Employment Law Regime
Malaysian employment law is determined by the Federal Constitution, the Employment Act 1955, the Industrial Relations Act 1967, and other related legislation. The Malaysian law recognizes two types of employers – industrial and non-industrial. Industrial employers are those involved in manual work and non-industrial employers are those involved in administrative, supervisory or clerical work.
Employment Classification
In Malaysia, employees are divided into two categories:
Manual workers – those who are employed mainly in manual work or who are engaged in the production or operation of machinery. They are entitled to additional protection and benefits under the Employment Act 1955.
Non-manual workers – those who are not manual workers, such as managers, executives, and administrative staff.
Employment Contracts
Employment contracts can be written, oral, or implied. However, a written contract is preferable, as it provides clarity and evidence of the terms and conditions of the employment relationship. According to the Employment Act 1955, an employment contract must contain certain terms, such as the employee’s job description, salary, hours of work, and the notice period required for termination.
Permanent employees are those hired for an indefinite period or for a fixed term of at least six months. They are entitled to statutory benefits such as annual leave, sick leave, and medical benefits.
Probationary employees are those employed for a probationary period of up to 12 months to assess their suitability for permanent employment. During this period, they are not entitled to certain statutory benefits, such as paid annual leave and sick leave.
Holiday’s in Malaysia
The following are the national public holidays in Malaysia:
New Year’s Day
Chinese New Year
Labour Day
Hari Raya Aidilfitri
Hari Raya Haji
National Day
Malaysia Day
Deepavali
Prophet Muhammad’s Birthday
Christmas Day
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Termination of Employment
Notice Period
An employer who terminates an employee’s services must provide notice or payment in lieu of notice. The notice period depends on the length of the employee’s service and is set out in the Employment Act 1955. If an employee has been employed for less than two years, the notice period is four weeks. If the employee has been employed for more than two years, the notice period is six weeks.
Severance Benefits
An employee who has been employed for at least 12 months and who is dismissed for a valid reason is entitled to termination benefits. The amount of the benefits depends on the length of service, as follows:
Less than two years – 10 days’ wages for each year of service
Between two and five years – 15 days’ wages for each year of service
More than five years – 20 days’ wages for each year of service
Employee Provident Fund
The Employees Provident Fund (EPF) is a compulsory savings scheme for employees in Malaysia. Employers are required to contribute 13% of an employee’s monthly salary to the EPF, while employees contribute 11% of their monthly salary. The EPF provides retirement benefits, savings for housing and education, and insurance coverage for death or disability.
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