1.1 Key statutes
The 2 key statutes governing employment law in Malaysia are the Employment Act, which deals with minimum terms and conditions for manual workers and for non-manual work employees whose wages do not exceed RM1,500 per month, and the Industrial Relations Act, which deals with the relations between employers, employees and trade unions.
Other major pieces of legislation include:
- the Workmen’s Compensation Act;
- the Trade Unions Act;
- the Employees’ Social Security Act; and
- the laws pertaining to welfare, health and safety of employees, eg the Factories and Machinery Act and the Occupational Safety and Health Act.
1.2 Probationary period
There are no specific regulations governing probationary period in Malaysia. However, this provision is a common practice in employment contracts. The duration can be freely agreed by the parties, but usually it varies between three and six months, or a higher period for senior employees.
1.3 Minimum wage
Minimum wages are provided for under the Wages Council Act only for certain sectors and industries and in fixed territories (West Malaysia, Sarawak and Sabah). Therefore, for many employees there is no minimum wage rate, and pay rates may be negotiated by the parties on an individual basis.
1.4 Remuneration structure
For the purposes of the Employment Act, ‘wages’ means all remuneration paid to the employee for work done. However, the Act expressly excludes certain payments from the definition of wages (eg costs for housing/accommodation, travelling allowances, contribution to pension funds, gratuity payable on retirement, annual bonuses, etc).
Whilst there is no statutory provision, bonuses may be provided as an entitlement under the employment contract.
1.5 Working hours
The Employment Act provides minimum standards on hours of work, overtime and rest periods, applicable to employees falling under the purview of the Act (see point 1.1 above). For those employees not covered by the Employment Act, terms and conditions of working hours and rest periods are negotiated and agreed upon by the parties.
Hours of work
According to the Employment Act, the employer cannot require employees to work:
- more than 5 consecutive hours without a period of rest of not less than 30 minutes;
- more than 8 hours per day;
- more than 10 hours spread over the course of a single day; or
- more than 48 hours per week.
These limits can be exceeded only in specified cases ie (a) accident, actual or threatened, in respect of the employee’s place of work; (b)the performance of work which is essential to the wellbeing of the community; (c) work essential for the defence or security of the country; (d) urgent work to be done to machinery or plant; (e) an interruption of work which it was impossible to foresee; or (f) work to be performed by employees in any industrial undertaking essential to the economy of Malaysia or any essential service as defined in the Industrial Relations Act).
Rest periods
Employees are entitled to one whole rest day each week. The rest day is usually on Sunday or Friday (or any other day fixed by the employer at its discretion), depending on the State of Malaysia in which the employee is based.
Overtime
Under the Employment Act, any work done in excess of the normal hours of work is considered overtime. In addition, the Employment (Limitation of Overtime) Regulations fix a limit of 104 hours of overtime work per month. Overtime hours must be paid as follows:
- at least 150% of the basic hourly rate of pay in case of overtime during an ordinary working day;
- at least 200% of the basic hourly rate of pay in case of overtime during rest days; and
- at least 300% of the basic hourly rate of pay in case of overtime during public holidays.
1.6 Public holidays
Employees are entitled to a paid rest day on public holidays. Currently there are 10 gazetted public holidays per year, 4 of which are mandatory, whilst the remaining 6 can be decided by the employer and must be notified to all the employees at the commencement of each calendar year.
1.7 Annual paid leave
According to the Employment Act, the minimum number of days of paid annual leave ranges from 8 to 16 depending on the employee’s length of service, as follows:
- 8 days if the length of service is less than 2 years;
- 12 days if the length of service is more than 2 years but less than 5 years;
- 16 days if the length of service is more than 5 years.
However, these minimum standards are commonly built upon by collective agreements or employment contracts which usually grant to all the employees (including those not covered by the Employment Act) between 2 and 4 weeks’ annual leave per year.
1.8 Other types of leave
Sick leave
Under the Employment Act, an employee is, after examination by a registered medical practitioner or dental surgeon appointed by the employer, entitled to paid sick leave depending on the employee’s length of service, as follows:
- 14 days if the length of service is less than 2 years;
- 18 days if the length of service is more than 2 years but less than 5 years;
- 22 days if the length of service is more than 5 years.
Where hospitalisation is necessary, the periods above can be extended to up to 60 days per year.
Maternity leave
Female employees covered by the Employment Act are entitled to 60 consecutive days of maternity leave which cannot commence earlier than 30 days before confinement, or later than the day after confinement. However, for certified medical reasons, an employer may require maternity leave to be taken up to 14 days before the probable date of confinement. Maternity allowance is payable for the first 5 children if the employee has worked for the same employer at any time during the 4 months preceding confinement and she has been employed by the same employer for not less than 90 days during the 9 months preceding confinement. The allowance is set at normal pay rates, or at the rate prescribed by the Minister of Human Resources, whichever is the greater. A female employee who is not entitled to maternity allowance can return to work early, provided that she obtains a medical certification that she is able to work. There are no statutory maternity benefits for female employees who are outside the scope of the Employment Act; however, most employers do usually provide maternity benefits for these employees as well.