In Malaysia, employers can retire their employees after the employees reach the minimum retirement age set by the law. This article will explore the law on the retirement age of Malaysian private-sector workers. Here are six fundamental points to know about the minimum retirement age in Malaysia.
1. The Minimum Retirement Age Act 2012
The minimum retirement age in Malaysia is governed and regulated under the Minimum Retirement Age Act 2012, which first came into force on 1st July 2013 and was last amended in 2016. The act applies to full-time employees in the private working sector as opposed to those working in the public sector.
2. The Act does not apply to all employees
The Act does not apply to all working Malaysians. According to the Schedule contained in Section 2 of the Act, there are nine categories of employees who are excluded from the Act;
- a person who is employed on a permanent, temporary, or contractual basis and is paid emoluments by the Federal Government, Government of any state, any statutory body or any local authorities;
- an apprentice who is employed under an apprenticeship contract;
- a person who works on a probationary term.
- a foreign employee (non-Malaysian);
- a domestic servant;
- a person who is employed in any employment with average hours of work not exceeding 70% of the regular hours of work of a full-time employee (e.g., part-timers)
- a student who is employed under any contract for a temporary term of employment but does not include an employee on study leave and an employee who studies on a part-time basis;
- a person who is employed on a fixed-term contract of not more than 2 years;
- a person who is employed on a fixed-term contract of service of more than 2 years but not more than 5 years with basic wages of RM20,000 and above; and
- a person who, before the date of the act came into force (1st July 2013), has retired at the age of 55 years or above and subsequently is re-employed after his retirement.
3. Minimum retirement age
According to Section 4(1) of the Act, the minimum retirement age in Malaysia is set at 60 for those working in the private sector. Before the implementation of the act, the minimum retirement age in Malaysia was at the age of 55. The Act prohibits premature retirement through provision Section 5(1) states that no employer shall retire their employee before they reach the age of 60. Under the law, before an employee reach their 60th birthday, their employer cannot request them to retire early. Section 5(2) of the Act expressly states that the violation of Section 5(1) is considered an offence, and any employer who commits such is subject to a fine of not more than RM10,000 if found guilty.
4. What happens if an employee is forced into a premature retirement?
If an employee has been prematurely retired by the employer, Section 8 provides the following options to the employee:
- They may make a complaint in writing to the Director General of Labour within 60 days from the date of the retirement: OR
- They may file a representation for unfair dismissal under Section 20 of the Industrial Relations Act 1967
However, it is essential to highlight that if an employee has filed a complaint to the Director General, they must only file the application for unfair dismissal once their former complaint to the Director General has been resolved. If found that the application for unfair dismissal has been made, the Director General will not conduct any inquiry on the complaints made due to redundancy of the application.
If the Director General is satisfied that the employee has been made prematurely retired by their employer, the Director, under the power given to them under Section 8 (5) (b) of the Act, shall order the following to the employer:
- To reinstate the employee to their employment and to pay any arrears of their wages calculated from the date the employee has been prematurely retired to the date of the reinstatement: OR
- Payment of compensation instead of reinstatement, not exceeding the amount of total wages of the employee calculated from the date the employee has been prematurely retired to the date the employee attains the minimum retirement age
5. What if the Director General dismiss the complaint made under Section 8?
Suppose the Director General, upon his inquiry, has dismissed the complaint of premature retirement made by the employee; the dissatisfied employee may then file an appeal to the High Court within 30 days of the communication of the dismissal or resort to the application of unfair dismissal at the Industrial Court.
6. Optional Retirement
If the employee has signed a contract of service or a collective agreement with a specific clause mentioning the age of optional retirement, the employee may voluntarily retire upon reaching the age stated in such a particular clause. Therefore, with mutual agreement between the employer and employee, an employer may retire an employee upon reaching any age below 60. However, if the contract of service is silent on the age of optional retirement, an employee is entitled to work until the average retirement age for employees in their field.
There have been a few debates urging for the revision of the retirement age including the suggestions to raise the minimum retirement age to be beyond 60 due to the current economy and high cost of living. However, until 2022, the government is not keen to increase the statutory retirement age as the previous increment of the retirement age from 55 to 60 before the coming of this Act has led to a loss of approximately a million job opportunities for millennials. However, the 60 years old retirement provides in the act is only the minimum age. There is no penalty for allowing employees who have reached the age of 60 and above to continue working for as long as they intend to. The age the employee should retire should be based on mutual agreement between the employees and their employer and must factor in their work performance, health condition and productivity.