The practical effect of this change is that employees with monthly wages in the RM2,001-RM4,000 range who previously may have been used to occasionally working beyond their normal working hours to complete urgent tasks, or to attending to work matters on weekends or public holidays, will be entitled to overtime payments for doing so. However, overtime does not simply mean any work done outside of the 9-5 window. There are various, sometimes fairly technical, definitions and legal provisions that have to be considered in order to understand the legal definition of “overtime”.
EA salary threshold increased from RM2,000 to RM4,000
Prior to the new amendments, the vast majority of the EA only applied to employees earning up to RM2,000/month, or to specified groups of employees irrespective of wages (e.g. those engaged in or supervising manual labour, and several other groups). The existing EA set out specific provisions to enable non-EA employees to also be included in the sections of the EA regarding maternity protection (Part IX) and sexual harassment (Part XVA).
Following the First Schedule Amendment Order which will come into force on 1 September 2022, the way the EA scope is defined has been reversed. While it previously only applied to employees earning up to RM2,000/month with some specific sections applying to all employees, it will now apply to all employees irrespective of wages, with some specific sections not applying to employees earning more than RM4,000/month. Here are the details:
The EA will now apply to “any person who has entered into a contract of service”.
However, the sections of the EA in relation to overtime payments and termination benefits will not apply to employees whose wages exceed RM4,000/month (the full list of excluded EA provisions is listed below).
The list of EA provisions which do not apply to domestic employees (previously known as domestic servants) has also been expanded.
This is the full list of EA provisions which will not apply to employees earning more than RM4,000/month:
Subsection 60(3): Overtime for work on rest days.
Subsection 60A(3): Overtime for work outside of normal working hours.
Subsection 60C(2A): Shift work allowance.
Subsection 60D(3): Overtime and allowance for work on public holidays.
Subsection 60D(4): Overtime for work on holidays on half working days.
Subsection 60J: Termination, lay-off, and retirement benefits.
What employers need to do
All employers will need to review their existing employment contracts and policies to ensure that they comply with the EA. It should be noted that Section 7 of the EA states that any terms or conditions which are less favourable to an employee than those provided under the EA will be void and of no effect. This includes contracts which were entered into before 1 September 2022.
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.