The Employment (Amendment) Act 2022 which introduces major amendments to employment law in Malaysia were initially scheduled to come into force in Peninsular Malaysia and Labuan on 1 September 2022. However, implementation of the amendments was recently postponed to 1 January 2023 to give businesses more time to recover from the economic downturn.
Background of Employment Laws in Malaysia
Private sector labour laws are mainly regulated by the Employment Act 1955 (“EA“) and Industrial Relations Act 1967 (“IRA“) in Malaysia. The EA basically sets out minimum statutory entitlements for low income employees i.e. employees whose monthly salary does not exceed RM 2,000; whereas the IRA governs all types of relations between employers and workers including the mechanisms for resolving their disputes.
Being governed by the EA means that if an employee’s contract contains terms which are less favorable than those imposed by the EA, then those contractual terms will be invalid and replaced by the statutory minimum (s 7 of the EA).
Relevant Statutes
For ease of reference, we listed down the statutes that are relevant to the topic at hand. PDF copies of the statutes can be accessed via the hyperlinks below.
- Employment Act 1955 (Act 265) (“Principal Act“)
- Employment (Amendment) Act 2022 (Act A1651) (“Amendment Act“)
- Employment (Amendment of First Schedule) Order 2022 (“Revised First Schedule“)
- Employment (Amendment of First Schedule) (Amendment) Order 2022 (the Act that postpone implementation of the Amended First Schedule to 1 January 2023
- Industrial Relations Act 1967
Which employees are affected?
Prior to 1 January 2023, the EA only covers (a) employees with monthly salary of RM2,000 or below; (b) domestic servants; and (c) workers engaged in manual labour or operation, supervision, or maintenance of mechanically-propelled vehicles, regardless of their salary.
Following the amendments, the EA will apply to all employees regardless of salary but those earning above RM4,000/month will be singled out from certain EA benefits.
Exclusive EA provisions
The EA provisions which will not apply to those earning above RM4,000/month are listed below:
- Section 60(3): Overtime pay for work on rest days.
- Section 60A(3): Overtime pay for work outside of normal working hours.
- Section 60C(2A): Shift work allowance.
- Section 60D(3): Overtime pay and allowance for work on public holidays.
- Section 60D(4): Overtime pay for work on holidays falling on half working days.
- Section 60J: Termination, lay-off, and retirement benefits.
In essence, provisions relating to overtime pay; termination, lay-off and retirement benefits will not apply to the higher income employees.
WHAT’S NEW?
The Amendment Act can be said to introduce ‘first world rights’ into the Malaysian employment scene as it explicitly recognizes, amongst others:- paternity leaves for working fathers; flexible working arrangement for employees; and specific safeguards against sexual harassment and discrimination at the workplace.
1. Introduction of Paternity Leave
Whilst previously in Malaysia only working mothers are entitled to nativity leaves, the new employment laws (s 60FA) allow working fathers to enjoy 7 days of paid paternity leave for each confinement. Note, there will be some caveats to the paternity leave entitlement, as follows:
- The employee must have been employed for at least 1 year before commencement of the leave
- The paternity leave is only available for up to 5 confinements (however number of spouses doesn’t matter)
- The employee must notify his employer of his wife’s pregnancy at least thirty (30) days from the expected confinement or as early as possible after the birth
- Paternity leave is not available to Domestic Employees (previously known as Domestic Servants) or ‘persons employed in connection with the work of a private dwelling-house..’.
2. Restriction on terminating pregnant female employees
A new section 41A also makes it harder for employers to terminate pregnant employees, save with valid reasons.
3. Flexible Working Arrangement
A new section 60p gives employees a statutory right to apply for flexible work arrangement from their employers. Subject to the individual’s employment contract, such an application may include a request by the employee for adjustments to his/her work schedule as well as the place of work.
An employer who receives such an application is required to respond within 60 days either by accepting or rejecting the application; and in the event of a refusal, the employer is required to state the ground of refusal in writing. There is currently no follow up provision in the Amendment Act stipulating the penalties for employers who fail to comply with this rule.
4. Sexual Harassment Notices
A new section s 81H imposes a mandatory duty on employers to conspicuously display a notice at the workplace to raise awareness on sexual harassment. It is interesting to see what would suffice as a “conspicuous display” of the sexual harassment notice and how this provision will be enforced.
(Note that sexual harassment provisions are not new to the EA, they are mentioned in PART XVA of the Principal Act. What is new here is the requirement to display notices.)
5. Offences for Discrimination
There will also be a new provision (s 69F) giving the Director General of Labour (“DG“) power to decide disputes relating to discrimination in employment, including the power to issue an order. Employers who violate such orders may be fined up to RM50,000, plus a daily fine of up to RM 1,000 for each day the offence continues after conviction.
WHAT’S CHANGED?
Apart from introducing new laws, the Amendment Act also enhances some of the existing provisions. Below are some of the more prominent changes.
6. Maternity leave extended from 60 days to 98 days
Following the amendments, eligible working mums will be entitled to 98 days of maternity leave as opposed to 60 days for each confinement (s 37). Note that unlike paternity leave, there is no statutory imposed limit as to the number of confinements triggering maternity leave.
7. Approval required for employing Foreign Employees
Whilst previously, employers who employ foreign employees need only furnish the DG with the employee’s particulars within 14 days of employment; the amended s 60K requires employers to obtain the prior approval of the DG before employing foreign employees.
An employer who hires foreign employees without obtaining such approval can be fined up to a RM100,000 and/or imprisoned up to 5 years.
8. Shorter Maximum Working Hours Per Week
Weekly working hours will also be shortened from 48 hours to 45 hours once the Amendment Act comes into effect (s 60A). Naturally, this would mean that overtime rates kick in faster than before. However as mentioned above, employees whose monthly income exceeds RM4,000 will not benefit from the resulting change given that this section will not apply to such employees.
CONCLUSION
The Amendments will apply retroactively to employment contracts entered prior to 1 January 2023. Thus, employers who wish to renegotiate existing terms of employment should be mindful to do so before 1 January 2023.
By Amanda Pang (Partner); Praveena Ravi (Intern); and Chao Wei Zhe (Intern)
