Employment regulations serve to benefit both employers and employees by setting a framework for maintaining a fair and safe working relationship between a hiring and hired party. They are not only a basis for rectifying mistreatment and exploitation of employees, but also a rule book, on top of other business regulatory obligations, to help employers remain compliant and not fall afoul of the law. Entrepreneurs who will open company in Malaysia inadvertently also become employers in some capacity. Therefore, after they register a company Malaysia and before they recruit the employees they need, new business owners should familiarise themselves with at least the basic provisions of employment regulations in Malaysia. Detailed information covering items such as employment contracts, remuneration or salary, workplace safety, procedures for negotiations, labour disputes, working hours, protection from discrimination, compensation or wage regulations, training, social insurance, and other legal responsibilities can be gradually followed up.
The main statutes and regulations pertaining to employment in Malaysia are:
Employment Act 1955: sets out the minimum benefits that are afforded to applicable employees, and it only applies to:
- Employees whose monthly salary does not exceed RM2,000
- Employees who are engaged in manual labour, regardless of salary
- Employees engaged in the operation or maintenance of mechanically propelled vehicle
- Employees who supervise or oversees other employees engaged in manual labour
- Employees engaged in any capacity on a vessel (subject to certain other conditions)
Industrial Relations Act 1967: governs the relations between employers and employees (including trade unions) and the prevention and settlement of disputes.
Trade Unions Act 1959: regulates the registration and constitution of trade unions and the rights and liabilities of trade unions.
Employees Provident Fund Act 1991: makes it mandatory for all employers and most employees to contribute to a state-managed provident fund. Contributions by foreign nationals employed in Malaysia and domestic servants are voluntary.
Employees’ Social Security Act 1969: provides social security for all employees in the event of contingencies, such as employment injuries. The Act makes it mandatory for employers and employees to contribute to the fund at the rate prescribed by the Act.
Employment Insurance System Act 2017: provides certain benefits and a re-employment placement programme for insured persons in the event of the loss of employment, and makes it mandatory for employers and employees to contribute to the fund at the prescribed rate.
Occupational Safety and Health Act 1994: imposes general duties on employers to secure the safety, health and welfare of persons at work.
Minimum Wages Order 2020: provides different minimum wage rates payable to an employee depending on the employee’s place of employment. The minimum wage rate payable to an employee who works in a place of employment in any of the 16 city council areas or the 40 municipal council areas specified in the Schedule to the Order is 1,200 ringgit per month or 5.77 ringgit per hour.
Minimum Retirement Age Act 2012: sets the minimum (not mandatory) retirement age at 60 years old. An employer may not retire an employee before he or she attains this age.
Personal Data Protection Act 2010: regulates the processing of personal data and sensitive personal data, including employee data.
Register a Company Malaysia
Malaysian employees are entitled to most the following basic benefits (as stipulated in the the Employment Act 1955) from the first day of employment:
- not more than 5 consecutive hours without a period of leisure of not less than 30 minutes duration
- not more than 8 hours in 1 day
- not more than 48 hours in 1 week
Public Holidays: 11 paid gazetted public holidays
- 8 days for every 12 months of continuous service for a period of less than 2 years
- 12 days for every 12 months of continuous service for a period of 2 years or more but less than 5 years
- 16 days for every 12 months of continuous service for a period of five years or more
Paid Sick Leave:
- where no hospitalisation is necessary
- 14 days if the employee has been employed for less than 2 years
- 18 days if the employee has been employed for 2 years or more but less than 5 years
- 22 days if the employee has been employed for 5 years or more
- 60 if hospitalisation is necessary, as may be certified by such registered medical practitioner or medical officer
Retirement: Employees Provident Fund (EPF) in excess of the statutory EPF contribution is:
• 2% for more than 1 year of service and below 4 years of service
• 3.5% for more than 4 years of service.
• Generalist Outpatient – An employee, one legal spouse and their dependent children are eligible to receive medical attention and treatment from company panel doctors. If employee chooses to obtain necessary care and treatment from a non-panel doctor, pay first and claim in accordance with the Health Plan Policy.
• Specialist Consultation – For Specialist Consultation, a referral letter from company panel doctor or In-Plant visiting doctor to a specialist is required. The Company will cover the Specialist Consultation in accordance with the Health Plan Policy.
• Dental / Optical Subsidy – Employees are entitle for the dental/optical care and treatment in accordance with the Health Plan Policy.
• Maternity benefit – Employees/spouse are entitled for Maternity (pre/post-natal visits and delivery cost) in accordance with the Health Plan Policy.
• Hospitalization & Surgical benefit – Employees, one legal spouse and their dependent children are eligible for Hospitalization & Surgical benefits in accordance with the Health Plan Policy.
• Total & Permanent disability: 36 x monthly basic salary.
• Death & Loss of body part due to accident: 36 x monthly basic salary.
• Sick Leave: 14 days per year for the first 2 years of service.
• Maternity Leave: 60 consecutive days for birth up to 5 surviving child.
• Paternity Leave: Male employees are eligible to 2 working days leave for the birth of their own child up to 5 surviving child.
• Marriage Leave: 5 days leave for first legal marriage per employment.
• Compassionate Leave: 3 consecutive working days on the death of their immediate family member.
• Child marriage Leave: 1 day marriage of legal child.
Employee Stock Purchase Plan: Employees are eligible to participate in the Stock Purchase Plan after 90 days of employment.
• Vehicle Purchase Interest Subsidy – The Company shall subsidize employees seventy percent (70%) of the interest incurred per annum. The minimum repayment period for each loan shall be 12 months and the maximum repayment period shall be 60 months.
• Gift for Retirees – Employee will receive appreciation retirement gift from the Company when attaining the age of 60 or optional retirement age of 55 or 56 or 57 or 58 or 59.
• Child Birth Gift – The Company will provide maternity hamper for female employees and registered spouse who are hospitalized.
• Birthday Gift – All employees will receive greeting card & birthday gift from the Company.
• Professional Membership – IDL employee is entitled to reimburse 100% of one professional membership per year according to his/her profession/job needs.