Flexible Working Arrangements: What employers should include in a Flexible Working Policy and other recommended documents

Pursuant to changes contained in the Employment (Amendment) Act 2022 (“the Amendment Act”), which the government has announced will come into force on 1 September 2022, employees in Malaysia will be allowed to apply to their employer for a Flexible Working Arrangement (“FWA”). (For a more comprehensive look at the changes under the Amendment Act, read my earlier article: “Malaysia Employment Act amendments: 7 key changes for employers to note”)

The introduction of FWAs under the Amendment Act is the first time that FWAs have been formally recognised in Malaysia, and may be the first of many such changes — the government has also shared that it is conducting studies on the feasibility of a four-day working week. Malaysian employers can expect FWAs to become more commonplace in the near future, and must start preparing now. Several of my clients are already putting in place the necessary flexible working policies and other related documents to not only ensure that they are not caught unprepared come the 1st of September, but also to lay the foundations for the anticipated changes in the next couple of years.

This article sets out the essential points that need to be covered in a Flexible Working Policy, and also other recommended administrative/HR documents that employers should strongly consider putting into place to smoothly accommodate FWAs.

What the Amendment Act says

The basis of any internal documents and policies must always be what is actually stated by the law. The FWA provisions in the Amendment Act are fairly simple. FWAs are provided under the Amendment Act by the introduction of a new Part XIIC.

A new Section 60P states that an employee may apply to an employer for a flexible working arrangement to vary the —

  • hours of work;
  • days of work; or
  • place of work,

in relation to his employment.

The application process is set out in a new Section 60Q, which states that:

  • The employee’s flexible working arrangement application must be in writing “and in the form and manner as may be determined by the Director General” (for now, no direction has been made regarding the form/manner of the application).
  • The employer must approve or refuse the application within 60 days from the date the application is received, and inform the employee in writing of the decision.
  • If the application is refused, the employer must state the ground of such refusal.

Therefore, these are the key legal elements which must be covered by any internal policies, and which will then be supplemented by content to address various other practical considerations.

Essential points that need to be covered in a Flexible Working Policy

Even after the Amendment Act comes into force, it is not mandatory for employers to put in place a Flexible Working Policy. However, introducing such a policy is a recommended best practice, as doing so will provide clarity for the management and employees on what the employer’s position is regarding flexible working arrangements. A clear policy also means there will be certainty for all parties on how FWA applications will be handled, and the Flexible Working Policy can be supplemented by an internal guidance document for HR/management.

A Flexible Working Policy can range in complexity and length, from as simple as a few paragraphs on a single page, to a much more comprehensive policy. These are a few key issues which an effective Flexible Working Policy should address.

  1. The applicability, scope, and effect of the policy: It should be clear from the outset which employees the policy applies to. This is particularly important for larger and multi-national organisations which are likely to engage workers on a wide range of different employment relationships, including part-time employees, temp workers, secondees, and interns. The policy should also state that while flexible working arrangements are recognised by the company, this does not mean that all applications for such arrangements will be automatically approved, or that employees are contractually entitled to such arrangements.
  2. The different types of flexible working arrangements recognised by the company: While the Amendment Act generally allows employees to apply to vary the hours, days, and place of work, an employer can provide more details through an internal Flexible Working Policy. For example, the policy can define specific arrangements such as temporary FWAs (where employees can apply for a FWA for a fixed period of 3-6 months), or fixed shift FWAs (where employees can choose either to work Monday-Wednesday or Wednesday-Friday). The benefit of expressly setting out the different types of “company approved” FWAs is that it provides employees with clear options to choose from, allows the company to have some control over the types of FWA applications that will be submitted, and also sets expectations that FWA applications outside those options are likely to be rejected.
  3. Any pre-determined conditions or limitations on flexible working arrangements: In addition to the specific types of FWAs as mentioned in the previous section, the policy should also spell out the conditions or limitations on those FWAs. For example, the company may allow an employee to work remotely, but subject to a limitation that the location must be within the same country or within a specific distance from the office, or that the employee must be able to be present in the office for a monthly in-person meeting, or be able to attend meetings at customers’ offices. As another example, the company may allow reduced working hours subject to a minimum number of hours per week.
  4. Obligations in relation to confidentiality and health and safety: Two major concerns that employers have when it comes to remote working are in relation to confidentiality, and health and safety. The Flexible Working Policy should set out the expectations and obligations on employees who are allowed to work remotely. The extent of these obligations will depend on the specific role, information access level, nature of work, as well as industry-specific requirements. Some employers may require high-level security in relation to documents or materials to be in place in the employee’s remote workspace. For health and safety, there should be minimum requirements in terms of equipment and the condition of the workspace (or the requirement to have a designated workspace), and some employers may want to mandate a health and safety inspection, or a self-assessment checklist.
  5. Potential changes to salary, flexible working allowances, or other benefits/remuneration: Depending on the types of FWAs specified in the policy (see above), it may be possible to spell out details of changes to compensation as a result of an approved FWA. Alternatively, the policy can generally explain that certain types of FWAs will come with changes to salary or benefits — for example, a permanent reduction in working hours will mean that an employee’s existing salary will be reduced, and possibly based on a fixed formula. For multinational employers, an employee who will be working in a different country under a FWA may have to switch to a different payroll location and have his/her salary localised to his/her new location based on the company’s pay scales in that jurisdiction. The policy can also include details of any new allowances as a result of a FWA (for example, remote office equipment and set-up allowance), or any existing allowances that will no longer be payable (for example, travelling or parking allowances).
  6. The company’s expectations of employees under a FWA: A comprehensive Flexible Working Policy should also briefly set out the company’s expectatations of employees who have been approved to work under a FWA. This should include the basics such as that employees with reduced working hours are still expected to complete their key deliverables, attend all scheduled meetings, and continue to abide with the company’s processes and policies. It can also include specifics where relevant, such as being required to attend a minimum number of on-site meetings.
  7. The application process: A key part of any Flexible Working Policy will be the application and approval process. In addition to the general applicability/scope section which was mentioned above, the section detailing the application process can set out other eligibility criteria. For example, the company may make it clear that applications from employees in their probationary period, or who are currently undergoing a PIP, will not be approved. This section can set out how applications can be submitted (ideally the company will also have a standard FWA application form — see “Other recommended documents” below), and the approval process. Where relevant, the policy should also explain that any approval is conditional upon the employee signing a Flexible Working Agreement or a supplemental document amending the relevant terms and conditions of their existing employment contract.

Other recommended documents

Besides the Flexible Working Policy, it is also a recommended best practice for employers to have some or all of the following documents in place:

  1. Workflow or guideline for HR/management: This is a confidential document for HR/management-level staff only, and will set out guidance on how to handle applications. This will include setting out the relevant persons-in-charge for handling, deciding on, and responding to applications, as well as the key considerations and relevant documents. This is an important guidance document to ensure that the proper process is followed and the company is not exposed to any legal risk.
  2. Template FWA application form: This standardised application form will be referred to in the Flexible Working Policy, and employees will be strongly encouraged to use this form when applying for FWAs. Having a template in place will ensure that all the relevant information is submitted as part of the application, and also allows the company to remind employees of the terms and conditions that will be attached to successful FWA applications. If the Flexible Working Policy clearly sets out the different types of FWAs recognised by the company (see “#2: The different types of flexible working arrangements recognised by the company” above), then the application form can include box-tick options (for example, the employee can apply for “FWA 4: Change of days of work to Wednesday to Friday”).
  3. Template approval or rejection letters: Again, having this standardised document in place will make it easier for HR/management and ensure that the company is not exposed to any legal risk. The standard approval letter will list down all related documents (for example, the FWA Agreement or compliance checklist) and standardises all required changes to the terms and conditions of employment. The standard rejection letter will contain clearly-worded and legally-acceptable reasons for rejecting any FWA applications.
  4. Template Flexible Working Agreement: The purpose of this document is to set out any changes to the existing employment contract or terms/conditions of employment. Whether or not this has to be in the form of a separate contract, an addendum to the employment contract, or a simple letter of undertaking by the employee, will depend on the extent of the changes required.
  5. Compliance checklist for remote working arrangements: This is the self-assessment checklist referred to above (see “#4: Obligations in relation to confidentiality and health and safety” above) and is a fairly standard document that employers who have employees working remotely should already be familiar with.
  6. Template FWA termination letter: This template is to bring any FWAs to an end if required. Having this in place will ensure that any legal changes that were implemented due to the change to a FWA will be appropriately reversed where necessary.

Benefits of preparing a Flexible Working Policy and the other recommended documents

While it is not mandatory for employers to have a Flexible Working Policy or any of the other documents recommended in this article, many Malaysian employers are already preparing these documents, and it is a recommended best practice with several clear benefits:

  • It clearly communicates the employer’s position on FWAs to employees, and sets out the employer’s expectations of any employees who are considering FWAs, as well as the repercussions of FWAs such as changes to compensation and benefits.
  • Setting out the types of FWAs recognised by the employer will help to streamline the type of FWAs that employees will apply for. For employers with a large workforce, this is crucial to ensure that there are not too many variations in the type of work arrangements.
  • The standardisation and streamlining of the process will also save a lot of time for HR/management and create more certainty in the process from start to finish. This greatly reduces exposure to legal risk for any potential missteps.
  • From a practical perspective, having a clear Flexible Working Policy will also help to make it easier to justify any rejections of FWA applications that fall outside the parameters and conditions set out in the policy.

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