top of page
  • CCS

Guides to Managing Malaysian Employment Act

Updated: Dec 18, 2022

Disclaimer: The information in this article should not be construed as legal advice, and we assume no responsibility or liability for any decisions made or actions taken from this article should not be construed as legal advice, and we assume no responsibility or liability for decisions made or actions taken as a result of reading this article. ‍

This guide is meant to briefly introduce the statutory requirements outlined in the Malaysia Employment Act and some common practices applied to employment contracts, wages, and benefits when hiring employees in Malaysia.

Who Does Employment Act Apply To?

The employment contract between an employer and an employee in Malaysia is the primary framework for connecting the two parties. Parties are generally free to enter into whatever kind of contract they see fit, provided that they conform with the Employment Act and some other constraints.

The Malaysia Employment Act (EA) 1955 is the piece of legislation that governs all private-sector labour policies.

The Malaysian Employment Act does not apply to all people. Instead, it applies only to “employees” as defined under the Act. It is important to note that the EA only covers the following two categories of employees as stated in the First Schedule of the EA:

  1. Any person who has entered into a contract of service;

  2. Any person who [collectively known as "manual worker"], irrespective of the amount of wages he earns in a month, has entered into a contract of service with an employer in pursuance of which:-

  3. is engaged in manual labour;

  4. is involved in the operation or maintenance of any mechanically propelled vehicle operated;

  5. supervises or oversees other employees engaged in manual work;

  6. is involved in any capacity in any vessel registered in Malaysia; or

  7. is employed as a domestic servant.

Non Applicability

However, the following EA provisions will not apply to non-manual worker employees earning more than RM4,000/month:

Importance of Employment Contract

The terms and conditions of employment are spelt out in an employment contract, an agreement between an employee and an employer.

An employment contract may also be referred to as an employment agreement, appointment letter, offer letter, etc.

In Malaysia, having a written employment contract is not mandatory unless the contract of service for a specified period exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month.

In most organisations, only personnel in high management positions can negotiate the terms of their employment contracts.

Breach of contract occurs when either the employee or the employer violates one or more of the provisions outlined in the employment contract. Either party can do this. The majority of employment contracts contain several key terms, such as the following:

  • Appointment position

  • Duration of employment contract for a fixed term contract.

  • Date of employment commencement

  • Remuneration package

  • Hours of work

  • Employee benefits

  • Probation clause, if applicable.

  • Notice of Termination [s 10(2)]

It is important to note that the list above is not exhaustive.

It is illegal for an employment contract to have terms and conditions that are less beneficial to the employee than the Employment Act mandates. [s 7A]

Employee Benefits

In addition to their regular salary, employees might get various sorts of Employee Benefits from their employers.

Common employee Benefits in Malaysia may include:

  • sick leave,

  • annual leave,

  • maternity leave,

  • incentives and bonuses,

  • contributions to retirement funds,

  • housing allowances,

  • healthcare benefits,

  • allowances for children's education,

  • relocation allowance,

  • childcare benefits, and

  • transportation reimbursements,

Salary & Bonus - Statutory Requirement

Wages‘ means the basic wages and all other payments in cash payable to an employee for work done in respect of his employment contract, excluding

  1. the cost of housing, food, fuel, light, water, medical care, or any approved amenity or service.;

  2. EPF or any contribution for retrenchment, termination, lay-off or retirement scheme, etc.;

  3. any travelling allowance;

  4. any reimbursement of expenses;

  5. any gratuity; or

  6. any annual bonus.

Even though the Employment Act does not include a provision mandating that each employee be paid a minimum wage, employers must adhere to the Minimum Wage Order.

In a layman's term, even though the Employment Act does not specify a minimum wage and leaves it up to the employer and the employee to discuss and agree upon the amount of the salary, the employee is still not allowed to be paid less than the amount that is mandated by the minimum wages order.

The salary needs to be paid no less than once every month [s 18(1)] and no later than seven days after the end of the wage period [s 19(1)].

Wages for work done on a rest day, gazetted public holiday, and overtime shall be paid not later than the last day of the next wage period.

The entire amount of wages are to be paid through bank [s 25(1)]

According to the Employment Act of Malaysia, the payment of bonuses is not mandated in any capacity.

Hours of Work & Overtime - Statutory Requirement

In general, an employee shall not be required under his contract of service to work[s 60A(1)]:-

  1. more than five consecutive hours without a period of leisure of not less than thirty minutes duration;

  2. more than eight hours in one day;

  3. in excess of a spread over period of ten hours in one day;

  4. more than 45 hours in one week [Employment (Amendment) Act 1955]

Overtime pay is only for those employees earning below RM 4,000/month [Employment (Amendment of First Schedule) Order 2022].

According to the Employment Act, employees are not allowed to work more than 5 hours without taking a 30 minutes break.

Employees are not permitted to work more than 12 hours in a single day, including any time spent performing overtime. There are exceptions to this rule:

  1. accident, actual or threatened, in or concerning his place of work;

  2. work, the performance of which is essential to the life of the community

  3. work essential for the defence or security of Malaysia;

  4. urgent work to be done to machinery or plant; or

  5. an interruption of work which it was impossible to foresee

Employees are eligible for one rest day per week.

Public Holidays - Statutory Requirement

Taking into account the country's wide cultural variety, Malaysia's national holidays are established to cater to a large number of distinct ethnic groupings.