BACKGROUND

All eyes are on the Employment (Amendment) Act 2022 (“Amendment Act”) and the Employment (Amendment of First Schedule) Order 2022 (“Amendment Order”) which will be in force from 1 September 2022 to amend the Employment Act 1955 (“Employment Act”).

The Employment Act (as amended by the Amendment Act and the Amendment Order) are only applicable to Peninsular Malaysia (being the states of Johore, Kedah, Kelantan, Malacca, Negeri Sembilan, Pahang, Perak, Perlis, Selangor and Terengganu and the Federal Territory of Kuala Lumpur and Putrajaya[1]) and Labuan, excluding Sabah and Sarawak which are governed by separate laws.

 

WHAT ARE THE KEY AMENDMENTS MADE TO THE EMPLOYMENT?

(1) The Employment Act will apply to all employees regardless of their monthly wages subject to certain exceptions

The Employment Act will apply to all employees regardless of their monthly wages, except that the following provisions will not apply to employees whose monthly wages exceed RM4,000:

1. (a) Section 60(3) of the Employment Act which provides the rates of payment to employees who are required to work during their rest days;
2. (b) Section 60A(3) of the Employment Act which provides the rate of payment to employees who work overtime during a normal working day;
3. (c) Section 60C(2A) of the Employment Act which gives the power to the Minister of Human Resource to make regulations relating to the entitlement of allowance during the employees’ shift work;
4. (d) Section 60D(3) of the Employment Act which provides the rates of payment to employees who are required to work during a public holiday;
5. (e) Section 60D(4) of the Employment Act which provides that if any holiday that falls on a half working day, the ordinary rate of pay shall be that of a full working day; and
6. (f) Section 60J of the Employment Act which provides for termination, lay-off and retirement benefits[2].

 

“wages” means basic wages and all other payments in cash payable to an employee for work done in respect of his contract of service but does not include:

1. (a) the value of any house accommodation or the supply of any food, fuel, light or water or medical attendance, or of any approved amenity or approved service;
2. (b) any contribution paid by the employer on his own account to any pension fund, provident fund, superannuation scheme, retrenchment, termination, lay-off or retirement scheme, thrift scheme or any other fund or scheme established for the benefit or welfare of the employee;
3. (c) any travelling allowance or the value of any travelling concession;
4. (d) any sum payable to the employee to defray special expenses entailed on him by the nature of his employment;
5. (e) any gratuity payable on discharge or retirement;
6. (f) any annual bonus or any part of any annual bonus; or
7. (g) any payment by way of commission, subsistence allowance and overtime payment[3].

 

(2) Paid Maternity Leave will be increased

Paid maternity leave will be increased from 60 days to 98 days[4].

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What happens if employers fail to comply?

Any employer who terminates the service of a female employee during the period in which she is entitled to maternity leave commits an offence provided that such termination shall not include termination on the ground of closure of the employer’s business[5].

Any employer who fails to grant maternity leave to a female employee commits an offence, and shall also on conviction, be ordered by the court before which he is convicted to pay the female employee the maternity allowance to which she may be entitled in respect of every day on which the female employee had worked during the eligible period, the payment so ordered being in addition to the wages payable to her, and the amount of maternity allowance so ordered by the court to be paid shall be recoverable as if it were a fine imposed by such court[6].

Further, any condition in a contract of service whereby a female employee relinquishes or is deemed to relinquish any right under Part IX of the Employment Act (which includes the paid maternity leave above) shall be void and of no effect and the right conferred thereunder shall be deemed to be substituted for such condition[7].

Please also refer to the implications highlighted in the conclusion section below.

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(3) Termination of Pregnant Female Employee because of Her Pregnancy or Illness arising out of Pregnancy will be prohibited

Where a female employee is pregnant or is suffering from an illness arising out of her pregnancy, it shall be an offence for her employer to terminate her services or give her notice of termination of service, except on the grounds of:

1. (a) wilful breach of a condition of the contract of service;
2. (b) misconduct; or
3. (c) closure of the employer’s business.

Where the service of a female employee above is terminated, the burden of proving that such termination is not on the ground of her pregnancy or on the ground of illness arising out of her pregnancy, shall rest on the employer[8].

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What happens if employers fail to comply?

Any condition in a contract of service whereby a female employee relinquishes or is deemed to relinquish any right under Part IX of the Employment Act (which includes the termination of pregnant female employees due to her pregnancy or illness arising out of her pregnancy above) shall be void and of no effect and the right conferred thereunder shall be deemed to be substituted for such condition[9].

Please also refer to the implications highlighted in the conclusion section below.

 

(4) Weekly Working Hour will be reduced

The weekly working hour of an employee will be reduced from 48 hours in one week to 45 hours in one week[10].

Overtime rates (at least one and half times the employee’s hourly rate) will therefore be charged for any hours in excess of the revised total 45 hours per week[11]. Please note that overtime rates will not apply to employees whose monthly wages exceed RM4,000.

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What happens if employers fail to comply?

Any employer who fails to pay to any of his employees any overtime wages as provided under the Employment Act or any subsidiary legislation made thereunder commits an offence, and shall also, on conviction, be ordered by the court before which he is convicted to pay to the employee concerned the overtime wages due, and the amount of overtime wages so ordered by the court to be paid shall be recoverable as if it were a fine imposed by such court[12].

Please also refer to the implications highlighted in the conclusion section below.

 

(5) Paid Sick Leave (when hospitalisation is not necessary) will be excluded when using 60 days of Paid Hospitalisation Leave

Employees will not be required to use any of their paid sick leave entitlement (when hospitalisation is not necessary) when using their 60 days of paid hospitalisation leave in each calendar year[13].

The paid sick leave (when hospitalisation is not necessary) in each calendar year under the Employment Act depend on the length of service as follows:

1. (a) 14 days if the employee has been employed for less than 2 years;
2. (b) 18 days if the employee has been employed for 2 years or more but less than 5 years; or
3. (c) 22 days if the employee has been employed for 5 years or more[14].

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What happens if employers fail to comply?

Any employer who fails to grant sick leave, or fails to pay sick leave pay, to any of his employees, commits an offence, and shall also, on conviction, be ordered by the court before which he is convicted to pay to the employee concerned the sick leave pay for every day of such sick leave at the rate provided under the Employment Act, and the amount so ordered by the court to be paid shall be recoverable as if it were a fine imposed by such court[15].

Please also refer to the implications highlighted in the conclusion section below.

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(6) Paid paternity leave of 7 consecutive days per confinement limited to 5 confinements will be introduced

Married male employee will have the right to 7 consecutive days of paid paternity leave per confinement up to a maximum of 5 confinements irrespective of the number of spouses. To qualify such paternity leave, a married male employee is required to fulfil the following requirements:

1. (a) he has been employed by the same employer at least 12 months immediately before the commencement of such paternity leave; and
2. (b) he has notified his employer of the pregnancy of his spouse at least 30 days prior to the expected confinement or as early as possible after the birth[16].

 

What happens if employers fail to comply?

Please refer to the implications highlighted in the conclusion section below.

 

(7) Employers to obtain prior approval from the Director General of Labour before employing foreign employees

Employers shall obtain the prior approval from the Director General of Labour before employing foreign employees.

An application for the approval shall be made in the form and manner as may be determined by the Director General of Labour.

Upon approval of the Director General of Labour, an employer shall, within 14 days from the date of the employment of a foreign employee, furnish the Director General of Labour with the particulars relating to the foreign employee in such manner as the Director General of Labour may direct.

The Director General of Labour may, subject to any written law, approve an application if the employer complies with the following conditions:

1. (a) the employer satisfies the Director General of Labour that on the date on which he makes the application:
   1. (i) he has no outstanding matter relating to any decision, order or directive issued under the Employment Act; or
   2. (ii) he has no outstanding matter or case relating to any conviction for any offence under the Employment Act, the Employees’ Social Security Act 1969, the Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990 or the National Wages Consultative Council Act 2011; or
2. (b) the employer has not been convicted of any offence under any written law in relation to anti-trafficking in persons and forced labour[17].
3. –

What happens if employers fail to comply?

Employers who contravene commits an offence and shall, on conviction, be liable to a fine not exceeding RM100,000 fine and/or 5 years imprisonment[18].

Please also refer to the implications highlighted in the conclusion section below.

 

(8) Employers to inform the Director General of Labour of the Termination of Employment of Foreign Employees

If the service of a foreign employee is terminated:

1. (a) by his employer;
2. (b) by reason of the expiry of the employment pass issued by the Immigration Department of Malaysia to the foreign employee; or
3. (c) by reason of the repatriation or deportation of the foreign employee,

the employer shall, within 30 days of the termination of service, inform the Director General of Labour of the termination in the manner as may be determined by the Director General of Labour.

On the other hand, if a foreign employee terminates his service or absconds from his place of employment, the employer shall, within 14 days of the termination of service or after the foreign employee’s absence, inform the Director General of Labour in the manner as may be determined by the Director General of Labour[19].

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What happens if employers fail to comply?

Please refer to the implications highlighted in the conclusion section below.

 

(9) Flexible Working Arrangement (subject to the discretion of the Employers) will be introduced

Employees can apply for flexible work arrangement with their employers to vary the hours of work, days of work or place of work in relation to his employment.

Where there is a collective agreement, any application made by the employee above shall be consistent with the terms and conditions in the collective agreement[20].

Further, the employee shall make an application for flexible working arrangement above in writing and in the form and manner as may be determined by the Director General of Labour.

Upon the application, an employer shall, within 60 days from the date such application is received, approve or refuse the application.

The employer shall inform the employee in writing of the employer’s approval or refusal of the application above and in the case of a refusal, the employer shall state the ground of such refusal[21].

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What happens if employers fail to comply?

Please refer to the implications highlighted in the conclusion section below.

 

(10) Director General of Labour has the power to inquire on Complaints relating to Discrimination

The Director General of Labour is given the power to inquire into and decide any dispute between an employee and his employer in respect of any matter relating to discrimination in employment, and the Director General of Labour may, pursuant to such decision, make an order[22].

What amounts to “discrimination” is however not provided for in the Employment Act.

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What happens if employers fail to comply?

Employers who fail to comply with the Director General of Labour’s order commit an offence and shall on conviction, be liable to a fine not exceeding RM50,000 and for continuing offence, a daily fine not exceeding RM1,000 for each day the offence continues[23].

Please also refer to the implications highlighted in the conclusion section below.

 

(11) Exhibit of Notice of Sexual Harassment at the Workplace

Employers must exhibit conspicuously a notice to raise awareness on sexual harassment at the workplace[24].

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What happens if employers fail to comply?

Please refer to the implications highlighted in the conclusion section below.

 

(12) Prohibition of Forced Labour

Any employer is prohibited from forced labour, i.e. threatening, deceiving or forcing an employee to do any activity, service or work and prevents that employee from proceeding beyond the place or area where such activity, service or work is done[25].

 

What happens if employers fail to comply?

Employers shall commit an offence and shall, on conviction, be liable to a fine not exceeding RM100,000 or to imprisonment for a term not exceeding 2 years or to both[26].–

Please refer to the implications highlighted in the conclusion section below.

 

Conclusion

It was reported that the Malaysian Employers Federation has urged the government to delay implementing the amendments to the Employment Act 1995 from 1 September 2022, which it estimates will cost employers nationwide an extra RM110.99 billion per year which derived from the following:

1. (a) increase in overtime costs to RM4,000 per month from RM2,000 (RM80.87 billion);
2. (b) reduction of hours of work to 45 hours per week, from 48 hours (RM26.88 billion);
3. (c) increase maternity leave to 98 days, from 60 days (RM2.97 billion); and
4. (d) paternity leave of seven continuous days per birth (RM275 million).[27]
5. –

With the above Amendment Act and Amendment Order that are going to bring about more protection and advantages for the employees with effect from 1 September 2022, all employers should get themselves prepared and consider engaging their lawyers to review their existing employment contracts and employment handbook/policies to ensure that they comply with the Employment Act taking into account that:

1. (a) Any term or condition of a contract of service or of an agreement, whether such contract or agreement was entered into before or after the coming into force of the Employment Act, which provides a term or condition of service which is less favourable to an employee than a term or condition of service prescribed by the Employment Act or any regulations, order or other subsidiary legislation whatsoever made thereunder shall be void and of no effect to that extent and the more favourable provisions of the Employment Act or any regulations, order or other subsidiary legislation whatsoever made thereunder shall be substituted therefor[28].
2. (b) Further, apart from the specific penalties highlighted above, any person who commits any offence under, or contravenes any provision of, the Employment Act, or any regulations, order, or other subsidiary legislation whatsoever made thereunder, in respect of which no penalty is provided, shall be liable, on conviction, to a fine not exceeding RM50,000[29].
3. (c) Where an offence under the Employment Act has been committed by, amongst others, body corporate, any person who is a director, manager, or other similar officer of the body corporate at the time of the commission of the offence shall be deemed to have committed the offence and may be charged jointly or severally in the same proceedings as the body corporate[30].
4. (d) If any person fails to comply any decision or order of the Director General of Labour pursuant to an enquiry, such person commits an offence and shall be liable, on conviction, to a fine not exceeding RM50,000; and shall also, in the case of a continuing offence, be liable to a daily fine not exceeding RM1,000 for each day the offence continues after conviction[31].
5. (e) Where an employer has been convicted of an offence relating to the payment of wages or any other payments payable to an employee under the Employment Act, the court before which he is convicted may order the employer to pay any payment due to the employee in relation to that offence. Where an employer fails to comply with an order, the court shall, on the application of the employee, issue a warrant to levy the employer’s property for any payments due in the following manner:
   1. (i) by way of distress and sale of employer’s property in accordance with the same procedure of execution under the Rules of Court 2012 and this execution shall apply mutatis mutandis notwithstanding the amount in the order; or
   2. (ii) in the same manner as a fine as provided under section 283 of the Criminal Procedure Code[32].

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[1] Section 2 of the Employment Act and Section 3 of the Interpretation Acts 1948 and 1967.

[2] Section 2 of the Amendment Order (as incorporated in the First Schedule of the Employment Act).

[3] Section 2(1) of the Employment Act and First Schedule of the Employment Act.

[4] Section 12 of the Amendment Act (as incorporated in Section 37(1)(d)(ii) of the Employment Act).

[5] Section 37(4) of the Employment Act.

[6] Section 94 of the Employment Act.

[7] Section 43 of the Employment Act.

[8] Section 13 of the Amendment Act (as incorporated as a new Section 41A of the Employment Act).

[9] Section 43 of the Employment Act.

[10] Section 20 of the Amendment Act (as incorporated in Section 60A(1)(d) of the Employment Act).

[11] Section 60A(3) of the Employment Act.

[12] Section 100(2) of the Employment Act.

[13] Section 22 of the Amendment Act (as incorporated in Section 60(F)(1) of the Employment Act).

[14] Section 60(F)(1)(aa) of the Employment Act.

[15] Section 100(5) of the Employment Act.

[16] Section 23 of the Amendment Act (as incorporated as a new Section 60FA of the Employment Act).

[17] Section 24 of the Amendment Act (as incorporated as a new Section 60K of the Employment Act).

[18] Section 24 of the Amendment Act (as incorporated as a new Section 60K(5) of the Employment Act).

[19] Section 25 of the Amendment Act (as incorporated as a new Section 60KA of the Employment Act).

[20] Section 27 of the Amendment Act (as incorporated as a new Section 60P of the Employment Act).

[21] Section 27 of the Amendment Act (as incorporated as a new Section 60Q of the Employment Act).

[22] Section 30 of the Amendment Act (as incorporated as a new Section 60F of the Employment Act).

[23] Section 30 of the Amendment Act (as incorporated as a new Section 60F(2) of the Employment Act).

[24] Section 36 of the Amendment Act (as incorporated as a new Section 81H of the Employment Act).

[25] Section 41 of the Amendment Act (as incorporated as a new Section 90B of the Employment Act).

[26] Section 41 of the Amendment Act (as incorporated as a new Section 90B of the Employment Act).

[27] https://www.theedgemarkets.com/article/mef-urges-govt-delay-enforcing-employment-act-amendments-estimated-cost-rm111-bil-year

[28] Section 7 of the Employment Act.

[29] Section 99A of the Employment Act.

[30] Section 101B of the Employment Act.

[31] Section 69 of the Employment Act.

[32] Section 40 of the Amendment Act (as incorporated as a new Section 87A of the Employment Act).

27. .

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About the Author

Maple Chieng Hea Fong

Partner

Halim Hong & Quek

maple.chieng@hhq.com.my

This article dated 19 August 2022 is contributed by Maple Chieng for general information/guidance only and is not meant to be exhaustive, and it is not a substitute for legal advice.