Update as of 26th August 2022: The Malaysian government announced today that the amendments to the Employment Act will be postponed to 1st January 2023. With several parties urging for extra time to prepare for these changes, the government said that it decided to delay implementing them as businesses were still getting back on their feet.
Minister of Human Resources of Malaysia, Datuk Seri Saravanan said that further changes may be seen come January, covering areas such as anti-discriminatory clauses for foreign maids in the First Schedule of the Act.
Malaysia’s New Employment Act Laws To Be Implemented on 1st September
Malaysia’s Employment Act of 1955 – the key piece of legislation when it comes to labour law in the country – has undergone quite a few changes since its inception.
Last year, Minister of Human Resources of Malaysia, Datuk Seri Saravanan announced that the Act would undergo further amendments to cover some major issues that have been deliberated for a while. After being debated in Parliament, the Bill has been passed this year, meaning that the new law will finally come into effect.
Key Changes Cover Flexible Working Arrangements to Longer Maternity Leave
Known as the Employment (Amendment) Act 2022, they will come into full force on 1st September with the following changes taking place:
- The Act will apply to all employees
Previously, this law was applicable to those earning RM2,000/month and below with only some Sections of the Act applying to everyone. With the expansion of the First Schedule, the amended law will now apply to ALL regardless of salary, but some parts of it will not apply to those earning RM4,000 or more per month. Those subsections are: 60(3): overtime for work on rest days, 60A(3): overtime for work outside of normal working hours, 60C(2A): shift work allowance, 60D(3): overtime and allowance for work on public holidays, 60D(4): overtime for work on holidays on half working days and 60J: termination, lay-off, and retirement benefits.
- Paid maternity leave
Increased from 60 to 98 days.
- Paternity leave is introduced
7 consecutive days for married male employees.
- Restriction on termination of pregnant employees
Unless there are other grounds for dismissing an employee such as misconduct or redundancy, pregnant employees/ those suffering from a pregnancy-related illness cannot be terminated.
- Reduction in working hours
Maximum working hours have been slashed from 48 hours to 45 hours per week.
- Flexible working arrangements
Employees may ask their bosses for flexible working arrangements – either for place of work or hours/days of work. This is to be done in writing, and the employer has to respond to the request within 60 working days.
- Hiring foreign workers
Companies who want to hire foreign employees must first get approval from the Director General of Labour, or they risk being fined and/or imprisoned.
- Notice on sexual harassment
Employers are to display a notice on sexual harassment in the workplace in order to raise awareness on the subject.
- Protection against discrimination
The Director General of Labour can inquire and make orders on discrimination disputes that arise between employers and employees.
- Protection for gig workers
Gig workers who don’t have a written contract of service are presumed to be employed, unless proven otherwise.
Malaysian Employers Federation Asks Government to Postpone Changes Due to Costs
With these changes set to take place just days away at the time of writing, some groups have raised concerns that businesses in Malaysia might not be ready to implement them just yet. While time is an issue, the costs of putting these new laws into practice might also be a blow to some businesses, according to the Malaysia Employers Federation (MEF).
The President of the MEF, Datuk Dr Syed Hussain Syed Husman has voiced out that a large number of local businesses are still recuperating from losses made in the last two years and will only be further burdened by the cost of implementing these new changes.
He pointed out that while the GDP for Q2 of 2022 was an encouraging 8.9%, the forecasted GDP for the second half of the year would drop to 5-6%. In an official press release by the MEF, the costs of implementing some of these amendments were listed:
- Increase in cost of overtime per year due to increased coverage of EA from RM2,000/month to RM 4,000 per month = RM80.87 billion a year
- Reduction of hours of work from 48 hours/week to 45 hours/week = RM26.88 billion a year
- Increase of maternity leave from 60 days to 98 days = RM2.97 billion a year
- Paternity leave of 7 continuous days per birth = RM0.275 billion a year
In total, employers may have to bear an additional cost of RM110.99 billion if all these changes are to be complied with. Employers must also still abide by the law on paying salaries on time, which is no later than the seventh day after the last day of the wage period.
Pro-rated salaries must also be paid correctly following this formula:
Salary/working days in a month = day rate
Day rate x number of days worked in a month = final amount
Further Concerns of Non-Financial Implications/ Other Changes in Employment Laws
The MEF also highlighted that more preparations will be needed in order to abide by the following to-be laws:
- Flexible work arrangements – while such arrangements are welcome by most, a lack of guidelines by authorities can make it difficult to implement in a systematic manner
- Hospitalisation leave – employees will have an extra full 60 days of hospitalisation leave in a year besides non-hospitalisation sick leave
- Procedures to hire foreign employees – approval to hire workers must now be obtained from the Director General of Labour
- Possibility of other labour laws being amended – The Trade Unions Act might also undergo changes soon, and this means that employers will need more time to ensure they are compliant with another set of laws
As of now, there has been no information on whether the government will defer implementing these laws – which likely means that the new changes will be kickstarted on 1st September 2022 as planned. Having to implement these changes to the Employment Act may be a feat for businesses – especially newer ones, or those that are smaller in size.
With over 20 years of experience in creating business solutions that are tailored to your specific needs, we at Links International can help you. Let us guide you on how you can run your business more effectively with these new laws, while we take care of your payroll or other HR matters.
We also will keep you up to speed on the latest legal updates in your region, so you will know what else you need to comply with (together with the Employment Act).
Want to know more? Feel free to get in touch with us today!