Employee’s Benefits under EA1955

1. General Overview

As an employer or business owner in Malaysia, it is crucial to understand the Employment Act (1955) in West Malaysia to comply with labor laws. This act outlines the rights and obligations of employees and employers.

Recent amendments to the act were scheduled to take effect on 1 September 2022 but have been postponed to 1 January 2023, as requested by industries and employers.

It’s important to note that the Employment Act does not apply to Sabah and Sarawak, as they have their own Labour Ordinances.

The enforcement structure of Malaysia’s employment law includes the Director General of the Industrial Relations Department, who reports to the Minister of Human Resources. The Minister of Human Resources can make referrals to the Industrial Court.

The multiple amendments to Malaysia’s employment law have caused confusion, leaving it to the courts to interpret the law for the modern business environment.

2. Basic Rights of Employees in Malaysia

The Employment Act (EA) covers all employees in Malaysia, irrespective of wages or occupation. However, employees earning above RM4,000 per month are exempted (excluding manual labor) from certain provisions in the Act, such as:

• Overtime rates for employees working on rest days
• Overtime rates outside normal working hours
• Allowance for shift-based work
• Overtime on public holidays
• Overtime for half working days on holidays
• Termination, lay-off, retirement benefits

Gig workers may also be covered by the Employment Act if they meet the conditions below. An individual is presumed under law to be an employee if the following conditions are met, in absence of a written contract. The conditions are:

• Their manner of work is subject to the direction or control of another person
• Their working hours are under the direction or control of another person
• They receive tools, supplies, or equipment from another individual to do a task
• Their work is a crucial component of another person’s enterprise
• Their work is performed purely for another person’s benefit
• They receive compensation for the task they perform on a regular basis, and this compensation makes up most of their income.

3. Probationary Period

The probationary period serves the purpose of evaluating a candidate’s qualifications for the position and assessing their compatibility with the organization. If everything goes well, the new recruit will be confirmed as a full employee. However, if issues arise, their probationary period may be extended.

Employers Cannot Simply Terminate a Probationer’s Employment

Probationers have certain employment rights and cannot be terminated without just cause. Companies must follow the termination process, including conducting a written appraisal and providing opportunities for improvement, such as extending the probation period.

4. Employment right

Rest days

Employees are entitled to one rest day per week.

Minimum wage

Effective from 1 Jan 2023, all employers must pay a minimum monthly wage of RM1,500 to their employees, regardless of the number of employees. This excludes domestic servants.

Hours of work and working at night

An employee shall not be required under his contract of service to work-

a)more than five consecutive hours without a period of leisure of not less than thirty minutes duration;

b) more than eight hours in one day;

c) in excess of a spread over a period of ten hours in one day;

d) more than 45 hours in one week

Provided that—

i) for the purpose of (a), any break of less than thirty minutes in the five consecutive hours shall not break the continuity of that five consecutive hours;

ii) an employee who is engaged in work which must be carried on continuously and which requires his continual attendance may be required to work for eight consecutive hours inclusive of a period or periods of not less than forty five minutes in the aggregate during which he shall have the opportunity to have a meal; and

iii) where, by an agreement under the contract of service between the employee and the employer, the number of hours of work on one or more days of the week is less than eight, the limit of eight hours may be exceeded on the remaining days of the week, but so that no employee shall be required to work for more than nine hours in one day or 45 hours in one week.

Sick leave

An employee shall, after examination at the expense of the employer—

a) by a registered medical practitioner duly appointed by the employer; or

b) if no such medical practitioner is appointed or, if having regard to the nature or circumstances of the illness, the services of the medical practitioner so appointed are not obtainable within a reasonable time or distance, by any other registered medical practitioner or by a medical officer,

be entitled to paid sick leave,—

(aa) where no hospitalization is necessary,—

(i) of fourteen days in the aggregate in each calendar year if the employee has been employed for less than two years;

(ii) of eighteen days in the aggregate in each calendar year if the employee has been employed for two years or more but less than five years;

(iii) of twenty-two days in the aggregate in each calendar year if the employee has been employed for five years or more; or

(bb) of sixty days in the aggregate in each calendar year if hospitalization is necessary, as may be certified by such registered medical practitioner or medical officer:

Annual Leave

An employee is entitled to paid annual leave as follows: (a) Eight days for every twelve months of continuous service with the same employer if employed for less than two years. (b) Twelve days for every twelve months of continuous service with the same employer if employed for two years or more, but less than five years. (c) Sixteen days for every twelve months of continuous service with the same employer if employed for five years or more.

Overtime pay

Overtime is usually calculated on an hourly basis, and employers are required to ensure that employees receive appropriate rest periods and compensation for their overtime work. The statutory limit for regular working hours in Malaysia is 45 hours per week and 8 hours per day

The overtime payment for an employee on a monthly pay basis differs for rest days and holidays:

1. Rest Day Overtime Payment: If an employee on a monthly pay basis is required to work on their rest day, they are entitled to additional payment:
   

   a) If the work does not exceed half of the normal hours of work, the employee should receive wages equivalent to half the ordinary rate of pay for work done on that day.

   b) If the work exceeds half but does not exceed the normal hours of work, the employee should receive one day’s wages at the ordinary rate of pay for work done on that day.

   c) For any work carried out in excess of the normal hours of work on a rest day by an employee mentioned in paragraph (a) or (b), the employee shall be paid at a rate which is not less than two times their hourly rate of pay.

2. Holiday Overtime Payment: If an employee on a monthly pay basis is required to work on a paid holiday, they are also entitled to additional payment:
   

   a) The employee should receive two days’ wages at the ordinary rate of pay, regardless of whether the period of work done on that day is less than the normal hours of work.

   • For this, they should receive their holiday pay for the day and, in addition, receive two days’ wages at the ordinary rate of pay for the work done on the holiday.

   • This means they are paid twice their usual daily wage for hours worked on the holiday.

   b) For any overtime work carried out by an employee in excess of the normal hours of work on a paid public holiday, the employee shall be paid at a rate which is not less than three times their hourly rate of pay.

Maternity

A female employee shall not be entitled to any maternity allowance if, at the time of her confinement she has five or more surviving children.

A female employee shall be entitled to receive maternity allowance for the eligible period from her employer if-

Allowance

1. The employee must have been employed by the employer for a total of at least ninety days during the nine months immediately prior to her confinement.
2. The employee must have been employed by the employer at any time during the four months immediately before her confinement.

A female employee who meets the eligibility criteria in paragraph (1)(a) is entitled to receive a maternity allowance from the employer for each day of the eligible period. The allowance will be based on her ordinary rate of pay for one day, or at a rate determined by the Minister under paragraph 102(2)(c), whichever is higher.

If a female employee is paid a monthly rate of pay, she will be considered to have received her maternity allowance if she continues to receive her monthly wages during the eligible period without any reduction.

If a female employee claims maternity allowance from multiple employers, the total amount she is entitled to receive cannot exceed the amount she would receive if she had made the claim against one employer only.

Leave

Paid maternity leave period has been extended from 60 days to 98 days, effective from 1 January 2023.

Paternity leave

Eligible working fathers are now entitled to 7 days of paid paternity leave under Subsection 60FA. These days must be taken consecutively.

If you’re an employee applying for paternity leave or an employer investigating the statutory entitlement of paternity leave, there are certain requirements:

• The male employee must be married to the mother.
• He must have been employed by the same employer for at least 12 months.
• He must notify the employer at least 30 days before the expected confinement or as early as possible.

Paternity leave is only available to eligible male employees for the first 5 births, regardless of the number of marriages/spouses.

5. Termination of notice

A lawful dismissal requires valid and substantive justifications, as well as a fair procedure.

According to Section 20(1) of the Industrial Relations Act 1967, employees who believe they have been dismissed without ‘just cause or excuse’ can file a complaint with the Department of Industrial Relations to seek reinstatement to their former employment.

Although the statute does not provide a specific definition for ‘just cause or excuse’, the most common reasons for termination of employment include:

• Misconduct
• Retrenchment
• Poor performance
• Retirement
• Expiry of a fixed-term contract
• Resignation
• Mutual agreement
• Closure of a business

When terminating an employee, it is important to provide proper notice and justification. Both parties must adhere to the terms and conditions for termination as outlined in the employment contract, including notice periods and compensation (unless termination is due to specific events, in which case statutory notice should be followed).

If the notice period is not stated in the employment contract or termination is due to events such as redundancy or business closure, employers should comply with the statutory provisions in Sections 12(2) and 12(3) of the Employment Act (EA). The minimum notice period should be:

• 4 weeks’ notice if the employee has worked for less than two years
• 6 weeks’ notice if the employee has worked for two years or more but less than five years
• 8 weeks’ notice if the employee has worked for five years or more

Alternatively, either party can make a payment in lieu of the notice period.

6. Relevant legislation

The Employment Act is not applicable to Sabah and Sarawak, as they have their own Labour Ordinances respectively: Sabah Labour Ordinance and Sarawak Labour Ordinance.

Our services include:

• Preparation of Employment Handbook
• Preparation of Employment Contract
• Preparation of Company HR Policies and letters
• Calculation of Payroll such as salaries, overtimes, commission and etc.
• Preparation of monthly payroll statements