Malaysia
Employment law in Malaysia is derived from several sources:
Statutes (Acts of Parliament):
Employment Act 1955
Industrial Relations Act 1967
Holidays Act 1951
Weekly Holidays Act 1950
Minimum Retirement Age Act 2012
Employees Provident Fund Act 1991 (EPF)
Social Security Organization Act 1969 (SOCSO)
Employment Insurance System Act 2017 (EIS)
Children and Young Persons (Employment) Act 1966
National Wages Consultative Council Act 2011
Subsidiary Legislation:
Employment (Part-Time Employees) Regulations 2010
Minimum Wages Order 2016
Case Law:
Judicial precedents set by Malaysian courts further clarify and interpret employment laws.
Applicability of the Employment Act 1955
The EA applies to specific categories of employees, as outlined in its First Schedule:
Employees earning wages not exceeding RM2,000 per month.
Employees engaged in manual labor or supervisory roles.
Domestic servants and workers on vessels registered in Malaysia.
For those not covered under the EA, employment relationships are governed by their respective contracts of service.
Key Provisions of Employment Law
1. Employment Contracts
Employment contracts, whether oral or written, must comply with the EA. Contracts with terms less favorable than the EA are deemed void (Section 7, EA). Contracts exceeding one month must be in writing and include a termination clause (Section 10, EA).
2. Wages and Payment
Employers are required to pay wages no later than the 7th day after the wage period ends (Section 19, EA). Wages include basic pay and other cash payments, excluding allowances and lawful deductions.
3. Statutory Contributions
Employers are obligated to make contributions for:
EPF
SOCSO
EIS
Schedular Tax Deductions (PCB)
4. Working Hours and Overtime
Maximum working hours: 8 hours/day or 48 hours/week (Section 60A, EA).
Overtime work is compensated at 1.5 times the hourly rate.
5. Leave Entitlements
Annual Leave:
8 days for 1-2 years of service.
12 days for 2-5 years of service.
16 days for 5+ years of service.
Sick Leave:
14-22 days (depending on tenure), plus 60 days for hospitalization.
Maternity Leave:
60 days for all female employees (Section 44A, EA).
6. Public Holidays
Employees are entitled to 11 gazetted public holidays, including:
National Day
Workers’ Day
Malaysia Day
Work on public holidays must be compensated at triple the daily wage rate.
7. Termination and Lay-Off Benefits
Termination must comply with the principle of “just cause and excuse” (Section 20, Industrial Relations Act 1967). Employees are entitled to termination benefits based on their tenure:
10 days for <2 years.
15 days for 2-5 years.
20 days for 5+ years.
8. Sexual Harassment Protections
Sections 81A-81G of the EA mandate employer obligations to address sexual harassment complaints. Failure to act may result in fines of up to RM10,000.
Specialized Areas of Employment Law
Unfair Dismissal: Employees terminated without just cause may seek redress via the Industrial Court.
Probation Period: While not legally mandated, probation typically ranges from 1-6 months, with termination requiring justification.
Restraint of Trade: Provisions restricting employees’ future employment are void under Section 28 of the Contracts Act 1950.
Localized Focus
For those seeking legal advice, you can consult employment lawyers in Kuala Lumpur, Selangor, Penang, or Johor, as these regions host specialized employment law practices.
Conclusion
This guide provides an overview of employment law in Malaysia to empower employers and employees with the knowledge of their rights and obligations. For specific legal advice, consult an employment law lawyer or labour law specialist to address your unique situation. Contact us for a free consultation via WhatsApp (+60143000960) or E-mail (general@luibhullar.com) for any queries
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