6 September 2022
The Employment (Amendment) Act 2022 (“Amendment Act”) and the Employment (Amendment of First Schedule) Order 2022 (“Order”) will come into force on 1 January 2023, amending the Employment Act 1955 (“Employment Act”). With effect from 1 January 2023, the Amendment Act will apply to all employees regardless of their wages or work types save for certain sections which will not be applicable to employees earning more than RM4,000 per month or domestic employees (previously known as domestic servants).
The amendments do not affect any complaint, investigation, inquiry, trial, prosecution, proceedings or appeal done, taken or commenced under the Employment Act prior to 1 January 2023.
It is advisable to amend new contracts of employment to ensure consistency with the Amendment Act. For existing contracts of employment, it is not necessary to ask an employee to re-execute an existing employment contract to incorporate the more favourable terms under the Amendment Act. This is because, under the Employment Act, any terms or conditions which are less favourable to an employee than those prescribed under the Amendment Act will be void and of no effect, with the more favourable provisions substituted. The employer must, however, ensure that as a matter of practice, the employees are indeed given the benefit of the more favourable terms under the Amendment Act with effect from 1 January 2023, with or without physically amending the individual contracts of employment or letters of offer. Alternatively, employers may amend its employment handbook to reflect the new terms under the Amendment Act.
This Alert sets out the key amendments that will come into effect on 1 January 2023.
- Protection extended to all employees irrespective of wages
- Increased maternity leave from 60 to 98 days and introduction of paid paternity leave
- Introduction of flexible working arrangements
- Increased general penalty from RM10,000 to RM50,000 for an offense
- Maximum weekly work hours reduced from 48 to 45 hours
- Enhanced sick leave policy
- New requirements relating to employment of foreign employees
- New power for Director General to inquire into and decide on disputes on discrimination in employment
All employees irrespective of wages earned to be covered under amended Employment Act
The Employment Act currently only applies to employees (a) whose wages do not exceed RM2,000 per month or (b) who are engaged in specific occupations regardless of their wages (such as manual labourers, supervisors of manual labourers and operators of mechanically propelled vehicles as set out under the First Schedule to the Employment Act (“First Schedule”) (“Specified Employees”). The Amendment Act extends Employment Act coverage to all employees who have entered into a contract of service irrespective of their monthly wages, with some specific sections not applying to employees earning more than RM4,000 a month or to domestic employees.
The provisions relating to additional payment for work done on rest day overtime payments, shift work allowances, additional payment for work done on a public holiday and statutory termination, lay-off, and retirement benefits will not apply to employees earning more than RM4,000 a month unless the employee fall within the ambit of “Specified Employees” under paragraph 2 of the First Schedule.
The Amendment Act continues to exclude domestic employees from Part XII of the Employment Act with the exception of the provision on rest days. Domestic employees will be entitled to one rest day per week once the Amendment Act takes effect.
Increased maternity leave from 60 to 98 days and enhanced protection for female employees
All female employees will be entitled to 98 consecutive days of maternity leave instead of 60 days. Employers will be prohibited from terminating or giving a notice of termination of service to a female employee who is pregnant or is suffering from an illness arising out of her pregnancy unless the termination is made on the grounds of wilful breach of a condition of the contract of service, misconduct, or closure of business. The burden of proving that such termination is not on the ground of the employee’s pregnancy or on the ground of illness arising out of her pregnancy will rest on the employer.
Introduction of paid paternity leave
All married male employees will be entitled to paid paternity leave at his ordinary rate of pay for a period of seven consecutive days in respect of each confinement (up to five confinements, regardless of the number of spouses). A married male employee must be able to satisfy the following conditions to be entitled to paid paternity leave:
- He has been employed by the same employer for at least 12 months immediately before the commencement of such paternity leave; and
- He has notified the employer of the pregnancy of his spouse at least 30 days from the expected confinement, or as early as possible after the birth.
Introduction of flexible working arrangements
Subject to Part XII of the Employment Act (which deals with rest days, hours of work, holidays and other conditions of service) or anything contained in the contract of service, an employee will be able to apply for a flexible working arrangement to vary the hours of work, days of work or place of work in relation to his employment. Once such application is received, the employer will be required to approve or refuse the application in writing within 60 days. In the case of a refusal, the employer will state the ground of refusal to the employee. The Amendment Act stipulates that the Minister may make regulations prescribing matters relating to flexible working arrangements. At the time of writing, there are no such regulations, or relating, to flexible working arrangements.
Increased general penalty from RM10,000 to RM50,000
The general penalty for offenses prescribed under the Amendment Act has been increased to RM50,000 instead of the previous penalty of RM10,000.
Reduction of maximum weekly work hours
The maximum weekly work hours will be reduced from 48 hours to 45 hours.
Enhanced sick leave
Currently, the total number of days of paid sick leave (inclusive of hospitalisation) in a calendar year which an employee is entitled to is capped at 60 days in the aggregate. For example, if an employee has 14 days sick leave, his hospitalisation leave will only be 46 days as his sick leave must be taken in aggregate with his hospitalisation leave. When the Amendment Act comes into effect, employees will be entitled to their sick leave and 60 days of hospitalisation separately from their sick leave entitlement. For instance, an employee who is employed for less than two years by the employer will be entitled to 14 days of sick leave and 60 days of hospitalisation leave (i.e. a total of 74 days instead of 60 days).
New requirements relating to employment of foreign employees
Once the Amendment Act comes into effect, prior approval from the Director General of Labour (“Director General”) will be required for an employer to employ a foreign employee. Failure to do so would be an offence and on conviction, punishable with a fine not exceeding RM100,000 or imprisonment for a term not exceeding five years or both. There is also an additional requirement to inform the Director General within 30 days of the termination of service of a foreign employee if the service is terminated:
- by the employer;
- by reason of the expiry of the employment pass; or
- by reason of the repatriation or deportation of the foreign employee.
If a foreign employee terminates his service or absconds from his place of employment, the employer must inform the Director General within 14 days of the termination of service or after the foreign employee’s absence.
Discrimination in employment
The Director General will be able to inquire into and decide any dispute between an employee and his employer in respect of any matter relating to discrimination in employment, and the Director General may, pursuant to such decision, make an order. Failure to comply with the order of the Director General would be an offence punishable with a fine not exceeding RM50,000. In the case of a continuing offence, the penalty would be a daily fine of not exceeding RM1,000. The term “discrimination” is, however, not defined in the Amendment Act.
Notice on sexual harassment
Employers will be required to conspicuously exhibit at the place of employment a notice to raise awareness on sexual harassment. The penalty for failure to inquire into complaints of sexual harassment will be increased to RM50,000 from RM10,000.
At the moment, there is no prescribed form of notice that the employers must adopt. Our view is that the notice should at the minimum contain the following information and statements:
- Sexual harassment is strictly prohibited by the company;
- Sexual harassment can take many different forms including verbal, non-verbal, visual, psychological, or physical harassment;
- Highlighting the company’s policy on sexual harassment and where it can be found;
- Name and contact person in the event employees wish to report incidence of sexual harassment; and
- All complaints of sexual harassment will be dealt with seriously, promptly and confidentially.
The Employment Act defines “apprenticeship contract” as a written contract entered into by a person with an employer who undertakes to employ the person and train or have him trained systematically in a trade for not less than two years. Once the Amendment Act comes into effect, a contract must be for a minimum period of six months and a maximum period of 24 months in order to qualify as an “apprenticeship contract”.
Information relating to supply of employees
A contractor for labour who supplies any employee to a principal, contractor or sub-contractor will be legally required to enter into a contract in writing and shall make such contract or any other document relating to such contract available for inspection. Failure to do so would constitute an offence punishable with a fine not exceeding RM50,000.
Calculation of wages for incomplete month’s work
The Amendment Act will introduce the following formula to calculate wages for an employee who is employed on a monthly rate of pay and has not completed a whole month of service (e.g. where the employee commenced employment after the first day of the month, where the employment was terminated before the end of the month, or where the employee took leave of absence relating to national service):
___________________________ x Number of days eligible in the wage period
Number of days of the particular
Deletion of sections 69B, 69C, 69D and 69E of the Employment Act
With the upcoming amendments to the scope of employees covered under the Employment Act, the intended deletion of section 69B on the additional powers of the Director General to inquire into complaints (and, consequently, the deletion of sections 69C, 69D and 69E) of the Employment Act will have the effect of allowing the Director General to inquire into complaints between an employee and employer without the limitation of a salary cap of RM5,000. All employees will be able to utilise the complaints process with the Director General under the Amendment Act.
Prohibition on forced labour
Employers will be expressly prohibited under the Amendment Act from threatening, deceiving, or forcing an employee to do any activity, service or work or preventing an employee from proceeding beyond the place or area where such activity, service or work is done. Forced labour is an offence punishable with a fine not exceeding RM100,000 or imprisonment for a term not exceeding two years or both.
Presumption on employer-employee relationship
The Amendment Act introduces a presumption as to the employer-employee relationship in the absence of a written contract of service relating to any category of employee under the First Schedule. It shall be presumed until the contrary is proven that a person is an employee where:
- the employee’s manner of work is subject to the control or direction of another person;
- the employee’s hours of work are subject to the control or direction of another person;
- the employee is provided with tools, materials or equipment by another person to execute work;
- the employee’s work constitutes an integral part of another person’s business;
- the employee’s work is performed solely for the benefit of another person; or
- payment is made to the employee in return for work done by him at regular intervals and such payment constitutes the majority of the employee’s income.
Court order for payments due to employee
Where an employer has been convicted for an offence relating to payment of wages or any other payments payable to an employee under the Amendment Act, the court before which the employer is convicted will be able to order the employer to pay any payment due to the employee in relation to that offence. In the event the employer fails to comply, the employee may apply to court for a warrant to levy on the employer’s property for any payments due by way of distress and sale of property, or by way of a fine as provided under the Criminal Procedure Code.
The following materials are available from the Attorney-General’s Chambers website www.lom.agc.gov.my:
- Employment (Amendment) Act 2022
- Employment (Amendment of First Schedule) Order 2022 (15 August 2022)
- Employment (Amendment of First Schedule) Order 2022 (30 August 2022)
- Appointment and Revocation of Appointment of Date of Coming into Operation (30 August 2022)
This article has been prepared with the assistance of Senior Associate Tan Mei Fang.