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Sponsored Q&A: Shook Lin & Bok (Malaysia)

1. What are the key employment laws and regulations in Malaysia that employers and employees should be aware of?

Employment in Malaysia is governed, primarily by contract, statute and collective agreements where there is a registered trade union at the employer’s place of work.

The principal statutory provisions relating to employment may be briefly set out as follows:

(a) The Employment Act 1955 (‘the EA 1955’) which prescribes minimum terms and conditions of employment in respect of employees within its scope. This includes employees who are earning a monthly wage of RM4,000 or less;

(b) The Industrial Relations Act 1967 (‘the IRA 1967’), which governs the relationship between employers, employees and their respective trade unions;

(c) The Trade Unions Act 1959 (‘the TU 1959’) which governs the formation, registration, membership and functioning of trade unions;

(d) The Minimum Retirement Age Act 2012 (‘the MRA 2012’) which prohibits an employer from enforcing compulsory retirement prior to the age of 60 years;

(e) In terms of occupational safety, there is the Occupational Safety and Health Act 1994 (‘the OSHA 1994’) which imposes an obligation on employers to ensure workplace health and safety. There is also the Factories and Machinery Act 1967 (‘the FMA 1967’) which specifically deals with the safety of employees where machinery is involved in the workplace;

(f) The principal source of statutory contributions to ensure financial security to employees is the Employees Provident Fund Act 1991 (‘the EPF 1991’) where both employers and employees are required to pay to a statutory fund, a specified percentage based on the monthly salary earned;

(g) The Employees Social Security Act 1969 (‘the SOCSO Act 1969’) which provides for payment/benefits for employees in relation to occupational disease/death/injury sustained in the course of employment;

(h) The Employment Insurance System Act 2017 (‘the EIS 2017’ which provides for certain statutory benefits and
re-employment placement programmes; and

(i) The Personal Data Protection Act 2010 (‘the PDPA 2010’) which provides for processing and protection of personal data of employees. There is also in place the Whistleblower Protection Act 2010 (‘the WPA 2010’) for protection of ‘whistleblowers’ in respect of disclosure of any improper conduct at the place of employment.

2. Can you explain the process and requirements for hiring foreign workers in Malaysia?

Section 60K of the EA 1955 requires approval of the director general of labour before an employer may seek to engage foreign employees.

Foreign employees work permits may be obtained from the immigration department of Malaysia under the Ministry of Home Affairs.

3. What are the rights and obligations of employers and employees in terms of working hours, overtime, and annual leave?

The statutory normal working hours for an employee is eight hours/a day (section 60A(1)(b) of the EA 1955). This does not include rest days or public holidays.

Section 60E of the EA 1955 provides for the minimum number of days for annual leave which varies according to the tenure of service.

Employees not governed by the EA 1955 will have their terms and conditions determined either by way of a collective agreement or individual contract.

4. What is the legal framework surrounding termination of employment contracts in Malaysia?

Termination of a contract of employment may be invoked by requiring the employee to serve the notice period or payment in lieu thereof. The termination provision is normally invoked by the employee by way of resignation. Section 12 of the EA 1955 makes provision for termination for those employees whose employment is governed by the said Act and the notice period is determined based on their tenure of service.

5. What are the grounds for unfair dismissal in Malaysia, and what remedies are available to employees in such cases?

The grounds for ‘unfair dismissal’ (known as ‘dismissal without just cause or excuse’) under the IRA 1967 may arise in a variety of circumstances including misconduct, poor performance, and retrenchment. The remedies available to employees in such cases include reinstatement to the previous job position of the employee prior to dismissal or compensation in lieu of reinstatement.

Such claims are normally brought to the Industrial Court under the provisions of the IRA 1967.

In such cases, the employer is required to establish that there was a proper basis for the dismissal and that the dismissal was carried out fairly as a matter of procedure.

6. Can you provide guidance on the procedures and requirements for handling workplace disputes, such as mediation, arbitration, or litigation?

All employment disputes are generally encouraged to be resolved without going to litigation. Employers who have a large workforce generally, have in place, collective agreements which provide for detailed grievance procedures for employees to invoke.

Mediation is encouraged for all disputes and may be conducted by the labour department/industrial relations department as appropriate.

7. How does the law protect employees against discrimination, harassment, and workplace bullying?

The director general of labour has the right to determine complaints relating to any form of discrimination in the workplace pursuant to section 69F of the EA 1955 and may order remedial action to be taken and/or impose penalties as appropriate. This provision applies to all employees whether governed by the EA 1955 or not and includes complaints of sexual harassment under sections 81B and 81D of the EA 1955.

8. What are the legal obligations of employers regarding workplace health and safety in Malaysia?

Please refer to paragraph 1(b) above.

9. Can you explain the legal framework and requirements for employee benefits, such as social security, insurance, and retirement funds?

Please refer to paragraphs 1(f), 1(g) and 1(h) above.

10. What are the potential legal implications for employers who fail to comply with employment laws and regulations in Malaysia?

The potential implications would include penalties being imposed by the labour department or imposition of fines and in serious cases of repeated breach, imprisonment.

The above is intended to provide a brief overview of employment issues in Malaysia and consultation with a solicitor is recommended to obtain any specific legal advice on such issues.

For more information contact

Mehala Marimuthoo
Deputy head – labour and industrial disputes department

Gavinesh Siva Dharma
Senior associate

Sabrina Mohammad Fuad

Jacklyn Yong Sook Kay

Cassandra Chung Li Hooi

Rashmika Krishnamoorthy