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9 Essential Must-Knows About Employment Law in Malaysia

When the phrase “Employment Law” comes up, what do you think of? Contracts? Salary? Your boss? Clueless? For the average working Malaysian, any encounter with the law is met with exasperation and perhaps, dread. Given the complexities that are part and parcel of the legal process, that feeling may well be warranted.
employment law in malaysia

However, the importance of law in protecting the rights and interests of all the parties in a working relationship necessitates us to have a basic understanding of the ins and outs of employment law. Yet, when the going gets tough and jargons become unbearable, it may be wise to seek help from an employment lawyer.

We have put together 9 essential points to understand the employment law, during employment and post-employment. It’s important to know your rights as an employee in Malaysia.

Before we dig deeper into the 9 points, let us take a look at a few nice-to-know information about the Employment Act in Malaysia prior to your employment.

Pre-Employment

The Employment Act is the authoritative legislation that governs employment law in Malaysia. The minimal statutory rights benefiting the employee are set out within the document. However, it needs to be emphasised that not all employees are afforded complete protection under the Employment Act. Broadly speaking, the Act grants complete protection to employees:

  • Whose month salary that does not exceed RM2,000;
  • Who are engaged in manual labour, regardless of salary;
  • Engaged in the operation or maintenance of mechanically propelled vehicle;
  • Who supervise or oversees other employees engaged in manual labour;
  • Engaged in any capacity on a vessel (subject to certain other conditions); or
  • Who are engaged as domestic servants.

The distinction is important, as an employee who falls under any of the categories above would be granted protection under the Act. Those who fall outside of these requirements would then have to rely primarily upon the terms that have been agreed upon in their contract of employment.

Additionally, there are other supporting legislation that employees may draw upon to protect their rights and interests such as the Employee Social Security Act 1969, Minimum Wages Order 2016 and many more.

This can all be rather overwhelming to understand without prior experience. Hence, it is advisable to seek legal advice to identify your position and eligibility under the Act right from the very beginning of your employment. This is to ensure that you are afforded the full benefits that are encapsulated within the legislation.

Alternatively, having a legal professional on your side as an employee who falls outside of the Act is equally as useful in order to negotiate a contract of employment that benefits and protects your rights and interests in so far as it is legally possible.

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During Employment

Great, you got the job! Now, let’s make sure that you get the right legal protection that you deserve from work.

There are several issues that can arise during the course of your employment that would warrant a closer inspection, just to make sure that you don’t lose out on what you deserve from all the hard work.

Salary & Overtime

Since 1 July 2016 as per the Minimum Wages Order 2016, the minimum wage in Peninsular Malaysia is set at RM 1,000 monthly while for East Malaysia and Labuan is set at RM 920 monthly.

The Employment Act also sets out a detailed breakdown for overtime entitlements. The Act allows for employees to be compensated a minimum of 1.5 times the hourly rate of pay. The rate of compensation is then scaled accordingly to the type of overtime worked.

Fundamentally, employees that are paid on a monthly basis are entitled to be compensated for any overtime work by law. However, employees that are not covered by the Employment Act in Malaysia are not entitled to overtime payments.

Deductions

There are 3 types of deductions that are requires an employer to make from an employee’s salary, namely:

  • The income tax deduction
  • The employee’s contribution to Employees Provident Fund (EPF)
  • The employee’s contribution to social security organisation (SOCSO)

Be mindful that the employer is to contribute their share towards the employee’s EPF and SOCSO funds as well.

Other than the above, an employer is not allowed to make any further deductions to an employee’s salary unless they satisfy the specific requirements as set out in the Act. Examples of these include overpayment of wages, payment in lieu of notice, recovery of advanced wages and authorised deductions as provided by other legislation.

Alternatively, an employer may also make certain deductions at the request of the employee.

The agreed terms of the contract would dictate the application of any deductions to be made from the salary of employees who are not covered by the Act.

Leaves & Holidays

The Act provides for a minimum of 8 days of annual leave and 14 days of sick leave. This increases accordingly to the number of years the employee has been employed.

Further to this, the Act entitles employees a minimum of 11 public holidays every year. There are 5 public holidays that are mandatory – National Day, Yang di-Pertuan Agong’s birthday, Ruler or Yang di-Pertua Negeri’s birthday of the respective state that the employee is based, Labour Day and Malaysia Day.

Should a public holiday be on a rest day, the next working day is substituted to replace it.

Maternity Leave

It is provided under the Act that all female employees are entitled to 60 consecutive days of paid maternity leave, subject to certain requirements. This includes employees who are not generally covered by the Employment Act as well.

There are additional provisions in the Act that guarantees for a maternity allowance as well as non-termination under the condition that the requirements are satisfied.

Harassment & Discrimination

All complaints of sexual harassment have to be investigated by the employer for all employees under the Act.

There is an implied term for an employee to have the right to be treated fairly with mutual trust and respect. However, there is no specific provision under the Act that prohibits discrimination.

Fortunately, there are alternatives to enforcing a claim for discrimination – a civil claim or an unjust dismissal claim after the termination of contract of employment on the grounds of breach of contract by the employer. Both alternatives are more complex in nature due to the overlapping areas of law that needs to be factored in.

Data Protection

The Personal Data Protection Act 2010 (“PDPA”) grants employees control over their personal information is used and processed by their employer. There are exceptions within the PDPA but any exception would still require written notice be issued to the person involved.

If it all goes accordingly, you won’t need to worry about this at all. However, in the event that a dispute occurs over the course of employment, there are ways to resolve this. An easy solution would be to get a lawyer on your side to set the record straight.

Post-Employment

Sometimes, things just don’t work out. You could be dismissed or even resign on your own accord and these things happen. What’s important is to make sure that even at the end, it’s all done right.

There are a few things to look out for with termination – notice, dismissal and restrictive covenants.

Notice

Employees falling under the protection of the Act are prescribed a minimum of 4 weeks notice. Depending on the length of employment, the notice period prescribed may be up to 8 weeks. Non-Act employees will have to rely upon the prescribed notice stated in their employment contracts.

Dismissal

For dismissals, it is important to remember that all employees are protected against unjust dismissals. This means that an employer may not dismiss an employee without just cause. If the employer is unable to provide reasonable grounds for dismissal, the employee may be entitled to remedies such as back wages, reinstatement and compensation.

Restrictive Covenants

Restrictive covenants are usually unenforceable in Malaysia due to the Contracts Act 1950 providing that agreements which restrain a person from exercising their right to work to be void. Therefore, any term that stops anyone from gaining employment or involvement with a competing business is not enforceable.

However, a restrictive covenant that prohibits employees from using confidential information acquired during the course of employment is enforceable.

Losing your job is a disruptive and, sometimes, traumatic life event. Just remember to take the time and thoroughly go through the details despite the chaos of it all. You’ve given the service, make sure that you’re getting the right ending.

Don’t Worry

Yes, employment law in Malaysia can be really confusing and lengthy. But it is necessary to be equipped with the basic knowledge to ensure that you are getting all that you deserve from your hard day’s work.

All it takes is a little bit of time and effort to seek out the right information from the right documents. Guides such as this provide a simplified summary of vital things to look out for but it should only be the start. At the end of the day, it is best to have an employment lawyer take care of it all for you!