Amendments to Malaysia's Employment Act 1955

From 1 Sep, the term "employee" will be amended to apply across the board; FWAs would be introduced to the Act, and more. Priya Sunil curates insights from industry experts for the benefit of employers and HR leaders in the nation.

Update: On 26 August, HR Minister Datuk Seri M Saravanan announced that the enforcement of the amended Act would be postponed to 1 January 2023. Full updates in our latest coverage. 


Malaysia's Employment (Amendment) Act 2022, which amends the Employment Act 1955 ('the Act', or EA1955), is set to take effect on 1 September 2022 (Thursday). In that vein, the Employment (Amendment of First Schedule) Order 2022 ('the Order'), which was gazetted on 15 August 2022, will come into operation effective the same date. 

As previously reported on HRO, among the series of amendments that will take place are the introduction of flexible work arrangements (FWAs) in the Act; the extension of maternity leave and paternity leave, the reduction of maximum weekly hours of work, and approvals on the hiring of foreign workers

Ahead of 1 September, HRO takes a look at the amendments for employers and HR leaders to familiarise with, in this special curation of insights by legal experts in the industry.

Read the excerpts below and do be sure to click on the source link for further details!

What "Employee" means under the Act from 1 Sep, and what it entails

A key thing to note in the Order is the revision and redefinition of who the term "Employee" refers to, and to whom the Act is applicable. 

Pre-amendment, the Act was only applicable to two categories of employees, as Amardeep Singh Toor, Partner, Industrial Relations & Employment, Lee Hishammuddin Allen & Gledhill clarifies:

  1. regardless of occupation, employees not earning more than RM2,000 a month, and
  2. regardless of wages, employees carrying on certain occupations such as manual workers, supervisors of manual workers, and employees operating mechanically propelled vehicles.  

Post-amendment, the Act will apply to any person who has entered into a contract of service/employment contract. However, certain provisions would only apply to a select group of employees earning RM4,000 and below: payment for work done on rest days and public holidays, overtime payments and termination, layoff benefits, and more.

The threshold has, therefore, been raised from RM2,000 to RM4,000.

To this, Amardeep notes: "With the expansion to coverage provided under the Act, the Act shall now apply across the board to all employees, irrespective of wages or occupation. This would include provisions such as annual leave, sick leave, lawful deductions, wage period, time of payment of wages, system of payment of wages, etc."

He adds that with the increase of the threshold, a wider range of employees will be statutorily entitled to overtime payments and payments for work done on rest days and public holidays. 

"As such, employers should review their current terms and conditions of employment captured in the employment contracts, employee handbook and policies to ensure due compliance," he advises.

 

On the same topic, Mohammad Adzam Khodzin, Senior Specialist, Industrial Relations & Human Resources, ADAMAS Integrated Venture shares examples of what the definition entails in relation to the Act entitlements:

  • An "Employee" could be:
    • A CEO who has signed a Fixed Term Contract and joined the company in July 2022. If her wages per month is RM90,000, she is entitled to 98 days of maternity leave, but not overtime claims (Paragraph 1 First Schedule EA1955).
    • A clerk who has been working with the company for 15 years. If her wages per month is RM4,200, she is entitled to 98 days of maternity leave, but not overtime claims, just like the CEO (Paragraph 1 First Schedule EA1955).
    • A mechanic working on the company's fleet, for being engaged in maintenance of mechanically propelled vehicles, with monthly wages of RM5,000, is an employee and entitled to 98 days of maternity leave and also overtime claims, unlike the Clerk (Paragraph 2 First Schedule EA1955).

Adzam further notes that the above is, so far, only applicable to "Employees" in Peninsular Malaysia. So if a company that operates in the Peninsular also has operations in Sabah and/or Sarawak, they will still need to adhere to the Sabah Labour Ordinance 1950 and/or Sarawak Labour Ordinance 1952.

Look into an SOP or policy around FWAs (if you don't already have one in place)

Per the Act amendments, effective 1 September, employees in Malaysia who would like to have FWAs can apply for it with their respective employers. All FWA applications must be made in writing, and can cover changes in working hours, working days, as well as the place of work.

Employers would then have to respond to the employee's request, in writing, within 60 days, and in the event of any rejections, must state the reasons why.

With the above in mind, Adzam points out that employers should already have a relevant policy, standard operating procedure (SOP), or terms & conditions set on FWAs; and if they don't, have less than two weeks to do so.

"Bear in mind that since now everybody in the company with a contract of service is an "employee" under the Employment Act 1955, declining to approve the FWA request gives employees the right to challenge it. It may reach the Court.

"Unless employers are confident enough that they can afford to spend (a lot of) money on litigation merely for the cost of declining an FWA request, I'd say please come up with the necessary policy/SOP," he advises. 

On that note, HR leader Farid Basir reaffirms the benefits of having a relevant FWA policy in place:

  • it provides clarity on the employer’s position with regards to FWA;
  • it ensures an efficient FWA application process;
  • it streamlines the type of FWAs that employees will apply for;
  • it sets out the employer’s expectations of any employees who are considering FWAs;
  • it communicates the repercussions of FWAs, such as a revision to their compensation and benefits, and
  • it justifies any rejections of FWA applications that fall outside the parameters and conditions in the policy.

It is important to also be clear that an FWA should not be treated as a benefit - "although employers are free to do so if they wish, it may defeat the very purpose of the provision," Adzam further shares. 

Employers and HR leaders looking to design an FWA application form for your workforce may refer to a sample provided by the Malaysia HR Forum, as shared by its Co-Founder Arulkumar Singaraveloo.


Looking ahead 

Apart from the above, the following amendments will take place effective 1 September, as summarised by the team at Harold & Lam Partnership:

  • Minimum number of paid sick leave
    • Pre-amendment: In the event of hospitalisation, an employee is entitled to 60 days of paid leave, minus any sick leave taken.
    • Post-amendment: n the event of hospitalisation, an employee is entitled to 60 days of paid leave, irrespective of any sick leave taken. [Section 60F, EA 1955]
  • Protection for pregnant employees
    • Pre-amendment: Pregnant employees can only be terminated:
      1. Prior to 90 days post maternity leave, due to illness arising out of her pregnancy which renders her unfit to work; and
      2. Due to closure of the employer's business. 
    • Pre-amendment: Pregnant employees can only be terminated in the event there is a breach of employment contract, misconduct, and/or closure of employer's business.

More updates here

The teams highlights that the Act amendments will provide better protection to combat sexual harassment at the workplace. 

"Further, tighter regulations would come into effect in so far as the hiring of foreign employees are concerned and errant employers could face stiffer penalties.


Image / Shutterstock

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