Employment law in Malaysia
Employment Law in Malaysia is primarily governed by the Employment Act 1955 (EA 1955), which applies to employees in the Peninsular Malaysia and Labuan. It sets out the minimum terms and conditions of employment, including rights and protections for workers. Other important legislation and regulations affecting employment in Malaysia include the Industrial Relations Act 1967 (IRA 1967), Trade Unions Act 1959, Employment (Termination and Layoff Benefits) Regulations 1980, and the Occupational Safety and Health Act 1994. Below is an overview of the key aspects of employment law in Malaysia:
1. Employment Contracts
Written Contracts: While the Employment Act requires a written contract for employees earning less than RM 2,000 per month (or those working in manual labor), it is best practice for all employers to provide a written contract to outline the terms of employment. The contract typically specifies:
Job title
Salary and allowances
Working hours and breaks
Term of employment (whether permanent, temporary, or fixed-term)
Benefits and entitlements
Types of Contracts:
Permanent Contracts: Employees on permanent contracts have ongoing employment without a fixed end date.
Fixed-Term Contracts: These contracts are for a specified duration or project. Upon completion of the term, the contract automatically expires unless renewed.
Probationary Period: A probationary period is often included at the start of the employment. It typically lasts 3 to 6 months and allows both employer and employee to assess if the relationship is suitable. During this period, the notice period for termination is usually 1 week.
2. Working Hours and Overtime
Standard Working Hours: The standard workweek in Malaysia is 48 hours, typically 8 hours per day, 6 days a week. Employees working in excess of this are entitled to overtime pay.
Overtime: Overtime is paid at the following rates:
1.5 times the hourly rate for overtime worked on a regular working day.
2 times the hourly rate for overtime worked on rest days, public holidays, or after normal working hours (usually after 10:00 PM).
Rest Periods: Employees are entitled to a minimum of 1 day off per week (usually Sunday).
Meal Breaks: Employees working for more than 5 hours are entitled to at least 30 minutes to 1 hour for a meal break.
3. Minimum Wage
National Minimum Wage: Malaysia has a national minimum wage, which was set at RM 1,500 per month (as of 2022) for workers in the Peninsular Malaysia and RM 1,200 per month for workers in Sabah, Sarawak, and Labuan. This rate applies to employees working in the private sector who are employed in non-managerial, non-supervisory roles.
Sector-Specific Minimum Wage: Some industries or sectors may have additional agreements or higher wages based on collective bargaining or industry standards.
4. Leave Entitlements
Annual Leave: Employees are entitled to paid annual leave as follows:
8 days of annual leave for employees with less than 2 years of service.
12 days for employees with 2-5 years of service.
16 days for employees with more than 5 years of service.
Sick Leave: Employees are entitled to paid sick leave:
14 days of paid sick leave per year if hospitalized.
15 days of paid sick leave if not hospitalized, with a cap of 60 days in total over a 5-year period.
Maternity Leave: Female employees are entitled to 60 days of paid maternity leave, provided they have worked for the employer for at least 90 days in the 9 months preceding the leave.
Paternity Leave: There is no statutory paternity leave under the Employment Act. However, some employers may offer paternity leave as part of their benefits package.
Public Holidays: Employees are entitled to 11 paid public holidays per year. If an employee works on a public holiday, they are entitled to 2 days’ pay or substitute holiday in lieu.
5. Social Security and Benefits
Social Security: Employees are required to contribute to Malaysia’s Social Security Organization (SOCSO), which provides coverage for accidents, illnesses, and disabilities. Employees and employers both contribute to SOCSO.
Employees' Provident Fund (EPF): The EPF is a mandatory savings scheme where employees contribute a percentage of their salary, which is matched by the employer. This fund is primarily used for retirement.
Health Insurance: Malaysia’s public healthcare system provides essential medical services, but employers are not required to provide private health insurance. However, many private-sector employers offer health insurance benefits.
Employment Insurance Scheme (EIS): The EIS provides unemployment benefits to employees who lose their job. Both employers and employees contribute a small percentage of the employee’s salary to the EIS.
6. Termination of Employment
Notice Period: The notice period for termination depends on the employee’s length of service:
Less than 2 years: 4 weeks’ notice.
2 to 5 years: 6 weeks’ notice.
More than 5 years: 8 weeks’ notice.
Severance Pay: Severance pay may be applicable for termination under specific conditions, such as redundancy. However, there is no statutory severance pay under the Employment Act, but the Employment (Termination and Layoff Benefits) Regulations 1980 provide guidelines on severance payments for redundancy situations.
Dismissal for Cause: Employees may be terminated for reasons such as misconduct, negligence, or breach of contract. In such cases, the employer is not required to provide a notice period or severance pay.
Redundancy: In cases of redundancy, employees are entitled to severance pay based on their years of service:
Less than 2 years: 10 days’ salary for each year of service.
2 to 5 years: 15 days’ salary for each year of service.
More than 5 years: 20 days’ salary for each year of service.
7. Discrimination and Equal Treatment
Non-Discrimination: Malaysia’s labor laws prohibit discrimination based on gender, race, religion, and other protected categories. Employers must not treat employees unfairly or differently based on personal characteristics.
Equal Pay: Employers must provide equal pay for equal work. There are no laws specifically related to gender pay gaps, but employees performing the same or equivalent work must receive equal remuneration.
8. Trade Unions and Collective Bargaining
Trade Union Rights: Employees have the right to form or join trade unions, and trade unions play an important role in representing workers’ interests. However, union membership is not mandatory.
Collective Bargaining: Unions can engage in collective bargaining to negotiate terms of employment such as pay, benefits, and working conditions. Collective agreements may be reached in certain industries or sectors.
Industrial Relations Act 1967: This law regulates industrial disputes and provides a framework for resolving conflicts between employers and employees or unions. Disputes can be taken to the Industrial Court for resolution.
9. Health and Safety
Occupational Safety and Health Act (OSHA) 1994: Employers are required to provide a safe and healthy working environment for employees. The Act outlines the responsibilities of employers, employees, and the government in ensuring workplace safety.
Workplace Accidents: Employees who suffer from work-related injuries or accidents are entitled to compensation through SOCSO or EIS.
10. Labor Disputes and Legal Recourse
Labor Court: If an employee believes that their rights have been violated (e.g., wrongful dismissal, non-payment of wages, etc.), they can file a complaint with the Industrial Relations Department or the Labor Court.
Mediation and Arbitration: Disputes can also be resolved through mediation or arbitration, which is often quicker and less expensive than litigation.
11. Child Labor and Protection of Minors
Child Labor: Malaysia has laws prohibiting the employment of children under the age of 13 in most work environments. Children aged 13-15 may work under certain conditions, but only for light work that does not interfere with their education or harm their health.
Youth Employment: Minors aged 15-18 may work, but they are subject to restrictions, such as not being employed in hazardous work.
Summary of Key Worker Rights in Malaysia:
Employment Contracts: Written contracts specifying terms and conditions.
Working Hours: Standard 48-hour workweek, with overtime pay.
Minimum Wage: National minimum wage applies.
Leave Entitlements: Annual leave, sick leave, maternity leave (60 days), and public holidays.
Social Security: Contributions to SOCSO, EPF, and EIS.
Termination: Notice periods and severance pay under certain conditions.
Non-Discrimination: Equal pay and protection from discrimination.
Trade Unions: Right to form or join trade unions and collective bargaining.
Health and Safety: Employer responsibility for workplace safety.
Labor Disputes: Dispute resolution through the Labor Court or mediation.
Malaysia’s employment laws are designed to ensure fair treatment of workers while maintaining flexibility for employers. They aim to create a balance between the rights of employees and the needs of businesses in the country.
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