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Unpredictable implementation of amendments means full compliance with Employment Act proving problematic for Malaysian employers

Marcus van GeyzelLeave a comment

The Malaysian government this week urged all employers to ensure compliance with the revised Employment Act (“EA”). This is following the wide-ranging amendments to the EA which came into force on 1 January 2023.

While the comments from Human Resources Minister V. Sivakumar were targeted at the reportedly widespread non-compliance with the reduced 45-hour weekly working hour limit (down from 48 hours/week), it brought into focus the widely-known reality that many employers are in fact not in complete compliance with the amended EA.

However, while some irresponsible employers are being unfair to employees and blatantly delaying making changes, to some extent there may be some justification for this non-compliance when it comes to the EA in general.

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Employees earning up to RM4,000/month will be entitled to overtime payments. Here’s what employers need to know.

Marcus van Geyzel16 Comments

[Note: When this article was first published on 18 August 2022, the amendments to the Employment Act were scheduled to come into force on 1 September 2022. In late August 2022, the government announced that the implementation date would be deferred to 1 January 2023. This article has been edited to reflect the new implementation date, with any new text in red.]

From 1 September 2022 1 January 2023, when the new Employment Act (“EA”) amendments come into force (See: Employment Act to apply to all employees from 1 January 2023, some sections subject to increased salary threshold of RM4,000/month), all employees with wages up to RM4,000/month will be entitled to overtime payments. This is a significant change from the pre-amendment EA, where generally only employees with wages up to RM2,000/month were entitled to overtime payments.

This widened scope will have a major financial impact on many employers, who have already had to cope with the increased minimum wage from 1 May 2022 (See: Confirmed: New Minimum Wages Order effective 1 May 2022; employers with less than 5 employees exempted), and the Malaysian Employers Federation recently called on the government to defer the implementation of the EA amendments.

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”.

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