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  • 1.0 Introduction


  • 2.0 Division of Terms of Employment


  • 2.1 Working hours


  • 2.2 Employment Contracts


  • 2.3 Minimum wage law


  • 3.0 Importance of Terms and Conditions of Employments


  • 4.0 Suggestions


  • 4.1 Termination of Employees


  • 4.2 Employment Discrimination


  • 4.3 Sexual Harassment


  • 5.0 Conclusion


  • 6.0 References


  • 1.0 Introduction

In order endorse various investments and economic growth, the Malaysian government had gone through a great development and encourages a pleasant relationship between employers and employees. Commonly, Malaysia has had no manifestation of crippling worker strikes,


lock outs and demonstrations for over the past ten to fifteen years. Problems are usually resolved in an atmosphere of willingness and intervention between parties including trade unions.

The major employment laws in the country that directly impact the employment relationship are the Employment Act of 1955 (EA) and the Industrial Relations Act 1967 (IRA). The EA administrates the matters relating to employment in Malaysia and it applies to most employees whose wages do not exceed RM1,500 (USD 1= RM3.22) or who are engaged in specified work which are manual labour or overseeing manual labour, operation or maintenance of a motor vehicle with the irrespective of salary amount (Ariff et. al., 1998).

The employment terms and conditions of employees above this wage level or those who are otherwise outside the ambit of the EA, are governed by common law and by their employment contracts. The main areas covered by the EA are terms relating to employment contracts, including the termination of contracts, maternity protection, days and hours of work, annual leave, public holidays, termination and lay-off benefits and methods of dealing with complaints and enquiries.

According to Kuruvilla S. (1993), Labour law is also known as employment law mediates the relationship between workers employees, employers, trade unions and the government. Collective labour law relates to the tripartite relationship between employee, employer and union. Individual labour law concerns employee’s rights at work and through the contract for work. Employment standards are social norms which in some cases also technical standards for the minimum socially acceptable conditions under which employees or contractors are allowed to work.

Labour law arose in parallel with the Industrial Revolution as the relationship between worker and employer changed from small scale production studios to large-scale factories. Workers sought better conditions and the right to join or avoid joining a labour union, while employers sought a more predictable, flexible and less costly workforce. The state of labour law at any one time is therefore both the product of, and a component of struggles between various social forces. As England was the first country to industrialise, it was also the first to face the often appalling consequences of capitalist exploitation in a totally unregulated and laissez-faire economic framework. Over the course of the late 18th and early to mid-


nineteenth century the foundation for modern labour law was slowly laid, as some of the more egregious aspects of working conditions were steadily ameliorated through legislation.

The basic feature of labour law in almost every country is that the rights and obligations of the worker and the employer are mediated through a contract of employment between the two. This has been the case since the collapse of feudalism. Many contract terms and conditions are covered by legislation or common law. In the US for example, the majority of state laws allow for employment to be at will, meaning the employer can terminate an employee from a position for any reason, so long as the reason is not explicitly prohibited.

A contract of employment is a category of contract used in labour law to attribute right and responsibilities between parties to a bargain. On the one end stands an ‘employee’ who is ‘employed’ by an employer’. It has arisen out of the old master-servant law, used before the 20th century. Put generally, the contract of employment denotes a relationship of economic dependence and social subordination.

The relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power. In its inception it is an act of submission, in its operation it is a condition of subordination, however much the submission and the subordination may be concealed by the indispensable figment of the legal mind known as the 'contract of employment'. The main object of labour law has been and will always be a countervailing force to counteract the inequality of bargaining power which is inherent and must be inherent in the employment relationship.

A contract of employment usually defined to mean the same as a ‘contract of service’. A contract of service has historically been distinguished from a contract for the supply of services, the expression altered to imply the dividing line between a person who is ‘employed’ and someone who is ‘self-employed’.

The purpose of the dividing line is to attribute rights to some kinds of people who work for others. This could be the right to a minimum wage, holiday pay, sick leave, fair dismissal, a written statement of the contract, the right to organize in a union, and so on. The assumption is that genuinely self-employed people should be able to look after their own affairs, and


therefore work they do for others should not carry with it an obligation to look after these rights.

One example of employment terms in many countries is the duty to provide written particulars of employment with the terms and conditions of employment to an employee. This aims to allow the employee to know concretely what to expect and what is expected. It covers items including compensation, holiday and illness rights, notice in the event of dismissal and job description. The contract is subject to various legal provisions. An employer may not legally offer a contract that pays the worker less than a minimum wage. An employee may not agree to a contract that allows an employer to dismiss them for illegal reasons.

In Malaysia employment law is outlined in the Employment Act 1955 and the Industrial Relations Act 1967, which deal with relations between employers, employees and trade unions. The Employment Act gives minimum terms and conditions for manual workers and non-manual workers who earn less than a defined amount. It covers full-time, part-time, temporary and contract employment (Ministry of Human Resources, 1997).

Part-time work is classed as being employed for less than 70 percent of the time of a full-time employee in a similar job. Casual workers, who are hired only when needed, are not covered by the Employment Act.

  • 2.0 Division of Terms of Employment

  • 2.1 Working hours


Working hours for employees following:


by the Employment Act


conform to the

Maximum of 48 hours per week

No more than eight hours of work per day

Maximum of ten hours of work spread over a day

No more than five hours straight without a minimum rest period of 30 minutes

One day off per week

  • 2.2 Employment contracts

Anybody employed in Malaysia for longer than one month must have a written employment contract or ‘contract of service’, which should include:

Names of the both the employee and the employer Date on which the employment begins Place of work and employer's address Job title or a brief description of the job Salary, including details of any bonuses or allowances Terms and conditions of employment (relating to holiday entitlement, sick pay, overtime, probation and working hours) Required notice period Retirement age

A written employment contract should be received before starting work. An oral agreement is sufficient for employment lasting less than a month.

  • 2.3 Minimum wage law


Minimum wage law applies to some industries and sectors in some territories. Many employees have jobs for which there is no legal minimum wage.

3.0 Importance of Terms and Conditions of Employments

The central focus of most employment contracts is wages for work. However, other essential terms might be notice periods in the event of dismissal, holiday pay rights, and the place of work and pension schemes. Many jurisdictions require these factors to be set out in a written contract In terms of pay which the employee may be compensated through wages, a salary, or by commission. In addition to monetary compensation, the employment contract often specifies a fringe benefit package, including a retirement plan, employee stock options, holiday entitlement, required hours of work, and also the health insurance benefits.

Normally, such contracts provide for termination of employment, by either party, and include associated matters such as notice period, compensation arrangements and, sometimes, garden leave.

Some employers also use non-disclosure and non-competed clauses to protect their trade secrets from being dispersed when employees leave. Depending on where you live, the laws regarding enforceability of these clauses vary widely.

In certain circumstances, an employer's conduct could be such that an employee is entitled to resign in response and to regard that as an unfair "constructive" dismissal. Failure by an employer to extend a fixed term contract can also be an instance where a claim for unfair dismissal may be made.

Employment regulations play a key role in the development of any business. Sometimes, building a team with complementary skills involves little more than a quick chat with someone who has been introduced to them by a business associate. No psychometric tests, references or formal contracts of employment here.


Often, employees or team members are taken on without sufficient protection in terms of valuable intellectual property or a means to prevent ´moonlighting’ or unfair competition when they leave.

Emerging businesses and entrepreneurs can have the basis of a fantastic business, but, once they start employing people, things can go wrong.

Employees can rip companies off by stealing their ideas or passing them on to subsequent employers, who have not invested heavily in the underlying research and development. Even if employees do not take ideas or indulge in unfair competition, poor performance can itself damage the business. Not only that but any attempt to discipline or improve the errant employees can lead to employment tribunal claims, where, for example, unlimited damages can be awarded where discrimination is proved.

Writing contracts should be worded clearly to avoid any misunderstanding, also the job description should be easy to follow so the employee can show flexibility in their job role. Terms and conditions of employments are important because it shows the employer and the employee clearly the rights and the responsibilities for each one of the people who work in the organisation and to make sure that everything in the environment is safe and fair.

Terms and conditions are related to the hours of work, as for the example, normal hours, and overtime, expected out of hours work. for example if the employer asked the employee to do something that is not written in the contract, then the employee will have the right not to do the job because it’s not written on the agreement document.

Terms and conditions allow the employer to specify an employee’s duties and responsibilities so an employee knows exactly what is expected from them. Terms and conditions are mainly important about safety for the employer and the employee.

They are there to make it clear to both employer and employee where each stand. To let them each knows their responsibilities and care for each other. It is best to have such an agreement so that if anything does go wrong, both sides has a clear understanding what rights each have. As for our further discussions, there are 3 items that could happen towards employee and


employers which I think it is a big issue in the employment terms and conditions topic and they are:

Termination of Employees Discrimination of Employees Sexual Harassment

There are many employers that do not provide its employees with an employment contracts. They always dream that "if it is not in writing, then it does not exist," nor "if there is no written contract, then we can do what we like with our employees." These are not dreams - these are nightmares which are sure to land the employer in court.

Every employer is required by law to provide the employee with a written contract of employment not later that the first day of commencement of employment. Failure to do so could land the employer in jail for a term of imprisonment or to liability for a hefty fine.

The contract of employment is a vital document which it regulates the terms and conditions of employment between the employer and the employee. It stipulates what the employer will provide in terms of benefits, and in terms of labour legislation, and it specifies what the employee is entitled to receive in terms of company policy, company benefits, and labour legislation.

It also regulates the behaviour of the employee in the workplace because all company policies and procedures, as well as your disciplinary code, form a part of the employment contract. If there is no contract regulating these matters, it is extremely difficult to take action against the employee, if there is no contract, or if the employee has never been informed, then he has the right to conclude that it does not exist.




  • 4.1 Termination of Employees

In Malaysia, termination of employment falls under the purview of the EA (Employment Act), the Employment (Termination and Lay-Off Benefits) Regulations 1980 (1980 Regulations), and the IRA. Although the provisions of the EA only cover EA employees, these principles of law are generally considered as guidelines for most employer-employee relationships, particularly in the absence of a written contract of service.

The IRA addresses the issue of unions, trade disputes and dismissals. It also mandates that an employment relationship cannot be terminated without just cause or excuse. While ‘just cause or excuse would be an issue to be determined by the Industrial Court in general, independently of the employer’s compliance with the EA and the terms and conditions of the employment contract relating to benefits, terminations should be motivated by a bona fide business decision, such as the cessation and sale of a business, continuing losses, or disciplinary or performance reasons.

In a disciplinary situation, an employer should ensure that the process of investigation and hearing be adhered to and that the employee be given due warning and the chance to state his or her case. In the event of unfair dismissal, employees may seek redress before the Industrial Court. In the first step, the claimant will make representations to the Director General for Industrial Relations for reinstatement. If there is no settlement, the matter may be referred to the Industrial Court for adjudication.

An employment relationship in Malaysia may be terminated for redundancy. Special provisions under the 1980 Regulations govern termination by retrenchment or the take-over or cessation of a business, and mandate that retrenched EA employees are entitled to specific termination indemnities. In a retrenchment situation, employers should select the employees of the same category to be retrenched based on objective criteria.


The Malaysian Code of Conduct for Industrial Harmony, which is not legally prescribed by

legislation but is taken note of by the Industrial Court, provides guidelines for the selection of affected employees. The guidelines specify the following criteria:

The need for the efficient operation of the organization.

The ability, experience, skill and occupational qualifications of workers.

The consideration for length of service and whether employees are casual, temporary or permanent.

The age of the employee.

The employee’s family situation. The last in and first out principle whereby the last person employed should be the first person retrenched.

The EA also outlines how and when a contract of service may be terminated. Under the EA, a contract of service for a specified period of time or the performance of a specified piece of work lapses when the period expires or when the work is completed. Where the contract of service is for an unspecified period of time, the contract may be terminated by either party by giving notice of termination as specified in the contract. In the absence of a written provision as to the length of notice required, Malaysian law provides that the period of notice shall not be less than:

Four weeks for employment of less than two years. Six weeks for employment of two years or more but less than five years. Eight weeks for employment of more than five years.

In lieu of notice, an employer may pay wages to an employee in the amount equivalent to the period of notice. However, regardless of compliance with the notice period or the payment of benefits, the IRA provides that there must be just cause or excuse. In cases of retrenchment, employers are also required to report to the Malaysian Director General of Manpower at least one month before carrying out the layoff.

Under the provisions of the 1980 Regulations, an employee who has been retrenched or whose service has been terminated as the result of redundancy is entitled to certain benefits. These benefits include:


10 day’s wages for every year of employment of more than 12 months but less than

two years. 15 day’s wages for every year of employment of two years or more but less than five

years. 20 day’s wages for every year of employment of five years or more.

Where an employee has only worked for a portion of a year, payment is to be prorated and calculated to the nearest month of employment. These benefits are in addition to wages paid in lieu of notice.

4.2 Employment Discrimination

Until recently, Malaysia had no legislation governing employment discrimination, although the Federal Constitution does state that there shall be no discrimination against citizens on the ground of religion, race, descent or place of birth. On September 28, 2001, Article 8(2) of the Federal Constitution was amended to prohibit gender discrimination through the Constitution Act 2001.

This, however, has yet to be encapsulated in any specific legislation. In 2001, the Labour Department of the Malaysian Ministry of Human Resources issued the Code of Practice for the Employment of the Disabled in the Private Sector ‘Disability Code’. The objectives of the Disability Code are to:

Establish guidelines for the registration and job placement of the disabled with the private sector. Increase the awareness of private sector employers on the importance of offering employment opportunities to the disabled. Encourage the disabled to prepare themselves in terms of ability, qualifications and skill sets to participate in the development of Malaysia as employees.


Though the Disability Code sets out the certain responsibilities of both the employer and the disabled employee, like other similar Codes relating to employment, there are no legal sanctions for non-compliance.

The Malaysian Government recently passed the Persons with Disabilities Act 2008 (PDA). It will be the first specific anti-discrimination law in Malaysia that applies in the workplace. Under the PDA, employers are now legally required to ensure that employees with disabilities are accorded just and favourable work conditions and equal remuneration to those without disabilities.

However, it is not expressly clear whether the PDA will cover both employees as well as job applicants. At present, the protections under the PDA only extend to current employees. More detailed guidelines and standards will presumably be promulgated by the National Council for Persons with Disabilities and/or the Minister of Human Resources in accordance with the PDA. Pending such guidelines and standards, the exact impact on the employment landscape remains to be seen.

The Department of Occupational Safety and Health of the Malaysian Ministry of Human Resources has also issued a Code of Practice on Prevention and Management of HIV or AIDS at the Workplace on September 2001 to reduce the spread of the disease and guide employers and employees in managing HIV or AIDS issues at the workplace. The objectives of this HIV or AIDS Code are to:

Provide guidelines to employers and employees on appropriate and effective ways of

preventing and managing HIV or AIDS at the workplace. Promote education and awareness on HIV or AIDS.

Promote a non-judgmental, non-discriminatory work environment.

Generally, employers in Malaysia may be liable for unfair dismissal pursuant to the employer’s discriminatory acts or omissions where they can be construed as evidencing intent on the part of the employer to no longer be bound by the terms of the employment contract.


As a first step to minimize discrimination problems at the workplace, employers should set up and implement in-house mechanisms as outlined in the Disability Code, the PDA and the HIV or AIDS Code. Such measures should be implemented despite the codes not having the force of law, so as to promote positive employee relations. More importantly, pursuant to the PDA, employers should now recognize and endeavour to fulfil their new legal obligations towards employees with disabilities to ensure equal and non-discriminatory workplace practices and attitude.

4.3 Sexual Harassment

Malaysia does not have any legislation governing workplace harassment. However, in 1999, the “Code of Practice on the Prevention and Eradication of Sexual Harassment in the Workplace” was promulgated (“Sexual Harassment Code”). The Sexual Harassment Code is not legally binding, but companies are expected to adopt its recommendations.

The Sexual Harassment Code contains guidelines for the establishment and implementation of internal preventive and redress mechanisms for dealing with sexual harassment. Sexual harassment is defined under the Sexual Harassment Code as any unwanted conduct of a sexual nature having the effect of verbal, nonverbal, visual, psychological, or physical harassment that might, on reasonable grounds, be perceived by the recipient as:

Placing a condition of a sexual nature on her or his employment.

An offence or humiliation, or a threat to her or his well-being, but that has no direct link to her or his employment.

This definition is wide-ranging and covers almost every possible form of sexual harassment, including verbal statements, gestures and physical conduct. It also includes employment- related sexual harassment that occurs outside the workplace as a result of employment responsibilities or employment relationships for example, at work-related social functions, during work-related travel or over the telephone.


To successfully combat sexual harassment in the workplace, employers are encouraged to set up comprehensive in-house mechanisms. The minimum elements of such a mechanism, as outlined by the Sexual Harassment Code, include:

A policy statement from management prohibiting sexual harassment in the organization.

A clear definition as to what constitutes sexual harassment.

Setting-up a special complaint/grievance procedure.

Clear stipulation of the disciplinary rules and penalties that will be imposed against a

harasser as well as against those who make false accusations. Formulation of a set of protective and remedial measures for the victim.

Promotional and educational programs to explain the company’s policy on sexual harassment and to raise awareness of sexual harassment among all employees.

Although it is not legally binding, implementation of the Sexual Harassment Code and the setting-up of in-house inquiry boards will provide employees under harassment with an avenue for redress within their organization.

5.0 Conclusion

Employment law is in place to guarantee a fair and safe working environment for employers and employees. Statutes and strict rules outline, for the employer, how their employee’s should be treated within the workplace. Many employers and employees often don’t realise how many rules and regulations are covered by employment law, leading to confusion for employers and employees alike. There are many aspects of covered by employment law which means employees can take legal action for being treated unfairly.

Before recruiting new employees, employers should refer to employment law to ensure they are up to date with all aspects. It is mandatory that employees and employees have a sound, equal understanding of employment law. For instance, if an employee feels they are being bullied or mobbed it is important they realise it is not acceptable and can take legal action


against an employer. Employers need to understand employment law so they are providing an optimal working environment for employees.

Equality within the workplace ensures that everyone has equal opportunities and can’t be denied promotion or training for prejudicial reasons. Employers cannot discriminate against employees because of age, gender, nationality, pregnancy and maternity leave, sexual orientation, disabilities, race, ethnic background, religion and beliefs. Legal action can be carried out, should an employee believe they are being treated unfairly due to prejudice.

Working time regulations state that employers can legally make their employees work no more than 48 hours a week, unless the employee agrees to “opt out” of the 48-hour week. This is an agreement that employer and employee sign to say the worker can work more than 48 hours a week. Unpaid lunch breaks, regular travel to and from work, voluntary unpaid overtime and paid or unpaid holidays are not counted as working hours. Paid overtime, working lunches, working abroad for a UK based company and job-related training however, are all included in the working week.

The Health and Safety at Work Act 1974 is a large piece of legislation which covers all aspects of health and safety in the workplace. Employers have a “duty of care” to ensure the working environment is safe for employees. Primarily, health and safety refers to eliminating hazards to prevent accidents and ensuring the working environment is safe. Should an employee be concerned about their health and safety at work, they should speak to their employer and trade union. If speaking to their employer or trade union has no effect, they should report the employer to the environmental health department of their local authority.

Understanding employment law is crucial for employers and employees. Workers should know their rights so that they are not treated unfairly or differently to the rest of the working society. Employers should understand employment law to avoid legal action being taken against them through ignorance or lack of knowledge in regards to employment law.


6.0 References

Ariff, Mohammed, Chung, M.Y.H., Kadir, A.W.A., Ean, O. G, & Lae-Imm, E. T. (1998). Currency Turmoil and the Malaysian Economy: Genesis, Prognosis and Response, Malaysian Institute of Economic Research, Kuala Lumpur.

Kuruvilla S. (1993). ‘Industrialization Strategy and Industrial Relations Policy in Malaysia’, in S Frenkel and J Harrod (eds) Industrialization and Labour Relations: Contemporary Research in Seven Countries, ILR Press, Ithaca, 216-235.

Kuruvilla, S and Hall, W (1999). Globalisation and Employment Relations in the Philippines, Report to International Labour Organisation, Bangkok.

Ministry of Finance (1998). Economic Report 1998/99, Kuala Lumpur.

Ministry of Human Resources (1997). Malaysia: Labour and Human Resource Statistics 1992-1996, Kuala Lumpur.

National Economic Action Council (NEAC) (1998). National Economic Recovery Plan:

Agenda for Action, Economic Planning Unit, Prime Minister’s Department, Kuala Lumpur. Malaysia, 1996.

Seventh Malaysia Plan (1996). Kuala Lumpur Malaysian Industrial Development Authority 1995 unpublished statistics.


National Union of Bank Employees (NUBE) (1996) Report for the Period 1st April 1993 to 31st March 1996: 18th Triennial Delegates Conference, Kuala Lumpur.