MALAYSIAN EMPLOYMENT LAW: TOP 5 QUESTIONS

Is it true that every individual who has a 9am to 5pm job is well protected under the Employment Law? What are your rights as an Employee in the event of an unfair dismissal, non-payment of wages, or if you are unfairly deprived of your annual or medical leave? We answer 5 of the commonly asked questions about the Malaysian Employment Law below.

If you are an employee who is currently considering your legal position, it is essential to first identify whether or not you satisfy the statutory definition of “Employee”. For the most part, pursuant to the Employment Act 1955, an individual who has entered into a Contract of Service would be deemed an “Employee”.

On the other hand, a “Contractor” is usually an individual or company who is hired or appointed under the Contract for Service solely to work on for a specific project or task for purposes of the principal’s trade or business.

Although the difference is just one word, the effect of both vastly differs. Take a look at the table of comparison below:

Contract for Service Contract of Service
The Employer should have no control over you e.g. in terms of working hours, annual leave,   office rules etc. Provided it is in compliance with the law, the   Employer would have the absolute discretion   in determining your working hours, the number  days for annual and medical leave and so on.

Payment for services rendered may, in some   occasion, come in the form of a Tax Invoice,   Payment and Official Receipt manner. There is no mandatory progressive payment unless the   purposes of hiring the Contractor so require. It is mandatory to progressively pay the   Employee’s monthly wages for services   provided. Failure to do so would expose to the   Employer to a potential Labour Court action.

The services rendered by a Contractor need not be personal. For instance, in most cases, a   Contractor is free to hire a Sub-Contractor to carry out the duties owed to the Employer   under the Contract for Service. A Contractor is also free to take on as many job offers at once. The services provided by an Employee must exclusive and personal.

A Contractor is solely in charge of the profit margin of the Contractor’s business. For   instance, under a Contract for Services, the Contractor would make profit out of his   undertaking. 

An Employee should not and would not be burdened by the Company’s business expenses and financial losses, if any.

A Contractor works independently and is only bound to comply with the terms and conditions   of the Contract for Service. An Employee is bound to work under the   direction and instruction of the Employer alongside complying with the terms and   conditions of the Contract of Service. A Contractor is not protected under the Employment Act 1955 An Employee is protected under the Employment Act 1955

While there is no statutory definition for what a Probationer is, case law has distinguished between a Probationer as well as an Employee.

Is it mandatory for all new Employees to undergo a probationary period? The answer is no. However, more often than not, an Employment Contract/Contract of Service would specifically provide for a probationary period. For example; “You will undergo a probationary period of three (3) months starting from the date of this Employment Agreement. During the probationary period, you shall not be entitled to any annual leave.”

Would a Probationer then be protected just like confirmed Employees? Similar to a confirmed Employee, in the event of an unfair dismissal, the Probationer is also entitled to make a representation to the Director-General for Industrial Relations.

What then distinguishes the position of a Probationer and a confirmed Employee? Should the Court be satisfied that the Probationer has been unfairly dismissed, the Probationer shall be entitled to any back wages, which shall not exceed twelve months’ back wages from the date of dismissal as per the salary given. On the other hand, when a confirmed Employee is unfairly dismissed, the entitlement to any back wages would be based on the number of years they have served the Company. In other words, the amount claimable by a Probationer would very likely be lower than a confirmed Employee.

Would an extension of a probationary period amount to an unfair and unjust treatment? Most Employers would opt to extend the Probationer’s probationary period instead of terminating him immediately. In other words, an extension of a probationary period may, in some instances be considered a second chance instead of an unfair or unjust treatment.

An Employer is bound to make contributions to the Employees Provident Fund (EPF) for any individual under the Contract of Service. Additionally SOCSO (Social Security Organisation), also known as PERKESO (Pertubuhan Keselamatan Sosial) contribution is a mandatory requirement imposed on all Employees irrespective of the Employee’s monthly wages. However, in the event the Employee’s monthly income exceeds RM4,000, the contribution required would only be based on RM4,000 per month.

A new piece of legislation which provides an additional statutory benefit to employees is the Employment Insurance System Act 2017 (EIS), which was passed by the Dewan Rakyat on 26 October 2017. The Human Resources Minister, Datuk Seri Richard Riot, stated that the Government is committed to implementing the Act in January 2018.

The EIS will be administered by SOCSO and it seeks to help employees who have lost their jobs get back on their feet by providing certain benefits. These benefits include job training as well as monetary payouts for a certain amount of time during the period of unemployment. However, it must be noted that this will not apply if the employee voluntarily resigned, retired, or the Contract of Service expired or was terminated by way of mutual consent or due to misconduct.

It must be noted that the EIS applies to all industries having one or more employees, except for certain groups of people specifically mentioned in the Act, for example domestic workers and members of the public service. Sections 14 to 16 of the Act makes it mandatory for both employers and employees to be registered under the Act and to contribute to the Employment Insurance Fund.

Labour Court

Industrial Court
Jurisdiction deals with disputes in relation to wages, sick-leave, annual leave and so on. Mainly deals with issues of unfair dismissal, trade union complaints and trade disputes.

Who hears and decides the cases?
Hearing is before a Labour Officer of the Labour Department for dismissal cases, the case is heard by the President or Chairman sitting alone.

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