Disclaimer: The information in this article is current as at 12th April 2023, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional employment or legal advice. Any reference to government policies, regulations, or guidance is for informational purposes only and should not be considered official government advice. The information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.
Note: The Employment Act is not applicable to Sabah and Sarawak, as they have their own Labour Ordinances respectively: Sabah Labour Ordinance and Sarawak Labour Ordinance.
Who is covered under the Employment Act
The Employment Act (EA) covers all employees in Malaysia, irrespective of wages or occupation.
However, employees earning above RM4,000 per month are exempted from certain provisions in the Act, such as:
- Overtime rates for employees working on rest days;
- Overtime rates outside normal working hours;
- Allowance for shift-based work;
- Overtime on public holidays;
- Overtime for half working days on holidays; and
- Termination, lay-off, retirement benefits.
Gig workers may also be covered by the Employment Act if they meet the conditions below. An individual is presumed under law to be an employee if the following conditions are met, in absence of a written contract.
The conditions are:
- Their manner of work is subject to the direction or control of another person;
- Their working hours are under the direction or control of another person;
- They receive tools, supplies, or equipment from another individual to do a task;
- Their work is a crucial component of another person’s enterprise;
- Their work is performed purely for another person’s benefit; or
- They receive compensation for the task they perform on a regular basis, and this compensation makes up most of their income.
Probation
Probationary periods are not required by law in Malaysia. It is only recommended as a best practice.
There is no minimum or maximum probationary period to be imposed — all probationary periods are up to the employer’s discretion. They typically last for three to six months.
The terms of an employee’s probation should be clearly stated in their employment contract. It should include the length of the probation period, the confirmation process, as well as the notice period should either party choose to end the relationship.
Employees under probationary status are afforded the same rights as regular employees. This applies to minimum wage, public holidays, overtime rates, annual leave and more. Their benefits will also be dependent on their employment contract.
Employers should not terminate a probationer’s service without just cause or excuse. Affected employees on probation can make a claim to the Director-General for Industrial Relations for unfair dismissal, if they feel that they have been dismissed without any valid reasons.
Minimum wage
According to the Minimum Wage Order 2022, employees are entitled to a minimum wage of RM1,500 across the board for all employers.
This order is not applicable to domestic employees.
Working hours
Non-shift employees should not be required to work:
- More than 8 hours a day;
- More than 5 consecutive hours without a break of at least 30 minutes;
- More than 45 hours in a week; and
- More than a spread over a period of 10 hours in a day.
However, exceptions apply, in the case of:
- Accidents, actual or threatened, in the place of work;
- Work essential to the life of the community;
- Work for the defence or security of Malaysia;
- Urgent work to be done to machinery;
- An interruption of work which was impossible to foresee; or
- Work in any industrial undertaking essential to the economy of Malaysia or any essential service as defined under the Industrial Relations Act.
Overtime pay
Under the Employment Act, employees with wages of up to RM4,000/month are entitled to overtime compensation.
Any hours of work carried out in excess of the normal hours of work per day will be classified as overtime work. The ‘normal hours of work’ refers to the number of hours of work agreed between an employer and an employee in the contract of service.
Overtime entitlements for employees are as follows:
| Working hours | Overtime rates |
| Normal work day, but working in excess of normal working hours | Not less than 1.5 times hourly rate of pay |
| Rest day, but working normal working hours or less than normal working hours | For employees employed on a daily, hourly or other similar rate of pay:
For employees employed on a monthly or weekly rate of pay:
|
| Rest day, but working in excess of normal working hours | Not less than 2 times hourly rate of pay |
| Public holiday, but working normal working hours or less than normal working hours | For employees employed on a monthly, weekly, daily, hourly or other similar rate of pay: 2 days wages at the ordinary rate of pay For employees employed on piece rates: 2 times ordinary rate per piece |
| Public holiday, but working in excess of normal working hours | Not less than 3 times hourly rate of pay |
According to the EA, the ordinary rate of pay for employees employed on a monthly basis shall be calculated by dividing the monthly rate of pay with 26 working days.
For employees who are not statutorily eligible for overtime, employers can, but are not required to, stipulate relevant provisions relating to overtime rates within their employment contracts.
Rest days
Employees are entitled a whole day of rest every week, or as determined by the employer. For employees engaged in shift work, any continuous period of not less than 30 hours shall constitute a rest day.
However, if the employee has to work on the rest day, or overtime on the said rest day, they must be paid in accordance with the overtime payments set out in the table above.
Flexible work arrangements
Employees can submit a written application to their employer, for a flexible working arrangement to vary the hours of work, days of work, or place of work.
Employers who receive such applications will be required to approve or refuse the application within 60 days, and inform the employee of the decision made in writing.
If the application is refused, the employer must provide grounds for refusal.
Employment contracts
Any fixed-term employment that lasts longer than one month requires a formal written contract, according to the EA.
The contract should specify crucial terms of the contract of service between the employer and employee, such as:
- Work scope;
- Work location;
- Wage rate;
- Wage period;
- Employment benefits;
- Public holidays;
- Annual leave;
- Sick leave;
- Maternity and paternity leave;
- Confidentiality clauses;
- Termination and dismissal;
- Retirement; and more.
Employers must keep all labour contracts for at least six years after the contracts have expired.
An employment contract cannot restrict an employee’s rights to participate or join trade unions.
An oral contract can be accepted as employment, as provided by the Contracts Act 1950 and Employment Act 1955. However, oral contracts can be difficult to prove and enforce, and written contracts are recommended to avoid future disputes over the existence of the contract, and terms agreed by both parties.
Even if a contract of service is signed and agreed upon by both parties, Section 7 of the EA states that terms which are less favourable shall be void and substituted by those prescribed under the EA.
For more information, check out our guide to HR compliance in Malaysia.
Relevant legislation
- Employment Act (Updated copy as at 1 Jan 2023)
- Employment (Amendment) Act (2022)
- Minimum Wage Order 2022
- Industrial Relations Act 1967
