Malaysia Employment Act amendments: 7 key changes for employers to note

[Update: The Bill was tabled for its second reading and passed on 21 March 2022. There were only two minor amendments from the first draft which was the subject of this article, in relation to maternity and paternity leave. These have been updated in the text below.]

Wide-ranging amendments to Malaysia’s Employment Act 1955 (“the EA”) are now going through Parliament. The Employment (Amendment Bill) 2021 (“the Bill”) was tabled for its first reading on 25 October 2021.

The Explanatory Statement to the Bill states that it seeks to amend the EA “to comply with the international standards and practices as required by the Trans-Pacific Partnership Agreement, the Malaysia-United States Labour Consistency Plan and the International Labour Organization”. It further states that the purpose of the amendments, among others, is “to provide for the protection against discrimination and forced labour, and to provide for maternity benefits”.

As the Bill is only in its first reading, I expect some changes before it is finalised and passed. The current draft of the Bill does appear quite disjointed in parts, and there are some inconsistencies that will need to be cleaned up. It is worth noting that many of the amendments contained in the Bill have been mooted as far back as 2017, so while the fact that the Bill has been tabled is promising, there is no guarantee that it will be passed — though for political reasons it does appear very likely that it will happen this time.

The current draft of the Bill contains comprehensive amendments — there are 46 sections in total — but at this stage I will briefly set out the key changes that employers should take note of, along with some commentary.

(1) Increase in paid maternity leave

The change: The Bill increases the paid maternity leave entitlement from the existing 60 days to 90 days. [Update: The revised Bill which was passed on 21 March 2022 provides for 98 days paid maternity leave.]

Comment: This is welcome, and is long overdue. The government has been promising to legislate this since 2017. Public sector employees have been entitled to 90 days paid maternity leave for several years now.

(2) Restriction on termination of pregnant employee

The change: The Bill introduces a new Section 41A in the EA which will prohibit an employer from dismissing an employee who “is pregnant or is suffering from an illness arising out of her pregnancy” except on the grounds of — (a) wilful breach of contract; (b) misconduct; or (c) business closure. The new Section 41A also provides that where the employment of a pregnant female employee is terminated, the employer will bear “the burden of proving that such termination is not on the ground of her pregnancy or on the ground of illness arising out of her pregnancy”.

Comment: These changes provide much greater protection to pregnant employees from being dismissed from their employment. The existing provisions of the EA [at Section 42(1)] only protect a female employee from being dismissed if she is absent for up to 90 days post maternity leave due to illness arising from her pregnancy that renders her unfit to work. A notable effect of the protection being put forward by the Bill is that employers cannot terminate the employment of a pregnant employee for poor performance, or as part of a retrenchment exercise arising from redundancy.

Interestingly, unlike the existing Section 42(1), the new Section 41A does not contain the limit of a 90-day period. Also, while Section 42(1) refers to “illness certified by a registered medical practitioner to arise out of her pregnancy and confinement and to render her unfit for her work”, Section 41A only refers to “an illness arising out of her pregnancy”. As a result, if the new Section 41A is passed in its current from, it may render Section 42(1) redundant, as Section 41A is not limited to 90 days, and has a seemingly lower bar as to what constitutes a pregnancy-related illness.

(3) Paternity leave

The change: The Bill introduces 3 days paid paternity leave for married male employees, for up to 5 confinements. [Update: The revised Bill which was passed on 21 March 2022 provides for 7 days paid paternity leave.]

Comment: Again a much welcome and overdue change, though obviously 3 days is well short of international standards. Public sector employees have been entitled to paid paternity leave (3-10 days) for several years now.

(4) Employees can apply for flexible working arrangement

The change: Pursuant to the Bill, employees will be able to 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”. An employer who receives such an application will be required to approve or refuse the application within 60 days, and if it is refused, the employer must “state the ground of such refusal”.

Comment: This is an interesting change, but arguably is just performative, with no real impact. The employer is under no obligation to reasonably consider these applications, or to provide fair or reasonable grounds for refusing them.

(5) Employment discrimination disputes

The change: The Bill seeks to introduce a new Section 69F. which gives the Director General the power to “inquire into and decide any dispute between an employee and his employer in respect of any matter relating to discrimination in employment [and] make an order”. Non-compliance by an employer with such an order would be an offence.

Comment: As Malaysia is notably lacking in terms of any discrimination protection, this is a move in in the right direction. However, the new provisions are very vague. There are no details at all in terms of what sort of “discrimination” is being addressed, and no indication of what types of orders the Director General may make pursuant to these new powers.

(6) Notice on sexual harassment

The change: The Bill introduces a new Section 81H, which requires employers to “exhibit conspicuously at the place of employment, a notice to raise awareness on sexual harassment”.

Comment: This is another very vague provision. There are no details at all regarding regarding what this “notice” must state, and really does appear to be something that was pencilled in to tick off the box of doing something about workplace sexual harassment.

(7) Formula for calculating wages for incomplete month’s work

The change: The Bill proposes a new Section 18A, which introduces a formula for calculating wages where an employee has not worked a full month. The new Section 18A provides that “notwithstanding Section 60I” (which I will explain below) the formula to be used to calculate the wages due in these circumstances is: [(Monthly wages / Number of days of the particular wage period) x Number of days eligible in the wage period]

Comment: This provides welcome clarification, as this is often an administrative issue for HR/payroll. However, there may be confusion regarding the Section 60I mentioned above, as Section 60I — which only applies to Part IX (Maternity Protection) and Part XII (Rest Days, Hours of Work, Holidays, and Other Conditions of Service) — provides the following formula for determining the “ordinary rate of pay” for employees employed on a monthly rate of pay: [monthly rate of pay / 26]

Confusion regarding the Bill’s effect on the scope of the EA and applicability to all employees

One general drafting comment I would like to add is that there is an overall confusion regarding whether the Bill seeks to expand the scope of the EA to beyond the existing definition of “employees”. Currently, employees who fall within the scope of the EA (“EA Employees”) are those defined in the First Schedule — generally, those earning up to RM2,000/month or engaged with manual labour. This legal separation of EA Employees and non-EA Employees has long been a feature of Malaysian employment law, and certain provisions of the EA which are intended to apply to both EA Employees and non-EA Employees would be specifically carved out and stated as applying to all employees.

However, many of the drafting changes proposed by the Bill seem to be contradictory, and appear to be drafting mistakes. Some brief notes on this:

  • The Bill proposes to delete provisions such as Section 44A which extends the Part IX maternity protections to all employees (“Notwithstanding paragraph 1 of the First Schedule, this Part extends to every female employee who is employed under a contract of service irrespective of her wages”), and Section 81G which extends the Part XVA sexual harassment provisions to all employees (“Notwithstanding paragraph 1 of the First Schedule, this Part extends to every employee employed under a contract of service irrespective of the wages of the employee”).
  • Unless the intention is to extend the coverage of the EA to all employees — and there is no indication that this is the case, and the First Schedule has not been amended by the Bill — there seems no reason to delete these existing provisions.
  • It also would not make sense to expand the EA’s coverage to all employees without then carving out exclusions for provisions which would be impractical to apply to all employees irrespective of wages, such as entitlement to overtime compensation and limits on working hours. EA Employees are also entitled to termination compensation pursuant to the Employment (Termination and Lay-Off Benefits) Regulations 1980.

Concluding comments

There are many welcome changes proposed under the Bill. However, while these changes move industrial relations in Malaysia in the right direction, many of them are too shallow, and too bereft of detail to make a material impact. I would hope that, as the Bill goes through Parliament, constructive feedback will be provided, and some of these new provisions can be reworked and strengthened before the Bill is finalised.

10 thoughts on “Malaysia Employment Act amendments: 7 key changes for employers to note

  1. Bhairave 15 November, 2021 / 3:56 pm

    Hi, I would like to know what I can do in the event of being forced to resign by My employer? What options do I have? Thank You

  2. Moganah Nadarajah 14 December, 2021 / 8:36 pm

    Hi, I would like to know is there such thing as if work as a civil engineer with the basic pay of rm5000, there is no such as overtime claim? Because my husband company is not providing him overtime hence order him to work 7 days in a week with o ly 2 days off in a month. How should I go with this matter? Kindly help me to sort of this matter. Thank you

  3. Lim Kim Chin 10 January, 2022 / 4:16 pm

    Can a company request all staff to go on annual leave in view of closure of office for certain or that particular day(s) in view of certain event such as any festivals or any event that company are allowed for the deduction as no staff are present.

    How can an employer protect itself against any disagreement by the staff to deduct their annual leave if view of above. Is written memo and meeting to explain to all staff sufficient notice?

  4. Poovithira Devi 16 February, 2022 / 9:55 am

    Hi I would like to check whether how is the confirmed maternity leave in Malaysia for private sector. Most of the companies have changed to 90 days and some still remain to 60 days. Reason why I’m asking, this is not fair for those entitlement for 60 days only.

  5. Wanda Mari Rivera 22 March, 2022 / 2:37 pm

    Hi there. This article is very useful and thorough. Thank you so much for that!!!.
    I do have a question. The company I have worked for 4 years has told me that for us (foreign employees) the maternity leave is only 60 days. That this law only applies for malaysians. Is this true? If not, can a company decide not to follow this 98 days maternity leave policy?
    I have searched online and this law was recently adopted by Malaysia but from an International law. I am due in 2 months and would like more clarity on what are my rights here since everything seems to be different for foreign employees (I’m american, if that helps).

    Thank you so much!

  6. OO WENG HOCK 8 June, 2022 / 5:16 pm

    Hi i’m a remisier with RHB Investment Bank Bhd. Can the broking firm not pay us the minimum wage set at $1500. Currently my enquiries is whether can they deduct to top up for security deposit and still pay us $1000 or deduct anything above $1500 commission earned to increase our security deposit as i’ve given up hope these last 2 years to reason up with RHB as they are still paying minimum of RM1000 in spite of the change in national wage policy. You may call me for my further explanations. Thank you and have a nice day.

  7. AiLing 17 July, 2022 / 1:09 pm

    May i know whether the above 7 keys changes on amendment act was the latest version? because i noticed the Paternity Leave entitlement from the Act shared online was 7 days but above stated only 3 days.

  8. Judy Felicia 18 November, 2022 / 3:20 pm

    A company provides 28 days holidays and does not specify the number of days for annual leave or the public holidays allowed but states where there is a need to work on a public holiday, we will be compensated. However where there is an additional public holiday, like 18/19 Nov, can the company opt not to give the holiday or pay salary for the day? The reason given is that we are under a contract of service and the salaries of all the staff is more than Rm2k.

  9. surina 4 January, 2023 / 5:18 pm

    any law to cover employer if an employee absconds from work place? currently, letter of demand need to be served to the employee than only next action can take place. in many cases, employee refused to accept the AR letter. so the case cannot be established further.

  10. KL Tee 24 March, 2023 / 2:49 pm

    Hi, I am in confusion with the calculation for Incomplete Month’s work for monthly basis employees.
    As from the 7 changes for EA amendment article is:-
    [(Monthly wages / Number of days of the particular wage period) x Number of days eligible in the wage period].

    *Number of days eligible in the wage period does it means number of days present for work?

    what was the formula calculation for incomplete month’s work before EA amendement?

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