SH Tan Consulting Group
English | 中文

Employment laws and regulations

1. Common laws on employment

1.1. An employment contract can be oral or in writing

1.2. An employment contract cannot be enforced if it is illegal in its performance

1.3. Clauses containing restraint of trade is void unless:

    • There is sale of goodwill; or
    • There is agreement between both parties prior to dissolution

1.4. In the absence of written contract, it would be deemed that the employee has entered into the same terms as other employees

1.5. The employer has the duty to indemnify employee against all liabilities and expenses in proper performance of his duties.

1.6. Orders given by employers, if within the scope of employment contract, must be obeyed.

1.7.   An employee must act in good faith.

2. Employment Act, 1955

2.1.   Scope

The Act covers the following:

    • Employees whose monthly wages is less than RM1,500 (excluding overtime, commission or allowances)
    • Employees engaged in manual labor, skilled or unskilled (irrespective of amount of monthly wages)
    • Employees engaged in operation/maintenance of motorized vehicles
    • Employees continuously supervise other employees in manual work
    • Engaged as domestic servant.

2.2.   Termination notice

An employer or an employee may terminate a contract of service by giving a notice period as stipulated in the employment contract or in cases it was not mentioned, at the following notice period:

Notice period Length of employment
4 weeks < 2 years
6 weeks between 2 to 5 years
8 weeks > 5 years

Either party may waive his right to notice of termination.

2.3.   Wages

2.3.1. Wages means basic wages and all other cash payment excluding food, lodging, traveling allowance, bonus, etc

2.3.2. Wage period cannot exceed 1 month

2.3.3. Wages must be paid not less than the 7th day after the last day of wage period

2.3.4. Where employer terminate contract without notice, wages must be paid on the date of termination

2.3.5. Where employee terminate contract without notice, employer has to pay not later than the 3rd day after termination

2.3.6. Employer is not required to pay wages for the time the employee is in police custody or in prison

2.3.7. The employer can make the following deduction without permission from employee:

EPF, Socso, Pcb

Recovery of overpayment made by mistake in preceding 3 months

Payment of indemnity due to employer

Recovery of advance given where no interest is levied

2.3.8. Ordinary rate of pay wages entitled under normal hours of work for 1 day but does not include overtime on rest day or public holiday

2.3.9. Hourly rate of pay OPR divided by normal hours of work

2.3.10. For monthly rated employee  , ORP = monthly pay / 26

2.3.11. For weekly rated employee, ORP = weekly pay / 6

2.3.12. Employer can use other method of calculation but the rate must m\not be lower than above.

2.3.13. On commencement or cessation, salary is apportioned as follows:

Mthly salary x no of days employed in the month/no of days in month

2.4.   Normal working hours

An employee shall not be required to work:

    • More than 5 consecutive hours without at least 30 minutes break
    • More than 8 hours a day
    • More than in excess of a spread over period of 10 hours in one day
    • More than 48 hours per week

2.5.   Overtime

2.5.1. Limit of overtime shall be 104 hours in any one month

2.5.2. No employee shall work more than 12 hours a day unless due to special circumstances

2.5.3. Overtime is paid 1.5 times the hourly rate

2.6.   Holidays

2.6.1. Every employee is entitle for 10 paid public holidays at ORP, four of which shall be :

    • National day
    • Agong birth day
    • Birthday of Sultan or Governor
    • Labour day

2.6.2. Overtime on public holiday shall be paid in addition to the holiday pay, 2 days wages at ORP even work less than normal hours

2.6.3. When overtime exceed normal hours, at 3 times the hourly rate.

2.7.   Rest day

2.7.1. Every employee must have 1 whole day off in a week as determined by the employer

2.7.2. For those on shift work, a rest day is a continuous period of not less than 30 hours

2.7.3. For those monthly rated employees, working for not more than then half of the normal hours shall be paid half the normal rate; if working for more than the normal hours, shall be paid a full day ordinary rate.

2.7.4. When overtime exceed normal hours, at 2 times the hourly rate.

2.8.   Annual leave

An employee is entitled to paid annual leave for every 12 months of continuous service with the same employer of:

Annual leave Length of service
8 days < 2 years
12 days Between 2 to 5 years
16 days > 5 years

2.9.   Maternity leave

2.9.1. A female employee who gives birth after at least 28 weeks of pregnancy is entitled to maternity leave for a period of not less than 60 days provided she met the following 2 conditions:

    • During the last 4 months preceding her confinement, she has been in employment with her employer for at least 1 day; and
    • During the 9 months preceding her confinement, she has been in employment with the same employer for an aggregate of not less than 90 days.

2.9.2. During the maternity leave, she will be entitled to receive a maternity allowance at her ORP for each day or RM6, whichever is higher.

2.9.3. A monthly rated employee is deemed to have been paid her maternity allowance if she receives her normal salary during her absence from work.

2.9.4. A female employee who has 5 or more surviving children at the time of confinement is not entitled for maternity allowance. She is still entitled for maternity leave.

2.9.5. Maternity leave shall commence anytime but not earlier than 30 days from the date of confinement and not later than the day immediately following the confinement. However, upon doctor advice, the employee may only commence leave 14 days preceding her confinement.

2.9.6. A female employee cannot be dismissed during the maternity leave period.

2.10. Sick leave

2.10.1. An employer must pay for the medical fees of the employee except for fees to dentist.

2.10.2. An employee shall be entitled for paid sick leave in a calendar year:

Sick leave Years of employment
14 days < 2 years
18 days Between 2 to 5 years
22 days > 5 years

2.10.3. When hospitalization is necessary, the total number of sick leave shall be 60 days in aggregate in a calendar year.

2.10.4. An employee must inform employer of the sick leave within 48 hours of the commencement of the sick leave. Otherwise, he shall be taken as absent from work without permission and without reasonable excuse.

2.11. Misconduct and inquiry

2.11.1. When an employee commits a misconduct, employer must hold an inquiry to see whether he is guilty of an offence.

2.11.2. The employee must be given particular of misconduct and reasonable time to prepare his case.

2.11.3. The inquiry should be conducted by officers not connected with the investigation of the misconduct.

2.11.4. The employee should be allowed to examine and cross examine witnesses.

2.11.5. Notes of the inquiry, in the form of question and answers, and also findings should be recorded.

2.11.6. Employer may suspend the employee for period not exceeding 2 weeks and given at least half pay.

2.11.7. If misconduct is proven, the employer may:

Dismiss without notice

Downgrade the staff; or

Impose any other lesser punishment.

2.11.8.  If misconduct is not proven, the employer must reinstate him and any wages withheld from him must be paid in full.

2.11.9. Employee who is unhappy with the employer decision can appeal to Director of Labor within 60 days.

2.12. Employment Regulations, 1957

2.12.1. Every employer is required to keep a register containing particulars regarding each employee.

2.12.2. Employees shall have the right of access to examine the register for not more than 2 times during each wage period.

An employer is required to furnish every employee particulars relating to details of wages and other allowances earned during each wage period.

© 2010 SH Tan Consulting Group