A Guide To Malaysian Labour Laws - Part 1 of 2 (As at March 1997) less than 2 years at least 4 weeks 2 years or more

but less than 5 years at least 6 weeks 5 years or more at least 8 weeks Some of the reasons for termination by the employer :1. Wilful breach by the employee as regards the terms and the conditions of the contract of employment. 2. An employer may terminate the contract of employment where there has been "misconduct" on the part of the employee. 3. Where the employee has been continuously absent from work for more than 2 consecutive working days either a) without prior leave from his employer or b) without informing or attempting to inform his employer of such an excuse prior to or at the earliest opportunity during such absence. 4. Where an employer is employed for a specific piece of work for a specific period under a contract of service, his services can be terminated when in the expiry of the period or upon the specified piece of work is completed.

(Reproduced with the courtesy of the Bar Council.)

Some useful guides Probation Entitlement of annual leave Entitlement of sick leave Maternity leave Rest day Hours of work Further useful guides SOME USEFUL GUIDES A. EMPLOYMENT ACT 1955 (ACT 265) The Act covers "employees" employed by an employer under a contract of service. This information gives a guide to the relevant Malaysian Labour Laws as regards employment, security of employment, unlawful dismissal, termination and lay-off benefits, EPF, SOCSO and workmen's compensation.

Outlined are some useful guides and explanations of some of the important definitions under this Act.

Termination of contract of service 1. " Employee " under the Act means:a) any person whose wages does not exceed RM1,500.00 per month under a contract of service with an employer. b) any person who irrespective of the wages he earns in a month has entered into a contract of service with an employer and disengaged in:(i) manual labour. (ii) engaged in the operation of mechanically propelled vehicles. c) one who supervises and oversees employees in manual labour. d) any person engaged in any capacity, in any vessel registered in Malaysia with certain exceptions. e) any person engaged as a domestic servant. 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 any payment by way of commission, subsistence and other overtime payment.

Note: The Industrial Court has interpreted " Wages " to include all allowances including contractual bonus received by an employee for normal hours of work including travel allowances.
3. " Contract of service " means any agreement whether oral or in writing where the employer agrees to employ and the employee agrees to be employed and includes an apprenticeship contract. Essentials Of Letter Of Appointment/Employment Agreement

Here are some of the essential elements required.

1. The Agreement must be in writing if the employment is to exceed 1 month. 2. It must contain the terms and conditions as regards:-

(i) category of employment. (ii) the commencement salary including other allowances and bonus, if any. (iii) probation period. (iv) working hours. (v) overtime payment/leave in lieu. (vi) annual leave/public holidays. (vii) sick leave/medical bills, (viii) EPF, SOCSO. (ix) notice of termination.

PROBATION

What happens during probation period?

1. The probation period is normally spelt out in the letter of appointment/agreement. 2. During the probation period the employer monitors the workman's performance. 3. Probationary period can be extended if employer deems it necessary. 4. Employer has the right to terminate the service during the probationary period for poor performance, misconduct, etc. 5. Upon confirmation of employment the employee must be informed in writing by the employer stating revised wages and other terms and conditions where applicable.

ENTITLEMENT OF ANNUAL LEAVE

What is an employee's entitlement?

An employee shall be entitled to paid annual leave as follows: 1. 8 days for every 12 months of continuous service if he has been employed by the same employer for a period of less than 2 years. 2. 12 days for every 12 months of continuous service if he has been employed by the same employer for a period of 2 years or more but less than 5 years. 3. 16 days for every 12 months of continuous service if he has been employed by the same employer for a period of 5 years or more. 4. where an employee has not completed 12 months of continuous service with the same employer, his entitlement to paid annual leave shall be proportioned to the number of completed months of service.

ENTITLEMENT OF SICK LEAVE

What is an employee's entitlement?

An employee is entitled to paid sick leave (where no hospitalisation is necessary):1. of a total of 14 days per year where employee has been employed for less than 2 years. 2. of 18 days in a year if the employee has been employed for 2 years or more but less than 5 years. 3. of 22 days in a year if the employee has been employed for 5 years or more. 4. of 60 days in each calendar year if hospitalisation is necessary as certified by a registered medical practitioner.

MATERNITY LEAVE

What is a female employee's entitlement?

1. Every female employee shall be entitled to maternity leave for a period of not less than 60 consecutive days in respect of each confinement. 2. Maternity leave shall not commence earlier than 30 days immediately preceding the confinement or later than the day immediately following the confinement. 3. The female employee shall also be eligible for maternity allowance upon prescribed rates and qualifications under the Employment Act. 4. Maternity allowance is payable to a female employee by the employer for each day of the eligible period at her ordinary rate of pay for one day or at the rate prescribed by the Minister. A female employee employed on a monthly rate shall be deemed to have received her maternity allowance if she continues to receive her monthly wages during her absentation from work during the eligible period.

REST DAY

What is an employee's entitlement?

1) Every employee shall be allowed in each week a rest day of one whole day as may be determined by the employer. 2) The employer shall prepare a roster for the rest days of his employees so that the employee is informed of his rest day. Work On Rest Day/Overtime

What is an employee's entitlement?

No employee shall be compelled to work on a rest day unless the employee is engaged to work in shifts. 1. If the employee works on a rest day and is employed on a daily, hourly or other similar rate of pay he shall be paid for the period of work (i) if the work does not exceed half his normal hours of work, he shall be paid one day's wages at the ordinary rate of pay.

(ii) if he works more than half but does not exceed his normal hours of work, 2 day wages at the ordinary rate of pay. 2. In the case of employee employed on a monthly rate of pay who works on a rest day, he shall be paid for work (i) if it does not exceed half his normal hours of work, wages equivalent to half the ordinary rate of pay for work done on that day. (ii) if it is more than half but does not exceed his normal hours of work, one day wages at the ordinary rate of pay for work done on that day. 3. For any work carried out in excess of normal hours of work, the employee shall be paid at a rate which is not less than 2 times his hourly rate of pay. 4. In the case of any employee employed on piece rates who work on a rest day, he shall be paid twice his ordinary rate per piece.

HOURS OF WORK

What are the hours of work under the law?

An employee shall not be required under his contract of service to work 1. more than 5 consecutive hours without a period of leisure of not less than 30 minutes' duration. 2. more than 8 hours in one day. 3. in excess of a spread over a period of 10 hours in one day. 4. more than 48 hours in one week with certain provisos.

FURTHER USEFUL GUIDES

Outlined are some further guides.

" Overtime " means the number of hours of work carried out in excess of the normal hours of work per day. " Normal hours of work " means the number of hours work as agreed between the employer and employee in the contract of service. " Ordinary rate of pay " means wages as defined which an employee is entitled to receive under his contract of service for the normal hours of work but does not include overtime payment on a rest day or a public holiday. " Contractual Bonus " means the amount of bonus fixed by the employer under a contract of service irrespective whether the company makes an annual profit or loss. " Hourly rate of pay " means the ordinary rate of pay divided by the normal hours of work provided in the case of an employee employed at a monthly rate of pay the ordinary rate of pay shall be calculated by the monthly rate of pay divided by 26. A similar formula is available for those employed on a daily rate.

TERMINATION OF CONTRACT OF SERVICE

What is the notice period required?

The employer and the employee to a contract of service may at any time give to the other notice of termination of such contract of service. The length of notice shall be the same for both employer and employee pursuant to the contract of employment. In the absence of the notice the period of notice under the Employment Act as follows: Length of Employment Period of Notice Required A Guide To Malaysian Labour Laws - Part 2 of 2 (As at March 1997) B. Industrial Relations Act 1967 (Act 177) B. INDUSTRIAL RELATIONS ACT 1967 (ACT 177)

This Act governs the relationship between employers and C. Employment (Termination workmen (employees) and their trade unions and generally And Lay-Off Benefits Regulations) 1980 Some Useful Guides D. Employees Provident Fund Act 1951 E. Social Securities Organisation Act 1969 (Socso) F. Workmen's Compensation Act 1952 "Collective agreement" means an agreement in writing concluded between an employer or a trade union of employers on one hand and a trade union of workmen (employees) on the other relating to terms and conditions between the 2 such parties. "Trade disputes" means any dispute between the employer and workman (employee) which is connected with the employment or non-employment or the terms of employment or the conditions of work of such workman. "Workman" means any person including an apprentice employed by an employer under a contract of employment to work for hire or reward and for the purposes of any proceedings in relation to a trade dispute includes any such person who has been dismissed, discharged or retrenched. Unlawful Dismissal "Award" means an award made by the Industrial Court in respect of any trade dispute or matter referred to it or any decision or order made by it under this Act. deal with trade disputes.

Outlined are some useful guides and explanations of some of the definitions under this Act .

What does this entail?

1. An workman whose services has been terminated by the employer feels he has been dismissed without just cause or excuse by his employer, can make representations in writing to the Director General for Industrial Relations within 60 days of the dismissal. 2. Reconciliation proceedings is then held to see if a settlement can be arrived at and if there is not likelihood of a settlement the Minister is informed accordingly. 3. The Minister if he thinks fit would then refer the

representations to the Industrial Court for adjudication and for an award. Functions Of Industrial Court The Industrial Court upon the matter being referred to it by the Minister then goes to consider whether the termination of employment of the workman is unlawful or whether it is justified. Where the Court holds that the termination is unlawful, the Court then makes an "Award" to reinstate the employee to his former position or in lieu awards proper compensation. Domestic Enquiry 1. Where an employer finds misconduct on the part of the employee, the employer firstly gives the employee a letter to "show cause" as to why his services ought not to be terminated paying reference to the allegations or charges preferred against him as regards the misconduct. 2. Where the employer finds that the reasons extended by the employee are not satisfactory, the employer then convinces a "Domestic Enquiry" to arrive a fair decision in compliance with the rules of Natural Justice wherein the employee is given every opportunity of being heard fully to defend himself against the charges made against him. Constructive Dismissal

What does this mean in law?

It is a situation where an employee being dissatisfied with the manner in which he is being treated by the employer e.g. where there is an unilateral change in his terms and conditions of service, the employee tenders his letter of resignation and pleads that he has been constructively dismissed. Trade Unions

Who can become a Trade Union member?

1. Employers shall not impose any condition in a contract of employment seeking to restrain the right of a person to join a trade union or to continue his membership in the trade union.

2. No employer shall refuse to employ any person on the ground that he is or he is not a member of an officer of a trade union. 3. An employer shall not discriminate any person in regard to employment, promotion, any condition of employment or working condition on the ground that he is or he is not a member or office of a trade union. 4. An employer shall not induce a person to refrain from becoming or to cease to be a member or officer of a trade union. The following categories of workmen (employees) are outside the scope of representation of trade unions:a) managerial capacity b) executive capacity c) confidential capacity d) security capacity Collective Agreement A collective agreement between the employer or trade union of employers and trade union of employees is an agreement in writing signed by the parties to the agreement setting out the terms of the agreement.

C. EMPLOYMENT (TERMINATION AND LAY-OFF BENEFITS REGULATIONS) 1980

When does an employer become liable?

An employer shall be liable to pay termination and lay-Off Benefits payment as follows:Length of Number of days wages Completed Service entitlement for each year of employment *1 year but less than 2 years 10

*2 years but less than 5 years 15 *5 years and more 20 *Pro-rata basis for an incomplete year. Calculate to the nearest month. Termination benefits are not payable for the following reasons:1. Where the employee attains the age of retirement as stipulated in the contract of service. 2. Where the employee commits misconduct inconsistent with the fulfilment of the expression or implied condition of his service after due enquiry. 3. Voluntary termination by the employee. 4. If the employee's contract of service is renewed or is reengaged by the same employer under a new contract of service on terms and conditions which are not less favourable and where the renewal or re-engagement takes effect immediately at the ending of his employment under the previous contract. Payment Of Termination Or Lay-Off Benefits 1. Any termination or lay-off benefits payment should be paid by the employer to the employee not later than 7 days after the relevant date. 2. Any employer who fails to comply shall be guilty of an offence. Amount Of Termination And Lay-Off Benefits

What is an employee's entitlement?

An employee is entitled to termination or lay-off benefits payment as follows:Not less than 1. 10 days wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for a period of less than 2 years; or

2. 15 days wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for a period of 2 years or more but less than 5 years; or 3. 20 days wages for every year of employment under a continuous contract of service with the employer if he has been employed by that employer for 5 years or more; and 4. pro-rata as respect of an incomplete year, calculated to the nearest month.

D. EMPLOYEES PROVIDENT FUND ACT 1951 Under the EPF Act 1951 it is compulsory for all employers and employees to contribute towards this Fund. The employer's contribution is 12% and the employee's contribution is 11 % of his monthly wages. Persons exempted from making the compulsory contribution are:1. expatriates. 2. domestic servants. 3. self-employed persons (but can elect to contribute). 4. out-workers (persons who do cleaning, alterations or repair works). 5. persons detained in custody e. g. prisoners. 6. pensioners. Nomination Of Beneficiaries 1. An employee above the age of 18 years can nominate any person or persons to become his or her beneficiary. The nominee or nominees can he changed by notifying the EPF accordingly. 2. EPF contributions can be withdrawn in full if a contributor

leaves the country permanently. 3. A contributor can also withdraw all his or her contributions on medical grounds subject to approval by a medical board. Employees can at any time check his or her balance with the EPF by approaching (in writing) the authorities concerned. Nominations of any person or persons to become a beneficiary can be made by an employee who is 18 years of age or above. Withdrawal of EPF 1. Should a contributor die his nominee can make the claim from the said Fund. 2. Any person who attains the age of 55 can withdraw his contributions (but he can opt to continue payment if he still continues employment). Conditions for Withdrawal of EPF Contributions Certain conditions must be fulfilled for withdrawal of the EPF. Some of the conditions to be satisfied are:1. Applicant must have contributed to the EPF for at least 5 years from the date of membership. 2. Partial withdrawal for purchasing a residential house or a shophouse cum residential unit. For the purpose of withdrawal from the EPF, a member's contribution is divided into 3 categories of his credit amount 1. The 1st category of 60% of his contribution cannot be withdrawn. 2. The 2nd category of 30% can be withdrawn for purposes of purchase of housing units. 3. The 3rd category of 10% can be withdrawn for medical purposes including critical illnesses e. g. cancer, heart problem, etc. The withdrawal for purchase of house is only possible if it is to

reduce the mortgage for the purchase. The withdrawal for the purchase of a house must he within 2 years from the date of signing of the Sale and Purchase Agreement. Further withdrawal is also possible after 5 years of withdrawal of the first loan provided it is for the same house. No withdrawal is possible for the purchase of a second house. Payment To Nominees Nominees of the contributor are entitled to monies upon the contributor's death irrespective of whether there is a Will or not. Nominations made before marriage, are automatically cancelled. Fresh nominations must therefore be made.

E. SOCIAL SECURITIES ORGANISATION ACT 1969 (SOCSO)

Those liable to contribute.

Firms with 1 or more employees whose individual earnings do not exceed RM1,000.00 a month have to register with SOCSO. The provisions of the Act do not cover the following categories of persons: 1. Any person whose wages exceed RM2,000.00 a month but who has never been covered before. 2. Any person whose employment is of a casual nature and not for purposes of the industry. 3. A domestic servant employed to work in a private dwelling house which includes a cook, house servants, gardeners, washer woman, watchman, driver, members of the armed forces, police officers. 4. Employees who have attained the age of 55 only for

purposes of invalidity but if they continue to work they should be covered under the Employment Injuries Scheme. 5. Foreign workers. 6. Government servants. 7. Self-employed. The SOSCO complements the following type of Schemes 1. Employment Injury Insurance Scheme. 2. Invalidity Pension Scheme. Under the above 2 categories, an insured employee who is classified or who has acquired invalidity status is entitled to such benefits and upon his death, his dependants can also benefit out of his Scheme including funeral benefits up to RM1,000.00. Invalidity pensions are also made to insured persons under the relevant provisions. Under the SOCSO Employment Injury Insurance Scheme, the family of a worker who dies will be entitled to a monthly pension or dependants benefits subject to a minimum of RM270.00 and a maximum of RM58.50 per day. A worker who is permanently disabled is entitled to a lump sum payment provided certain conditions are met.

Note : An employee covered by both SOCSO and Workmen's Compensation Scheme can seek compensation from both Funds.

F. WORKMEN'S COMPENSATION ACT 1952

How does the law operate?

There is no coverage of Malaysian workers under the Workmen's Compensation Act from 1 July 1992. Only foreign workers are covered. Employers of foreign

workers pay towards the Scheme.

(Reproduced with the courtesy of the Bar Council.)