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Employment conditions
The terms of an individual’s employment are governed by their employment contract (which may include terms implied through dealings between the employer and the employee, terms incorporated from other documents such as employee manuals and collected agreements), statutes and statutory instruments.
For an employee whose monthly salary does not exceed Rm1,500 or an employee engaging in work such as manual labor or domestic servant irrespective of his wage, the minimum protection given by the Employment Act 1955 (revised 1981) will apply to the employment contract.
Under the Employment Act:
  • the contract of employment must be in writing and state the notice period required to terminate it
  • wages must be paid by the seventh day after the last day of any wage period. A pay slip must be given to the employee, detailing the wages and deductions made
  • normal hours of work must not exceed eight hours per day, 48 hours per week, more than five consecutive hours a period of leisure of not less than 30 minutes’ duration and in excess of a spread over period of 10 hours in one day
  • employees are entitled to paid holidays on at least 10 gazette public holidays in any one calendar year and on any day declared as a public holiday under section 8 of the Holiday Act 1951
  • employees must be given eight days’ paid annual leave if having less than two years of service, 12 days’ paid annual leave if having two years but less than five years of service, and 16 days’ paid annual leave if having five or more years of service
  • employees are entitled to 14 days’ paid sick leave if having less than two years of service, 18 days’ paid sick leave if having two but less than five years of service and 22 days’ paid sick leave if having over five years of service per calendar year, and where hospitalization is necessary, up to a maximum of 60 days’ paid sick leave per calendar year
  • female employees are entitled to not less than 60 days’ consecutive paid maternity leave for up to five surviving children
  • overtime work must be paid at a minimum of one and a half times the hourly rate of pay on normal working days, twice the hourly rate on rest days and triple the hourly rate on public holidays
  • an employer may not terminate the services of a local employee in favor of a foreign employee and, if retrenchment is necessary, to first terminate the services of all foreign employees before the locals.
Employees’ Provident Fund
The Employees’ Provident Fund Act 1991 requires all employers and employees to pay monthly contributions to the Employees’ Provident Fund at minimum rates of 12 percent and 11 percent of an employee’s monthly wages respectively. Both employers and employees are encouraged to contribute at a rate higher than this mandatory contribution.
All foreign workers and expatriates and their employers are exempted from compulsory contributions. They can, however, choose to contribute at the rate of Rm5 per employee per month by the employer and 11 percent of the monthly wages by the employee. Employment injury insurance scheme and invalidity pension scheme These schemes are administered by the Social Security Organization under the Employees’ Social Security Act 1969. The schemes cover only Malaysian workers and permanent residents. All employers of workers earning wages not exceeding RM3,000 per month must insure their workers under the schemes.
The Employment Injury Insurance Scheme provides employees with coverage of cash benefits and medical care for any disablement or death due to employment injury.
The Invalidity Pension Scheme provides 24-hour coverage to employees against invalidity and death due to any cause not connected with their employment before the age of 55. The principal employer must make a monthly contribution for each eligible employee according to the rates specified under the Act. The employee’s share of 0.5 percent of wages should be paid for coverage under the Invalidity Pension Scheme while the employer pays 1.75 percent for the Employment Injury Insurance Scheme and the Invalidity Pension Scheme. Contributions should be made from the first month the employee is employed.

Workmen’s compensation
Under the Workmen’s Compensation Act 1952, an employer must pay compensation for expenses incurred in the treatment and rehabilitation of a workman for personal injuries caused by employment-related accidents.
Generally, a “workman” under the Workmen’s Compensation Act refers to private sector employees who earn less than RM500 a month and all manual workers irrespective of their wages. The Act fixes the amounts of compensation under different circumstances to the workman or, if death resulted from the injury, to the dependants.
Malaysians and permanent residents who are covered by the schemes administered by the Social Security Organization are not covered by the Workmen’s Compensation Act. This Act applies to all foreign workers whether the compensation relates to employment or non-employment injury.

Employees’ safety and health
The Factories and Machinery Act 1967 requires occupiers of factories to provide certain minimum standards (for example, the factory buildings are structurally sound, proper storage of goods and dangerous substances, fire protection, cleanliness, ventilation) of safety and welfare for employees working within the factories. The occupiers must report in writing to the inspector appointed under the Act of any accidents involving death or serious injury or serious damage to properties.
The Occupational Safety and Health Act 1994 requires an employer to ensure the health and safety of its employees by properly maintaining safe plant and systems in areas of storage, transport, etc. of substances, and by providing adequate training, supervision etc. to employees. An employer must inform the nearest occupational safety and health office of any accident, dangerous occurrence, occupational poisoning or disease which has occurred or is likely to occur. The Act also requires an employer to ensure its employee’s activities do not affect the health of non-employees.

Industrial relations
Trade unions are regulated by the Trade Unions Act 1959 and the Trade Unions Regulations 1959, which require:
  • membership of a trade union be confined to employees within any particular establishment, trade, occupation or industry
  • registration of all trade unions
  • a trade union to obtain prior consent by secret ballot of at least two-thirds of total members before organizing a strike
  • all unions to be inspected regularly to ensure compliance with the laws.
Relations between employers and workmen and their trade unions, including the prevention and settlement of trade disputes, are regulated by the Industrial Relations Act 1967, which covers:
  • the protection of the legitimate rights of employers, workmen and their trade unions
  • the procedure for submission of claims for recognition and the scope of representation of trade unions and collective bargaining
  • matters not allowed to be included in the proposals for collective bargaining, such as those relating to promotion, transfer, recruitment, retrenchment, dismissal, reinstatement, allocation of duties, and prohibition of strikes and lockouts over any of these issues
  • the prohibition of strikes and lockouts once a trade dispute has been referred to the Industrial Court and on any matter covered by a collective agreement or by an award of the Industrial Court
  • the protection of pioneer industries during the initial years of their establishment against any unreasonable demands from a trade union.

Collective agreements cannot contain more favorable terms of employment than those stipulated under the Employment Act 1955 unless approved by the Minister of Human Resources.
The Industrial Relations Act emphasizes direct negotiation between employers, workmen and their trade unions to settle any differences. Where this fails, the Act provides for speedy and just settlement of trade disputes by conciliation or arbitration. The Minister of Human Resources may intervene and, at any time, refer a trade dispute to the Industrial Court for arbitration.

Employment of expatriates
Where there is a shortage of trained Malaysians, foreign companies are allowed to bring in expatriate personnel. Qualified foreign companies are also allowed to apply “key posts” for its expatriate personnel, that is, posts that are permanently filled by expatriates.
Effective from 17 June 2003, the new guidelines on the employment of expatriates are as follows:
  • for manufacturing companies with foreign paid-up capital of uS$2 million and above, automatic approval is given for up to 10 expatriate posts, including five key posts. Expatriates may be employed for up to a maximum of ten years for executive posts and five years for non-executive posts
  • for manufacturing companies with foreign paid-up capital of more than uS$200,000 but less than uS$2 million, automatic approval is given for up to five expatriate posts, including at least one key post. Expatriates may be employed for up to a maximum of ten years for executive posts and five years for non-executive posts
  • for manufacturing companies with foreign paid-up capital of less than uS$200,000, applications may be considered on a case-by-case basis for both key posts and time posts. Applications for key posts may be considered where the foreign paid-up capital is at least RM500,000. Time posts can be considered for up to ten years for executive posts that require professional qualifications and practical experience and five years for non-executive posts that require technical skills and experience. Malaysians must be trained to eventually take over these time posts.
Employment passes for key post holders are generally issued on a five-year renewable basis. All employment passes for non-key post holders are valid for the period approved for the post. Employment pass holders will be issued with multiple entry visas valid for the duration of the relevant employment passes.