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What many people fail to realize is that the Employment Act does not apply to all
employees. The protection under the
Employment Act only applies to these categories of employees (let’s call them EA
Employees):
Domestic servants
Certain parts of the Employment Act are not applicable to certain categories of
employees. For example, multiple parts of the Employment Act do not apply to domestic
servants such as termination benefits, hours of work and maternity protection.
What law governs employees who don’t fall under the Malaysian Employment
Act?
Unless otherwise stated, the rest of this guide addresses the minimum benefits
applicable to EA Employees.
In addition to making these deductions, an employer must also make the employer’s
contributions to their employee’s EPF and SOCSO accounts, so don’t forget to factor
these additional “costs” into your payroll and headcount budget.
For more information about the new SOCSO rate (that apply to both Employment Act
and non EA Employees) that took place effective 1 July 2016, please read our previous
article here.
Under the Employment Act, an employer only allowed to make deductions from an EA
Employee’s salary in the following circumstances:
Overpayment of wages due to a mistake by the employer (only for the immediately
preceding 3 months)
Deductions for payment in lieu of notice, where the employee resigns without serving
the full notice required under the contract
Deductions for recovery of advances of wages (provided no interest is charged on the
advances)
Deductions authorized by any other written law (eg: EPF, SOCSO, income tax
deductions)
An employer can also deduct these items from an EA Employee’s salary ONLY if the
employee requests:
Deductions for payments to a trade union or co-operative thrift/loan society for entrance
fees, subscriptions, etc
Deductions as payment for any shares in the employer’s business offered for sale by
the employer and purchased by the employee (For more information on Employee
Share Option Schemes, click here)
Certain other deductions can only be made if the EA Employee requests in writing and
prior permission from the Director General of Labour is obtained.
For Non EA Employees, the normal rules of contract shall apply, so deductions can be
made upon mutual agreement, provided it does not contravene any law or statute.
Under the Employment Act, these are the minimum requirements for annual leave:
Annual leave can be pro-rated if an employee has worked less than a full year in that
particular calendar year. You can also read our previous article about annual
leave here.
For more information about sick leave, read our previous article here.
For employees paid on a monthly basis, overtime entitlements under the Employment
Act are as follows:
“Hourly rate of pay” means the ordinary rate of pay divided by the normal hours
of work.
For example, an employee who works 8 hours a day for a monthly salary of
RM1,300.00 would have an ordinary rate of pay of RM50 (RM1,300 / 26 = RM50). That
employee’s hourly rate of pay would be RM6.25 (RM50 / 8 hours = RM6.25)
If that employee was asked to work on a public holiday during his normal working hours,
his overtime payment for that day would be RM100 (RM50 x 2).
How are public holidays handled? Can an employer choose which public holidays
to observe?
National Day
Birthday of Yang di-Pertuan Agong
Birthday of the Ruler or the Yang di-Pertua Negeri of the state where the employee
works
Labour Day / Worker’s Day
Malaysia day
The other 6 holidays can be chosen by the employer from the list of gazetted public
holidays. However, the employer must exhibit conspicuously at the workplace which six
gazetted public holidays are being observed.
Where a public holiday that falls on a rest day (typically Sunday), the next working day
shall be a holiday in substitution.
What about “sudden” public holidays? Are employers required by law to observe
them?
There have been instances where the government has declared a public holiday without
much notice to the public. One example was in 2010 when the government declared a
public holiday under the Holidays Act 1951 because of Malaysia’s victory at the AFF
Suzuki Cup.
The Employment Act provides that employers must also observe any public holiday
declared under the Holidays Act 1951. However, for this category of public holidays, the
employer has an option to choose another day as a paid public holiday in substitution, if
they do not want to observe this public holiday. There is no requirement for employers
to get the consent of employees to make the substitution.
An employer is required to pay maternity allowance (ie payment of her salary for that 60
consecutive days) to an employee if she has been employed by that employer for:
At least 90 days in aggregate during the 9 months before her confinement; AND
She was employed by the employer at any time in the four months immediately before
her confinement
This means that an employer could still be required to pay maternity allowance to an
employee who has left employment before giving birth. However, the law requires that
a female employee who is about to leave her employment and knows she is expected to
deliver within 4 months from her last date of employment must notify her employer of
her pregnancy, failing which she will not be allowed to receive any maternity allowance.
However, certain exceptions may apply if the employee is on a fixed term contract. For
more information about employees on fixed term contracts, click here.
Terminating employees without good reason can amount to unfair dismissal. For more
information about unfair dismissal, click here.
Yes. Under the Employment Act, an employer is required to inquire into all complaints
of sexual harassment, and this regardless of whether the employee involved is an EA
Employee or a Non-EA Employee. For more information about an employer’s
obligations when it comes to sexual harassment complaints, please click here.
Malaysian employment law can look confusing, complicated and even tricky at first
glance. However, having the right source of information will make navigating Malaysian
employment law much simpler.
Note: This guide is for information or reference purposes only, and is not intended to act
as, or substitute, legal advice. Certain requirements may change depending on specific
factual circumstances. This article is based on information as at 1 December 2016 and
does not address any updates or revisions to the law that may come into effect after this
date.