Employment Act 1995 (“EA) is the primary legislation in Malaysia that outlines the legal rights and responsibilities of both employers and employees. Malaysia’s EA has undergone several amendments, which have been critically important to the country’s employment landscape. The most recent amendment came in 2022, and its enforcement set in on January 1, 2023.
Who is covered under the EA?
As it stood before the change, EA only concerned individuals whose monthly income was RM2,000 or less. However, recent amendments have expanded coverage to include all private-sector employees, regardless of salary. Those earning more than RM4000 per month are exempt from the following provisions of EA:
- Section 60(3) – Overtime rates for employees working on rest days
- Section 60A (3) – Overtime rates outside working hours
- Section 60C(2A) – Allowance for shift-based work
- Section 60D (3) – Overtime on public holidays
- Section 60D (4) – Overtime for half working days on holidays
- Section 60J – Termination, layoff, retirement benefits
In this article, we will examine some of the most significant changes that have taken place in the EA during the past year.
1. Maternity Leave
In a stunning move, the previous 60-day maternity leave has been increased to 98 days. The break cannot begin sooner than 30 days before or later than the day after the due date.
It should also be mentioned that paid maternity leave is only granted to eligible employees for the first five births. An employer must pay a maternity allowance, the employee’s salary, while on maternity leave if she has worked for the company for at least 90 days in the nine months before giving birth or at any point in four months four giving birth.
The employee is responsible for informing and notifying their employer of the expected confinement period 60 days before the start of maternity leave. Failure to do so, or commencing maternity leave without informing their employer, will result in her losing her right to maternity payment.
2. Protection for pregnant employees
Section 41A of the EA stipulates the restriction on terminating pregnant female employees. Suppose a female employee is pregnant or suffering from a pregnancy-related illness; the employer may not terminate her employment or give her notice of termination of employment except for the following reasons:
- Wilful breach of a condition of the contract of service;
- Misconduct; or
- Closure of the employer’s business.
In the event of termination, the employee will bear the burden of proving any of those, as mentioned earlier.
3. Grant of paternity leave
Paternity leave was not previously mandated by law for Malaysian employers. Hence, paternity leave would be among the most awaited and celebrated developments under the EA. The law is revised by inserting Section 60FA, which provides married male employees with seven consecutive days of paternity leave for the first five births, regardless of the number of marriages or spouses.
To qualify for this leave, the employee must be married to the qualifying mother and employed by the same company for at least a year. Also, he must notify his company at least thirty days in advance.
4. Decrease in Maximum Working Hours
According to the result of the discussion made during the International Labour Organization’s Convention, which seeks to preserve workers’ rights and allows greater discretion in working arrangements, the maximum number of hours an employee can be required to work each week has been reduced by 48 to 45 hours.
A person cannot be compelled to work more than 45 hours weekly or on their days off except in one of six specified instances in the Act. They consist of, among others:
- An actual or threatened accident at work;
- Work or the performance of which is essential to the life of the community;
- Work essentially for the defence or security of Malaysia;
- Urgent work to be done to the machinery of a plant;
- An interruption of work which was impossible to foresee; or
- Work to be performed by employees in any industrial undertaking essential to the economy of Malaysia or any crucial services as defined under the Industrial Relations Act
5. Flexible Working Arrangement under Section 60P
Employees can apply for a flexible working arrangement (“FWA”) under Section 60P to request a change in their regular work schedule, including but not limited to their scheduled work hours, workdays, or work location. Each qualified employee may apply for FWA by submitting a written application to their employer following the procedures outlined in Section 60Q. The employer must approve or reject the FWA application within 60 days, and the applicant must be notified in writing of the decision.
If an application is denied or rejected, the company must present reasonable justifications for such rejection. The purpose of enacting Section 60P is to provide employees more leeway in determining when and where they get their jobs done, whether that means being able to work from home in case of an emergency or sticking to more traditional business hours.
This change is part of an effort to cut working hours and restore Malaysia’s image as one of the countries with the longest work weeks and home to the world’s fourth most overworked city. Many employees now prefer the flexibility of FWA owing to family arrangements, as well as to minimise the daily commute to work and for a variety of other personal reasons, as a result of the pandemic’s impact on the workforce worldwide.
6. Awareness of Sexual Harassment
Section 81H of EA states the following;
“An employer shall, at all times, exhibit conspicuously at the place of employment a notice to raise awareness on sexual harassment.”
If an employer receives a complaint of sexual harassment, they must investigate the EA or face an RM50,000 fine in stark contrast to the previous amount of RM10,000. On top of the amendment made in EA, in line with the movement to eradicate the rising number of sexual harassment complaints at the workplace, the Malaysian Parliament passed the Anti-Sexual Harassment Bill in July 2022, which aims to provide a right of redress to those who have been sexually assaulted at work.
The Bill safeguards both men and women from sexual harassment, which includes any unwanted action of sexual nature that is reasonably offensive, humiliating or threatening. One of Bill’s main draws is its proposal to establish a tribunal dedicated to hearing and resolving sexual harassment allegations, which advocates say will allow victims to receive relief and justice more quickly than in regular civil court.
7. Discrimination at the Workplace
Section 60L of the Act, which gave the Director General authority to investigate discrimination complaints, has been repealed and replaced with Section 60F, which provides the Director with General authority to investigate and resolve any dispute between an employer and an employee involving discrimination in the workplace.
Violating any order issued by the Director General is now a crime under the amended EA. If an employer is found guilty, they might be subject to a maximum fine of RM50,000 and, if the offence persists after conviction, a daily penalty of RM1,000.
8. Calculation of Wages for Incomplete Month’s Work
The amended EA introduces new Section 18A with the formula for the calculation of wages where an employee has not completed a whole month of service under any of these conditions;
- Employee who joins the company after the 1st day of the month
- Employee who is terminated before the end of the month
- Employee who took “leave of absence without pay” for one or more days of the month
- Employee who took leave of absence due to national service
9. Employment of Foreign Workers
According to Section 60K of the revised EA, to hire foreign workers, employees must receive prior clearance from the Director General. Subject to any written legislation, subsection 4 of the said provision states that the Director General may approve an application under this section provided the employer meets the following conditions:
- Employer satisfies the Director General that on the date of the application, they have no outstanding matter relating to any decision, order or directive issued under the Act, and they have no exceptional matter or case related to any conviction for any offence under these following Acts:
- Employment Act
- Employee’s Social Security Act 1969
- Employee’s Minimum Standards of Housing Accommodations and Amenities Act 1990
- National Wages Consultative Council Act 2011
- Employer has not been convicted of any offence under any written law concerning anti-trafficking in persons and forced labour.
Additionally, under Section 60KA, if the service of a foreign employee is terminated, the employer must notify the Director General within 30 days after the termination took place if the termination is due to any of the following:
- Termination made by the employer
- Termination by reason of the expiry of the employment pass issued by the Immigration Department of Malaysia to the foreign employee; or
- Termination by reason of repatriation or deportation of foreign employee
The modified Employment Act now protects a considerably broader category of employees in Malaysia, regardless of their salary or occupation. Employers are also encouraged to take the actions necessary to comply with the updated law and to remain vigilant while evaluating and amending the terms of employment contracts. The revision was made to establish a more compassionate working environment to protect Malaysian employees; therefore, employers must take note of and adopt these changes to maintain legal compliance.