Asia-Pacific employment law bulletin 2023

Malaysia

After a period of some uncertainty, the amendments made to the Employment Act 1955 (EA) over the course of 2021 and 2022 finally took effect on 1 January 2023. The amendments contained some of the most drastic changes made to Malaysian employment laws to date. 

Scope of Employment Act 1955

While the EA had previously adopted a monetary threshold among other factors to determine its applicability to certain individuals, that monetary threshold has been removed. The EA now applies to “any person who has entered into a contract of service.” This change to the definition means that all employees who are engaged by way of an employment contract are now covered by the EA. However, the EA also sets out provisions that only apply to a certain category of employees. Under the EA, employees who earn a monthly wage of RM4,000 (approx. USD 900) or less per month (and some other types of employees specified in the EA) are deemed non-exempt employees. Some regulations are only applicable to these non-exempt employees such as: (i) overtime payments for work on rest days/public holidays; (ii) overtime payments for work exceeding normal work hours; (iii) allowance for shift-based work; and (iv) termination/lay-off benefits.

Amendments to the EA

With the widening of the scope of the EA, employers are now required to ensure compliance with the EA for all of its employees. This includes obligations that have always existed under the EA as well as new provisions introduced through amendments to the EA over the course of 2021 and 2022.

Key obligations on and issues for employers under the amended EA include the following:

• increased maternity leave entitlement from 60 days to 98 days;
• introduction of 7 days paternity leave;
• maximum working hours per week has been reduced from 48 hours to 45 hours;
• the number of hours an employee can work in a day has been increased to 12 hours;
• overtime hours must be limited to 104 hours per month;
• with exceptions expressly permitted under the EA, any deductions of wages must be made with the consent of the Director General of Labour;
• statutory minimum annual leave entitlement is now applicable to all employees;
• statutory minimum sick leave entitlement is now applicable to all employees;
• employees can apply for flexible work arrangements – though the employer may reject such applications with reasons;
• the Director General of Labour became entitled to hear and make decisions on complaints of discrimination in the workplace;
• prohibition of “forced labour” is now an offence embodied in the EA with penalties of fines, imprisonment or both;
• approval from the Director General of Labour is required before an employer hires foreign employees in addition to other relevant approvals and requirements;
• when receiving labour from a third party who supplies its employees, a contract must be concluded with the third party; and
• obligation to raise awareness of employees on sexual harassment.

Although the amendments to the EA are now effective and employers are expected to be compliant with all obligations under the new EA, there are still some areas of uncertainty. For example:

• it remains unclear whether the Director General of Labour can issue “orders” in relation to discrimination disputes;
• there is also a question as to whether a position for an expatriate  also requires the approval of the Director General of Labour when this kind of position already requires necessary approvals from other relevant authorities and regulators; and
• the definition of forced labour also seems quite wide and employers need to be cautious when they require their employees to stay back in the workplace to complete their tasks. This in theory could potentially be considered “forced labour”.

In any case, while there are still some uncertainties with respect to some of the provisions, employers are required to revisit their employee handbooks and internal policies and ensure that they are in compliance with the amended EA.

Zaid Ibrahim & Co. (a member of ZICO Law) - Advocates & Solicitors: Yong Hon Cheong