The Malaysian Employment Act 1955 underwent major changes and the Employment (Amendment) Act 2022, which came into effect on the 1st January 2023 enhances the protection for employees. Below is an update on recent amendments to the Employment Act 1955.

(1) Update on the Employment Act 1955

• The Employment Act 1955 (“EA 1955”) is the primary legislation relating to employment in Peninsular Malaysia and the Federal Territory of Labuan.
• The Employment (Amendment) Act 2022 (“Amendment Act”) introduced significant amendments to the EA 1955. The Government originally announced that the Amendment Act would come into force on 1 September 2022. However, the Minister of Human Resources announced on 26 August 2022 that the implementation of the Amendment Act would be deferred to 1 January 2023¹.
• The Employment (Amendment of First Schedule) Order 2022 (“Ministerial Order”) has now expanded the applicability of the EA 1955 to all employees (see further explanation below). Similarly, the implementation of the Ministerial Order, which was scheduled to come into force on 1 September 2022, has also been deferred to 1 January 2023².

(2) Applicability of the EA 1955

• Currently, the EA 1955 only governs employees listed in its First Schedule, which are principally employees whose wages do not exceed RM2,000 per month (“EA Employees”). The EA 1955 is generally not applicable to employees earning wages exceeding RM2,000 per month (“Non-EA Employees”), subject to limited exceptions; the provisions on pregnancy, maternity and sexual harassment applies to all employees irrespective of wages.
• With the introduction of the Ministerial Order, with effect from 1 January 2023, the EA 1955 (as amended by the Amendment Act) will be applicable to any employee who has entered into a contract of service irrespective of wages (i.e. there will no longer be a distinction between EA Employees and Non-EA Employees). However, certain sections of the EA 1955 will not apply to employees whose wages exceed RM4,000.00 per month (“Exempted Employees”) (see further explanation below).

(3) Amendments introduced by the Amendment Act

The Amendment Act has introduced the following key amendments:

Introduction of:

• Statutory presumption of who is an employee and employer, based on control of manner and hours of work, provision of equipment, significance of work, parties benefiting from the work, frequency of payments and significance of income.
• Flexible working arrangements, where an employee may apply in writing to vary working hours, days or place of work, and the employer must inform the employee in writing of any approval or refusal of the application within 60 days, including grounds of refusal.
• Mechanism for dealing with discrimination, where the Director General of Labour may inquire into and decide any dispute between an employee and his employer in respect of any matter relating to discrimination in employment.
• Mechanism to outlaw forced labour.
• Paid paternity leave of 7 days per confinement, limited to 5 confinements, for married male employees.
• Requirement to conspicuously exhibit a notice to raise awareness on sexual harassment at the place of work;
• Prior approval required from the Director General of Labour for the hiring of a foreign employee and requirement to inform the Director General of Labour of the termination of a foreign employee.

Revision of:

• Maximum weekly working hours reduced from 48 to 45 hours.
• Paid maternity leave increased from 60 to 98 days.
• Fine for failure to inquire into complaints of sexual harassment increased from RM10,000 to RM50,000.
• General penalty for offence (where not prescribed) increased from RM10,000 to RM50,000.

(4) Material provisions of the EA 1955 (as amended by the Amendment Act) which will be applicable to all employees from 1 January 2023

1. Minimum statutory annual leave entitlement

   Period of Employment	Minimum days of annual leave entitled (for every 12 months of continuous service)
   Less than 2 years	8
   2-5 years	12
   5 years and above	16

2. Minimum statutory medical and hospitalisation leave
   1. Where no hospitalisation is necessary:

      Period of Employment	Minimum days of sick leave entitled (for every each calendar year)
      Less than 2 years	14
      2-5 years	18
      5 years and above	22

   2. If hospitalisation is necessary, employees shall be entitled to 60 days of hospitalisation leave, in aggregate in a calendar year, in addition to the sick leave stipulated under paragraph (a) above (previously, both sick leave and hospitalisation leave was capped at 60 days in aggregate in a calendar year).
3. Minimum statutory paid public holidays
   1. At least 11 of the gazetted public holidays in one calendar (5 of which are public holidays listed in the EA 1955) and on any day appointed as a public holiday for that particular year under Section 8 of the Holidays Act 1951, where except for the Exempted Employees, all other employees shall be entitled to overtime pay for work done on such days.
4. Minimum statutory rest day
   1. At least 1 day as a rest day in a week, where except for the Exempted Employees, all other employees shall be entitled to overtime pay for work done on such days.
5. Maximum statutory hours of work
   1. Prohibition to work in excess of the following hours of work:
      • More than 5 consecutive hours without at least 30 minutes period for leisure;
      • More than 8 hours in one day;
      • Excess of a spread over a period of 10 hours in one day; and
      • More than 45 hours a week.
   2. Except for the Exempted Employees, all other employees shall be entitled to overtime pay for work done in excess of the abovementioned hours.
6. Paid maternity leave
   1. In respect of female employees, paid maternity leave of 98 days together with maternity protection such as restriction on termination of pregnant female employees.
7. Paid paternity leave
8. Minimum statutory notice period for termination
   1. If the employment contract does not contain a written provision on the applicable notice period, then the minimum notice period for termination of employment, which shall be the same for both employees and employers, is as follows:

      Period of Employment	Minimum notice period
      Less than 2 years	4 weeks
      2-5 years	6 weeks
      5 years and above	8 weeks

9. Termination, lay-off and retirement benefits
   1. Except for the Exempted Employees, all other employees shall be entitled to termination, lay-off and retirement benefits.
10. Other general entitlements
    1. All employees may apply for flexible working arrangements.
    2. All employees are accorded protection against discrimination relating to employment.
    3. All employees are entitled to file complaints with the Department of Labour in respect of any non-compliance with the EA 1955.
11. Exempted Employees
    1. As highlighted in the foregoing paragraphs, provisions in the EA 1955 in respect of the following are not applicable / available in respect of Exempted Employees (employees whose wages exceed RM4,000 per month):
       • Overtime pay for working outside of normal working hours.
       • Overtime for work on rest days.
       • Overtime for work on public holidays observed by the employer.
       • Termination, lay-off and retirement benefits.

(5) Effect on existing employment agreements

1. Existing employment agreements will remain valid and binding between the employer and the employee even after the Amendment Act and the Ministerial Order come into force on 1 January 2023. However, if the terms of the existing employment agreement are:
   1. more favourable than the minimum requirements prescribed under the EA 1955, such terms of the employment agreement shall prevail; or
   2. less favourable than the minimum requirements prescribed under the EA 1955, only the relevant terms of the employment agreement shall be void and of no effect and the provision(s) of the EA 1955 which are more favourable shall apply.

(6) Next steps for clients

1. To undertake the relevant HR audit of existing policies and benefits applicable to all employees to ensure compliance with the EA 1955 (as amended by the Amendment Act) from 1 January 2023;
2. To prepare the notice to raise awareness on sexual harassment and to identify the location(s) in which it should be exhibited from 1 January 2023;
3. To undertake a legal review of existing employment agreements, and to arrange for amendments reflecting the updated EA 1955 to be effected via a supplemental agreement or an addendum to the existing employment agreement(s); and
4. To undertake a legal review of template employment agreements to ensure that templates are updated to reflect the amendments to the EA 1955.

For further information or any related inquiries, please contact our Partners: Durai Sharmini Natalie and Selvaraj Rebecca Jeyanthi

1. This has now been gazetted via P.U.(B) 394.
2. This has now been gazetted via P.U.(A) 273.