Amendments to Malaysia’s Employment Act

Amendments to Malaysia’s Employment Act

The amendments introduced to Malaysia’s Employment Act were driven by Malaysia’s commitment to comply with international labour law standards required under the Trans-Pacific Partnership Agreement, the Malaysia-United States Labour Consistency Plan and the International Labour Organisation (ILO).

The Trans-Pacific Partnership Agreement (TPPA) is a trade agreement between 12 Pacific Rim countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam signed on 4 February in Auckland, New Zealand in 2016.

The International Trade Union Confederation (ITUC) and the Malaysian Trades Union Congress (MTUC) observed in 2015 that the Malaysian government was amending the Industrial Relations Act 1967 (IRA) and the Trade Unions Act 1959, after taking into consideration the comments of the Committee of Experts. Malaysia embarked on labour law reforms as a signatory to the Trans-Pacific Partnership Agreement (TPPA).

The Malaysian government had requested technical assistance from the International Labour Organisation (ILO) to facilitate the drafting of the amendments and to ensure that they were in line with the requirements of the Convention and the principles of the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87).

Important amendments to Malaysia’s Employment Act will introduce paid paternity leave, increase paid maternity leave, and add protections for paid sick leave. Amendments would also allow flexible working arrangements.

The Ministry of Human Resources has announced that the amendments to the Employment Act will take effect on 1 September 2022, said the Malaysian Human Resources Minister M. Saravanan said.

Saravanan said that the HR Ministry was in the midst of ensuring that the changes to the Act are being worded carefully so as not to confuse the category of employees that will fall under the Act.

Summary of Key Changes

1) Power of Magistrate and general penalty

The Bill proposes to empower the court of a First-Class Magistrate to try any offence and impose penalties under the Act. The Bill increases the amount of the penalty imposed from RM10,000 to RM50,000 for any offence in the Act or its regulations, for which no penalty is prescribed.

The Bill empowers the court to order an employer to pay any payment due to an employee. If the employer fails to comply, then a warrant may be issued to levy the employer’s property for any payments due.

2) Calculation of wages for the incomplete month of service.

The Bill proposes to introduce Section 18A to cover the calculation of wages where an employee has not completed an entire month of service due to the following reasons:

(a) Employment commenced after the first day of the month;

(b) Employment terminated before the end of the month;

(c) Employee took a leave of absence without pay

The formula shall be as follows:

              Monthly Wages

———————————————–  x  Number of days eligible in the wage period

Number of days of the wage period 

The current method to calculate an employee’s ordinary rate of pay under Section 60I of the Act remains unchanged.

3) Foreign Employees

The one-stop centre for foreign workers’ approval has been transferred from the Home Ministry to the Human Resources Ministry, according to Human Resources minister M. Saravanan.

There are extra approval requirements for the employment of foreign employees.

Before the amendments, an employer was only required to furnish the particulars of foreign employees employed to the Director-General of Labour within 14 days of the start of the employment.

The amendments now require the prior approval from the Director-General to be obtained before the employment of a foreign employee.

The approval is subject to the employer having no outstanding matters relating to any decision, order or directive under the Act, or outstanding matter for any conviction under the laws applicable to social security, minimum wages or minimum housing, or conviction in relation to human trafficking and forced labour. 

An employer who employs a foreign employee without approval will, if convicted, be liable to a fine not exceeding RM100,000 or to imprisonment for a term not exceeding five years, or both.

The Bill imposes the obligation on the employer of a foreign employee to inform the Director-General within 30 days of any termination:

(a) by the employer;

(b) on account of the expiry of the employment pass issued to the foreign employee; or

(c) by reason of the repatriation or deportation of the foreign employee.

An employer must also inform the Director-General within 14 days of any termination of service by the foreign employee themselves or due to their abscondment from their place of employment.

Maternity and Paternity Leave 

Maternity leave is increased from 60 days to 98 days to comply with international labour standards. 

Paternity leave is increased to seven days. The addition of paternity leave is a policy milestone. 

Protection from termination during pregnancy.

Employers are prohibited from terminating pregnant employees, except under specific circumstances. Employers will have to prove that the termination was not because of the pregnancy.

The amendments also empower the Labour Department to investigate disputes on discrimination.

Section 37aa allows women who were not entitled to maternity leave pay to return to work during their maternity period if declared fit. 

Flexible Working Arrangements

A new part of the Act (Part XIIc) sets down rules on flexible work arrangements. Employees may apply for flexible work arrangements regarding working hours, work days and place of work. 

Employers have 2 months to accept, or refuse applications but adequate reasons have to be provided in writing for refusing flexible working arrangements. 

Discrimination Protection 

The Director-General of Labour is empowered to inquire and make orders on discrimination disputes between employers and employees. Employers that fail to comply with any orders after the dispute are committing an offence and will be liable to fines not more than RM50,000.

If the offence still continues, a fine of not more than RM1000 per day after the conviction will be imposed. 

Please note that the amended Act applies only to employees whose wage per month does not go above RM1500. This may present potential ambiguity which remains to be made clear.

The Human Resources Ministry said in a statement that currently, Act 265 only applies to the categories of employees specified in the First Schedule. Employees earning RM2,000 and below, such as manual labour workers and domestic workers.

“With this extension, any existing provisions of Act 265 that touch on employee salary limits should be repealed, namely Sections 44A, 69B, 69C, 69E and 81G,” the ministry said.

It explained that follow-up amendments would be made to the First Schedule of Act 265 through the Human Resources Ministry under subsection 2(2) of Act 265 to enable all workers in Malaysia to receive the minimum benefits and protection prescribed under Act 265.

Amendments would be made to the First Schedule of Act 265 to enable all workers to be given the protection prescribed under Act 265. The ministry has drafted the amendments and will announce the additions at a date to be determined later. 

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