Guides
Employment Act 2023 Malaysia

Employment Act 1955 (Amendment 2022) Comes into Force on 1 January 2023

Enforcement of the amendments to Malaysia’s Employment Act 1955 [Act 265] will begin on 1 January 2023, instead of 1 September 2022 as initially planned. The purpose of the amendment is to increase and expand the protection and welfare of all private sector employees in Peninsular Malaysia including Federal Territory of Labuan, irrespective of wages.

Some of the key changes made to the Employment Act 1955 include the following:-

1. Amendment to the First Schedule

Prior to the new amendments, the vast majority of the EA only applied to employees earning up to RM2,000/month, or to specified groups of employees irrespective of wages (e.g. those engaged in or supervising manual labour, and several other groups). It will now apply to all employees irrespective of wages, with some specific sections not applying to employees earning more than RM4,000/month. Here is the list of EA provisions which will not apply to employees earning more than RM4,000/month:

  • Subsection 60(3): Overtime for work on rest days.
  • Subsection 60A(3): Overtime for work outside of normal working hours.
  • Subsection 60C(2A): Shift work allowance.
  • Subsection 60D(3): Overtime and allowance for work on public holidays.
  • Subsection 60D(4): Overtime for work on holidays on half working days.
  • Subsection 60J: Termination, lay-off, and retirement benefits.

 Employees earning RM4,000/month and below are now eligible for overtime payment.

2. Working Hours

The maximum weekly working hours for the employees are reduced from 48 hours per week to 45 hours per week. This essentially means that the employment contract for those covered under the EA 1955 would have to be reviewed and amended accordingly as any work performed beyond the now-amended working hours would entitle the employees to overtime pay.

3. Calculation of Wages for Incomplete Month’s Work

18a. Notwithstanding section 60i, an employee who is employed on a monthly rate of pay and has not completed a whole month of service-

  • where he commenced employment after the first day of the month;
  • where his employment was terminated before the end of the month;
  • where he took leave of absence without pay for one or more days of the month; or
  • where he took leave of absence by reason of having been called up for national service under the National Service Act 1952 [Act 425], to present himself for national service training as required under the National Service Training Act 2003 [Act 628] or to comply with any other written law relating to national service,

shall be paid wages due to him for that month calculated according to the following formula:

4. Pregnancy and Maternity

The following changes in relation to pregnancy and maternity protection for employees have been introduced under the Amendment Act:

  • Paid maternity leave period has been extended from 60 days to 98 days;
  • A female employee may, with the consent of her employer, commence work at any time during the maternity leave if she has been certified fit to resume work by a registered medical practitioner, regardless of whether she is entitled to receive maternity allowance; and
  • Where a female employee is pregnant or is suffering from an illness arising out of her pregnancy, her employer is prohibited from terminating her employment or giving her a notice of termination of employment except on the grounds of:
  • wilful breach of a condition of the contract of service;
  • misconduct; or
  • closure of the employer’s business.

The employer bears the burden of proving that the female employee’s termination from employment was not premised on the grounds of her pregnancy or an illness arising out of her pregnancy.

5. Paternity Leave

A new provision is introduced into the Act which entitles a married male employee to seven consecutive days of paid paternity leave for each confinement, up to five confinements (irrespective of the number of spouses).

Such entitlement is subject to the male employee being employed by the same employer for at least a 12 months period immediately preceding the commencement of paternity leave, and having notified his employer of his spouse’s pregnancy at least 30 days from the expected confinement or as early as possible after the birth.

6. Sick Leave and Hospitalisation Leave

The proviso to Section 60F of the Act is deleted. This has the effect of entitling employees to 60 days of paid sick leave if hospitalisation is necessary in addition to 14 to 22 days of paid sick leave (depending on length of service) if hospitalisation is not necessary.

Years of ServiceSick LeaveHospitalisation LeaveTotal Sick Leave + Hospitalisation Leave
Below 2 years14 days60 days74 days
2 years to 5 years18 days60 days78 days
Above 5 years22 days60 days82 days

7. Employment of Foreign Employee

The Act now requires an employer to obtain the prior approval of the Director General before employing a foreign employee. Failure to do so is an offence and on conviction, the employer shall be liable to a fine not exceeding RM 100,000 or to imprisonment for a term not exceeding five years, or to both. Previously, the Act only required employers to furnish the Director General with particulars of the foreign employee within 14 days of his employment.

8. Flexible Working Arrangement 

The Act now allows an employee to apply in writing to his employer for a flexible working arrangement to vary his hours, days or place of work. The employer is required to inform the employee in writing of his approval or refusal of the application within 60 days from its receipt the application. An employer who refuses the application is required to state the ground of such refusal. There is, however, no provision to challenge the employer’s refusal or the grounds on which the decision is made.

9. The Requirement to Exhibit Notice on Sexual Harassment

Section 81H which requires employers to exhibit conspicuously at the place of employment, a notice on sexual harassment at all times is inserted into this Act to raise awareness on sexual harassment.

The fine which an employer is liable to pay for failure to, amongst others, inquire into complaints of sexual harassment will be increased from RM10,000 to RM50,000.

10. Forced Labour

The amendments to the Act outlaw forced or bonded labour by making it an offence for an employer to threaten, deceive or force an employee to do any activity, service or work and prevent that employee from proceeding beyond the place or area where such activity, service or work is done. Upon conviction, the employer shall be liable to a fine not exceeding RM100,000 or to imprisonment for a term not exceeding 2 years, or to both.

11. General Penalty under the Act 

The general penalty for a contravention of the Act or any subsidiary legislation made under the Act in respect of which no penalty is provided, has been increased from a fine of RM10,000 to RM50,000.

12. Presumption as to Who is an Employee and Employer

A provision has been introduced whereby in any proceeding for an offence under the Act, in the absence of a written contract of service relating to any category of employee under the First Schedule of the Act, it shall be presumed that a person is an employee:

  • Where his manner of work is subject to the control or direction of another person;
  • Where his hours of work are subject to the control or direction of another person;
  • Where he is provided with tools, materials or equipment by another person to execute work;
  • Where his work constitutes an integral part of another person’s business;
  • Where his work is performed solely for the benefit of another person; or
  • Where payment is made to him in return for work done by him at regular intervals and such payment constitutes the majority of his income.

13. Director General’s Approval for the Payment of Wages paid in Legal Tender and Cheque

Under Section 25A, the alternative methods of payment of wages besides through a bank are:

  • legal tender; (cash) or
  • cheque

Previously, only domestic servants who wished to be paid in cash or cheque were required to submit a written request to their employer, and the employer would then need to obtain approval from the Director General of Labour (s.25A(2) EA 1955). Per contra, no such approval from the Director General was required for employees (including foreign workers).

The new provision provides that an employer is now required to obtain approval from the Director General for both domestic servants and employees (including foreign workers). Additionally, it is pertinent to note that the Director General may impose any condition as he may deem fit on the approval granted. Once authorised by the Director General, employers are advised that such requests made by domestic servants/employees should not be unreasonably withheld.

14. Discrimination in Employment

Section 69F is inserted into this Act which gives power to the Director General to inquire into and decide any dispute between an employee and his employer in respect of any matter relating to discrimination in employment without the limitation of a salary cap. Prior to the amendments, the Director General may only inquire into complaints between employees and employers provided that the employees’ wages do not exceed RM5,000. The Director General is also vested with the power to make an order after such inquiry has been done. Failure to comply with the Director General’s order constitutes an offence and can result in a fine not exceeding RM50,000.00 and for continuing offence, a daily fine of up to RM1,000.00 for each day the offence continues.

15. Contractors for Labour

The amendments impose an obligation on a contractor for labour who supplies any employee to a principal, contractor or sub-contractor to enter into a contract in writing (presumably with the recipient of employees’ services) and to make such contract or any other document relating to such contract available for inspection (presumably by the Director General). Failure to make such documents available for inspection is an offence and, on conviction, the contractor of labour shall be liable to a fine not exceeding RM50,000.

16. Apprenticeship

An “apprenticeship contract”, previously defined as a written contract for a period of not less than 2 years has been amended to limit the duration of such a contract to 24 months. The Amendment Act also imposes a minimum duration of 6 months on an apprenticeship contract.

Employers are advised to review and revise their terms and conditions of employment to ensure compliance with the Act in respect of all its employees. For more information, please seek further guidance from the Labour Department of Malaysia.

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