Employment Act - For Employers

Contract of Services

If the employer and the employee signed a contract before the Employment Act came into effect, that contract is still valid as long as it does not conflict with the new Act. This means that the agreements and terms you agreed to in the past are protected.

If the employment contract provides benefits or terms that are better than those required under the law, those better terms will apply to the employee.

If any term in the employment contract or this Handbook is less favourable than what the law provides, the legal minimum standards under the Employment Act will apply instead.

The employment contract cannot stop the employee from joining or participating in trade unions. The employee’s right to be part of a union, which fights for workers’ rights and benefits, is protected.

Rest Days & Weekly Off Days

1. Records must be kept

The employer must keep the roster records for up to 6 years.

2. How to keep records if no clock-in/out

You don’t need clock-in/out if you already have:

• Monthly roster: Shows assigned rest days and off days
• Leave application logs: Replacement leave requests and approvals
• Timesheets or manual logs: Any extra hours worked

Even a simple Excel or HRIS record works, as long as it clearly shows:

| Employee | Week | Assigned Rest Day | Worked Off Day | Hours Worked | Replacement Leave Approved |

Time of Payment of Wages

Employees will receive their wages no later than seven days after the end of each pay period. This payment will reflect the total wages earned, minus any lawful deductions (such as taxes or contributions).

Wages for special days
Wages for work performed on rest days or gazetted public holidays, as well as any overtime, must be paid by the end of the next pay period following the work.

Extension of payment timeline
If there are circumstances where it is not reasonably practicable for the employer to make the payments on time, a request can be made to the Director General for an extension of the payment timeline. The Director General has the authority to grant additional days as deemed appropriate.

To apply for an extension of the payment timeline to the Director General, an employer generally needs to follow these steps:

1. Written Application: The employer must submit a written application outlining the reasons for the delay in salary payments. This should include details such as the financial condition causing the difficulty and any relevant supporting documentation.
2. Submission Timeline: The application should be submitted as soon as the employer recognizes that they will be unable to meet the regular payment schedule.
3. Director General's Discretion: The Director General will assess the application and may grant an extension based on the circumstances presented. There may be specific guidelines or additional information required during this process.

Regarding the duration for which extensions can be applied:

• Extensions for Multiple Months: Generally, while employers may apply for an extension, it is at the discretion of the Director General to grant approval for one or several months. Each request will be evaluated based on the individual circumstances and justification provided by the employer.

Salary Advances

The employer may provide advances on wages, but the total advance in any one month cannot exceed:

• For employees who have worked at least one month: the amount the employee earned in the previous month.
  
  Example: Last month, Employee A earned RM3,000 → maximum advance this month = RM3,000.
  
  
• For employees who have not yet completed one month of employment: the amount the employee would normally earn in a full month.
  
  Example: Employee A just started and has a monthly salary of RM3,000 → maximum advance = RM3,000.

Exceptions for Advances
Employers can give larger advances for specific reasons, including:

• To help the employee buy or improve a house.
• To help the employee buy land.
• To help the employee purchase a motor vehicle (car, motorcycle, or bicycle).
• To help the employee buy shares in the company.
• To help the employee buy a computer.
• To cover medical expenses for the employee or their immediate family members (employee's parents, spouse, children, siblings, or any person under the employee's legal guardianship).
• To cover daily expenses while waiting for payments related to temporary disablement.
• To cover educational expenses for the employee or their immediate family members.
• For other reasons if the employer applies to and gets approval from the Department of Labour.

Interest on Wage Advances

If the employer provides an employee with an advance on wages, the employer will not:

• Make any additional deductions from the employee’s wages, or
• Charge any extra fees, including interest or discounts,

as long as the total wage advances does not exceed one month’s salary.

If the amount of the advance exceeds one month’s wages:

the provisions mentioned earlier would not apply. This means that the employer may be allowed to make deductions or charge interest or fees on that advance.

In simpler terms, if an employee receives an advance that is more than one month's salary, the employer could charge them extra costs or take deductions from their future wages regarding that advance. This could include charging interest on the outstanding amount or deducting it from their pay.

However, it’s important for both the employer and employee to agree on these terms clearly and ensure that they are compliant with the relevant employment laws.

Benefits Provided in Addition to Wages

An employment contract may include benefits such as housing, food, utilities (fuel, electricity, water), medical care, or other approved amenities or services in addition to wages.

However, alcohol must not be provided as part of any employment contract.

• The Director General may approve additional amenities or services if the employer applies in writing. When granting approval, the Director General may set conditions or require changes.
• If an employer disagrees with the Director General’s decision, the employer may submit a written appeal to the Minister within 30 days from the date the decision is communicated.
• The Minister’s decision on the appeal is final.

Principals, Contractors, Sub-Contractors and Contractors for Labour

1. Who is Responsible: If a main business (called the principal) hires another business (the contractor) to do a job, and the contractor doesn't pay their workers, then both the principal and the contractor are responsible to pay those workers. It’s as if the workers were directly hired by both the principal and the contractor.
2. Special Rules:
3. • If the job is construction-related, the principal must be a construction worker or developer to be responsible for paying workers.
   • This responsibility lasts only for the last three months of owed wages.
   • Workers must ask for their unpaid wages or complain about it within three months of when they were supposed to be paid.
4. Getting Paid Back: If someone (not the employer) pays the workers what they were owed, that person can ask the main employer to pay them back the amount they covered.

Information Relating to Supply of Employees

1. Registration Requirement: If a contractor wants to provide workers (employees) to someone else, they must register with the Director General using a specific form. This must be done at least fourteen days before they supply the workers.
2. Written Contract: When the contractor supplies a worker to a principal (the main business) or another contractor, they must have a written contract. This contract must be available for people to check if needed.
3. Record-Keeping: The contractor must keep a register (a list) with information about each worker they supply and make this register available for inspection.
4. Penalties for Non-Compliance: If a contractor:
5. • Supplies a worker without registering,
   • Fails to provide the required written contract for inspection,
   • Or doesn’t keep the needed records,

they commit an offence and could face a fine of up to fifty thousand ringgit if convicted. 

Annual Leave Entitlement

1. Minimum Entitlement
   Employees are entitled to paid annual leave according to length of service:
2. • 2 years: 8 days
   • 2–5 years: 12 days
   • ≥5 years: 16 days
     
     
3. Pro-Rated Leave for Partial Year
4. • If an employee hasn’t completed 12 months, leave is calculated based on completed months.
   • Example: entitlement 12 days/year → 1 day per completed month.
     
     
5. Scheduling Leave]
6. • Annual leave must be granted and taken within 12 months after the end of the leave year.
   • Employees cannot automatically “bank” leave indefinitely—use it or lose it, unless exceptions are approved.
     
     
7. Payment in Lieu
8. • If an employee agrees in writing not to take leave (at employer request), leave can be paid out instead.
   • On termination, employees must be paid for any unused leave accrued, except in cases of dismissal for misconduct.
     
     
9. Interaction with Other Leave
10. • Annual leave is in addition to rest days, public holidays, sick leave, and maternity leave.
    • If annual leave overlaps with sick leave or maternity leave, the affected days are reclassified as sick/maternity leave.
      
      
11. Leave During Absence Without Pay
12. • If an employee takes unpaid leave totaling more than 30 days in any 12-month period, that period of absence will not count toward the calculation of their annual leave entitlement for that year.
    • For example, annual leave accrual is paused during long unpaid leave, but previously earned leave is not affected.
      
      
13. Record-Keeping
14. • HR must track each employee’s leave accrual, usage, and carry-forward.
    • Should be able to calculate pro-rated leave for partial-year service or during termination.
      
      
15. Operational Considerations
16. • Leave approval is subject to operational requirements, but HR must ensure employees are aware of their entitlement and leave cannot be unreasonably withheld.

Maternity Leave

Multiple employers and contribution

1. If the employee works for more than one employer during the 9 months before giving birth, she might technically be entitled to maternity allowance from more than one employer.
2. The employer who actually pays her maternity allowance can ask the other employer(s) to contribute, so the total payment is fairly shared.
3. How it’s calculated:
4. • Take the number of days she worked for the other employer in the 9 months before childbirth
   • Divide by the total number of days she worked for all employers in that period
   • Multiply that fraction by the amount of maternity allowance that was paid → that’s the contribution owed by the other employer.

✅ Example:

• Employee works:
• • Employer A: 60 days
  • Employer B: 30 days
  • Total: 90 days
• Total maternity allowance paid: RM 9,000
• Employer A pays full RM 9,000 initially → Employer A can recover a contribution from Employer B:
• • Employer B’s share = 30 ÷ 90 × 9,000 = RM 3,000

Exception for subsection 40(1) or (2)

·         Even if the employee didn’t do something required under subsection 40(1) or (2) (failure to notify employer of pregnancy – check 5.4(6)), the employer can still claim contribution from the other employer.

·         Basically, the employee’s mistake doesn’t stop the employers from sorting out contributions between themselves.

Payment of allowance to nominee on death of female employee

1.      Trigger

·         The employee must have already given notice to her employer that she is expecting to go on maternity leave.

·         She must have started her maternity leave.

2.      What happens in case of death

·         If she dies during the eligible maternity leave period, the employer (or any employer who would have been liable to pay her allowance) must pay the maternity allowance she would have received.

3.      Who gets the payment

·         First choice: the person she nominated under Section 41 (basically a designated nominee, e.g., spouse or family).

·         If there is no nominee, payment goes to her legal personal representative (executor of her estate).

4.      Amount

·         The allowance is calculated from the day she started maternity leave up to the day before her death.

·         The rate is the same as in subsection 37(2) (i.e., normal daily pay or Minister’s rate, whichever is higher).

Subsection (2): Technical rule about termination before childbirth

This part is not about protection, but about how employment duration is calculated.

What it means

• If the employee is terminated within 4 months before childbirth, and
• The employer pays wages in lieu of notice (instead of allowing notice period),

👉 then for maternity-related calculations, the law treats her as if:

• She worked through the notice period, even though she didn’t physically work.

Why this matters

This prevents employers from:

• Terminating an employee close to childbirth
• Paying notice instead
• And then arguing she didn’t meet the minimum employment period for maternity allowance

It’s an anti-avoidance rule.

Example for subsection (2)

• Employee is due to give birth on 31 December
• Employer terminates her on 1 October with 1 month’s wages in lieu of notice
• Legally, she is treated as employed until 31 October, not 1 October
• That extra month counts when checking maternity eligibility

Section 44 — “Register of allowances paid”

This one is administrative.

It means:

Every employer must:

• Keep a proper record of all maternity allowance payments made.
• Follow the format required by the government (if regulations specify it).

So basically:

📚 HR must maintain a maternity payment record.

This is for:

• Audit
• Labour inspections
• Compliance purposes

Sexual Harassment

A complaint can be:

• employee → employee
• employee → employer / manager
• employer → employee

So it's not limited to subordinate complaints. Even a boss can complain about an employee.

Once a complaint is received:

• employer must conduct an inquiry
• cannot ignore it
• must follow a proper process
• • 
    [link]

If employer refuses:

• must give written reasons
• must do it within 30 days

Employer can only refuse if:

• same complaint already investigated and not proven
• complaint is clearly malicious / not in good faith

Otherwise, they must investigate.

If employer refuses to investigate:

• employee can complain to Director General of Labour
• Labour Department can force employer to investigate

This is important — it removes employer discretion.

Employer must discipline the offender. Options include:

• dismissal without notice
• demotion
• suspension (max 2 weeks without pay)
• other punishment

If offender is not an employee (e.g. client/vendor):

• employer must refer to appropriate authority
• basically still must act

This is why your policy must say disciplinary action will be taken.

5. Labour Department can also investigate directly (81D)

If complaint goes directly to Labour Department:

• they can order employer to investigate
• employer must submit report within 30 days
• if employer is sole proprietor → Labour Department investigates themselves

6. If harassment is proven, complainant can quit immediately (81E)

If Labour Department confirms harassment:

Complainant can:

• resign without notice

• still receive:

  • salary in lieu of notice
  • termination benefits

This protects victims from being forced to stay.

7. Employer can be fined if they don’t investigate (81F)

If employer:

• ignores complaint
• refuses without reason
• doesn't investigate when ordered
• doesn't submit report

They can be fined up to RM50,000

This is the biggest legal risk for companies.

8. Employer must display sexual harassment notice (81H)

Company must:

• put up a visible notice at workplace
• raising awareness of sexual harassment

Many companies forget this — but it's legally required.

Internal Compliance Summary: Part XIII (Registers, Returns & Notices)

To ensure the Company remains in full compliance with the Malaysian Employment Act 1955, the following administrative duties must be maintained by the Operations and HR departments.

1. Mandatory Record Keeping (Section 61)

• The Duty: The Company must maintain a formal "Register" for every employee. This must include personal details, terms of employment, and a history of all payments made.
• Retention Period: All records must be preserved for at least six (6) years.
• Digital Records: Under Section 61(3), digital systems (such as our CRM/HR software) are permitted, provided they are available for immediate inspection by a Labour Officer if requested.

2. Statutory Returns & Information (Section 62 & 63)

• Wage Particulars: The Company is legally required to provide every employee with a statement of their wages (the Monthly Payslip), detailing all earnings and deductions.
• Government Returns: Upon notice from the Director General of Labour, the Company must submit "Returns" (workforce reports). This power applies to all employees, including those earning above RM 4,000.

3. Reporting Business Changes (Section 63A)

The Company has a strict legal obligation to notify the nearest Labour Office (JTK) in writing within ninety (90) days of any of the following events:

• Commencing operations at a new branch or location.
• Changing the Registered Name of the business.
• Taking over or commencing a new business undertaking.
• Penalty Note: Failure to provide this notice, or providing false information, is a criminal offense.

4. Conspicuous Notice Boards (Section 64)

If the Company operates a site, factory, or business premises with 5 or more employees that is located outside major city/town limits, a notice board must be displayed.

• Language: Must be in the National Language (Bahasa Melayu).
• Content: Must display the registered name of the business and the address of the registered office.

Service of Summons by Labour Department

Under the EA, a Labour Department summons or notice is legally valid once served to the Company, even if it is not received directly by senior management.

A summons or notice may be considered properly served if it is:

• Delivered to the Company's office or registered address
• Sent by registered post to the Company
• Given to a Director, manager, HR, or responsible officer
• Left with an appropriate person at the workplace
• Affixed at the premises when direct delivery is not possible

Important:

• The Company is considered notified once the summons is served.
• Internal miscommunication or failure to escalate does not invalidate the notice.
• The Company must respond within the stated timeline.

Action Required:
Any Labour Department correspondence must be immediately escalated to Management for prompt handling.

Cross-Border Service of Summons (Malaysia–Singapore)

Under the Employment Act, Malaysia and Singapore may recognise and enforce each other’s summonses, warrants, or orders relating to employment matters.

This means a summons or order issued in Malaysia may be served or enforced in Singapore, and vice versa, where applicable.

Key Point:
Being located in Singapore does not prevent the service or enforcement of Employment Act notices issued in Malaysia.

Management should ensure that any cross-border employment matters involving Singapore-based personnel or entities are treated with the same urgency and compliance requirements.

Court Enforcement and Prosecution

Under the Employment Act, non-compliance with statutory obligations may result in court proceedings in addition to Labour Department inquiries.

Key points for management:

• Employment Act offences may be prosecuted in Magistrate or Sessions Court

• The Labour Department may appear in court and represent an employee

• Employees may still file civil claims separately, even where Labour Department proceedings exist

• Courts may order employers to pay wages, benefits, or other amounts due

• Failure to comply with a court order may result in seizure and sale of company property to recover payments

• Courts may also impose fines and penalties in addition to payment orders

Management should treat all Employment Act matters seriously, as non-compliance may escalate from Labour Department inquiry to court enforcement proceedings.