In Colloboration with

6518YPCBSC
STRATEGIC HRM
Lecture 11:
Guide to Employment
Law in Malaysia
Contents:
1. Legal Framework: The Cornerstone of Employment Relations
2. Employment Contracts: The Framework of Workplace Relationships
3. Balancing Rights and Obligations in the Workplace
4. Wages and Benefits: Beyond Monetary Compensation
5. Upholding Equality and Non-Discrimination in the Workplace
6. Ensuring Occupational Health and Safety
7. Termination and Redundancy: A Delicate Process
8. Dispute Resolution: Safeguarding Employment Rights
9. Expatriate Employment in Malaysia: Navigating the Legalities
Introduction:
• In today’s global business
environment, understanding the
intricacies of local employment
laws is crucial for business leaders
and owners.
• In Malaysia, like any dynamic and
rapidly growing economy, the legal
landscape governing employment
relationships is multifaceted and
requires intimate understanding
for businesses employing staff.
Legal Framework of Employment Law in Malaysia: The
Cornerstone of Employment Relations
Employment Act 1955 and Industrial Relations Act 1967
• The foundation of employment law in Malaysia was established by the Employment
Act 1955 and the Industrial Relations Act 1967.
• The Employment Act primarily addresses the minimum terms and conditions of employment for
a certain category of worker.
• It includes provisions for working hours, overtime, leave entitlements, public holidays,
termination, and maternity benefits.
• Meanwhile, the Industrial Relations Act governs the resolution of employment disputes and the
regulation of trade unions.
• This Act plays a pivotal role in maintaining harmonious industrial relations, providing
mechanisms for conciliation and arbitration of labour disputes.
Employment Act 1955 and Industrial Relations Act 1967

Statutory Benefits and

Entitlements
• Under the Employment Act,
employees are entitled to various
statutory benefits, including sick
leave, annual leave, maternity leave,
and public holidays.
 Employment Act 1955 and Industrial Relations Act 1967

All female employees are entitled to 98 consecutive days of paid maternity

Statutory Benefits and leave. 7 days of paternity leave
Entitlements (cont…)
Employment Contracts: The Framework of Workplace
Relationships

Essentials of Employment Contracts

• Employment contracts in Malaysia, whether oral or
written, represent a mutual agreement between
employer and employee, setting out terms and
conditions of employment.
• These contracts must detail job responsibilities,
salary, working hours, and termination conditions,
among other elements.
Employment Contracts: The Framework of Workplace
Relationships (cont…)
Types of Employment Contracts
• In Malaysia, there are two recognised forms of employment
agreements: those that are written and those that are verbally
agreed upon.
• For a written employment contract, the Employment Act of
1955, particularly Section 10(1), mandates that any job lasting
more than a month must have a formal written agreement
between the employer and the employee.
• Additionally, Malaysian labour regulations require that these
written contracts be kept by the employer for a period of six
years following the end of the contract.
• On the other hand, an oral employment contract is also legally
valid. According to Section 2(1) of the Employment Act, 1955, a
verbal agreement made between an employer and an
employee is considered a legally enforceable contract.
Balancing Rights and Obligations in the
Workplace
Employee Rights and Protections
• Employees in Malaysia enjoy a range of rights and protections under the law.
• This includes the right to fair wages, safe working conditions, and protection against unlawful
dismissal.
For example, the Employment Act mandates protection against unfair dismissal, ensuring that
terminations are conducted with just cause and after due process.

Employer Obligations
• Employers have significant responsibilities towards their employees, encompassing timely wage
payments, adherence to working hours regulations, and the provision of statutory benefits.
For instance, the law requires employers to pay wages no later than the 7th day after the end of a
wage period, as stipulated in Section 19 of the Employment Act.
Balancing Rights and Obligations in the
Workplace (cont…)

Wages, Benefits, and Working Hours

Regulations
• Compliance with regulations regarding wages, working
hours, and other benefits is crucial. The Malaysian
government has set a minimum wage policy, and failure to
comply can lead to legal repercussions. Additionally,
working hours are capped at 48 hours per week, with
regulations governing overtime pay.
Wages and Benefits: Beyond Monetary
Compensation
Minimum Wage and Compliance
• The minimum wage in Malaysia is a crucial aspect of
employment law. As of 1 Feb, 2025, the minimum
monthly wage nationwide is set at RM1,700.
• Employers must regularly review their payroll systems
to ensure compliance with these updates.

Overtime Pay and Entitlements

• Overtime compensation is another critical area of
employment law. Employees are entitled to overtime
pay at a rate of 1.5 times the normal hourly rate for
work beyond the standard hours. This regulation
ensures fair compensation for extended working hours.
Wages and Benefits: Beyond Monetary
Compensation (cont…)
Bonuses and Incentives
• While not mandated by law, bonuses and incentives are common practices
that contribute to employee motivation and job satisfaction.
• These benefits, though discretionary, can significantly impact employee
retention and productivity.

Deductions and Allowances

• Employers are also responsible for making statutory deductions from
employees’ salaries for contributions to the Employees Provident Fund
(EPF), SOCSO, and Employee Insurance System (EIS).
• These deductions contribute to the employees’ long-term financial security
and social safety net.
Upholding Equality and Non-Discrimination in
the Workplace
Prohibition of Discrimination
• Malaysian employment law emphasises the importance of a
discrimination-free workplace.
• Employers must ensure that their employment practices, including hiring,
remuneration, promotion, and termination, are free from bias based on
gender, race, religion, or disability.

Creating an Inclusive Workplace Environment

• Fostering an inclusive workplace goes beyond mere compliance with
legal requirements.
• It involves implementing policies and training programs that promote
diversity and prevent discrimination.
• Such an environment not only adheres to legal standards but also
enhances employee morale and productivity.
Ensuring Occupational Health and Safety
Workplace Safety Regulations and Compliance
• Employers in Malaysia are obligated to provide a safe and
healthy working environment.
• This includes complying with the Occupational Safety and
Health Act 1994, which mandates measures to prevent
workplace accidents and illnesses.

Employee Health and Safety Rights

• Employees have the right to work in an environment that
does not pose a risk to their health and safety.
• Employers must conduct regular risk assessments,
provide necessary safety equipment, an ensure that
employees are trained on safety procedures.
Termination and Redundancy:
A Delicate Process
Lawful Grounds for Termination
• Termination of employment in Malaysia must be based on
valid grounds such as misconduct, poor performance, or
redundancy.
• The Industrial Relations Act provides guidelines for what
constitutes ‘just cause and excuse’ for termination.

Termination Notice Periods and Severance Payments

• Notice periods for termination vary based on the length of
service, as outlined in the Employment Act.
• For instance, an employee with less than two years of
service is entitled to a minimum of four weeks’ notice.
• Additionally, severance payments are required under
certain conditions, especially in cases of redundancy.
Termination and Redundancy: A Delicate
Process (cont…)
Redundancy Procedures
• When making employees redundant,
employers must follow a fair and
transparent process.
• This includes adhering to the ‘Last In, First
Out’ principle, unless there are valid
reasons for deviation, and ensuring that
employees are adequately compensated.
Dispute Resolution: Safeguarding Employment
Rights
Employee Dispute Resolution Avenues
• The Industrial Relations Act provides avenues for employees to
resolve disputes, including issues related to unfair dismissal, wage
disputes, and workplace discrimination.
• This includes mediation and, if necessary, arbitration or adjudication
by the Industrial Court.

Role of Labour Courts and Departments

• The Industrial Court plays a crucial role in adjudicating employment
disputes in Malaysia.
• It provides a formal platform for both employers and employees to
resolve conflicts in accordance with the law.

Alternative Dispute Resolution Methods

• Besides formal litigation, alternative dispute resolution methods
such as mediation and arbitration offer less confrontational ways to
resolve employment disputes.
• These methods are often quicker and more cost-effective.
Dispute Resolution: Safeguarding Employment
Rights (cont…)
Dispute Resolution: Safeguarding Employment
Rights (cont…)
Expatriate Employment in Malaysia:
Navigating the Legalities
Work Permit Requirements for Expatriates
• Expatriates wishing to work in Malaysia must obtain proper work permits.
• Employers are responsible for ensuring that their expatriate employees
have the necessary legal documentation to work in the country.
Tax and Social Security Implications
• Employers must also be aware of the tax and social security implications
for expatriate employees.
• This includes understanding the requirements for EPF contributions and
complying with Malaysian tax laws.
Rights and Protections for Expatriate Employees
• Expatriate employees in Malaysia are entitled to the same legal
protections as local employees.
• This includes fair treatment in terms of wages, working conditions, and
access to statutory benefits
Conclusion: Embracing Compliance for
Sustainable Business Growth

Understanding and adhering to Employment Law in

Malaysia is not just about fulfilling legal obligations;
it’s about creating a positive, fair, and productive
workplace.