Malaysia’s employment system

Non-Malaysians require a work permit to be employed in Malaysia. Considering that the Malaysian government’s goal is to train Malaysians to be competent in all levels of employment, in certain industries such as manufacturing, only certain pre-designated and approved “key positions” may be occupied by foreigners Long term. Generally speaking, foreigners will be approved for positions only if the paid-up capital of the wholly foreign-owned Malaysian company is at least RM500,000. Companies carrying out services or wholesale and retail trade that are not regulated in Malaysia are required to have a paid-up capital of RM1 million. Without compelling reasons, the number of foreign positions allowed to be established as a registered branch of a foreign company is usually extremely limited.

Applications for foreign positions in certain industries (such as manufacturing, information technology, financial institutions, insurance companies, and educational companies) must be submitted to designated government agencies and then to the immigration department. Other executive positions requiring professional qualifications and practical experience, as well as non-executive positions requiring specialized skills and experience, may be filled by foreigners, provided that Malaysians must ultimately be trained to fill these positions. In early 2011, Malaysia introduced the “residence permit”. This permit is valid for 10 years and is not employer-specific, but is open to highly qualified foreign nationals employed in specific industries.

The Employment Act 1955 (the “Employment Act”, applicable to employees in West Malaysia) and the Sabah or Sarawak Labor Ordinances (the “Labor Ordinances”, applicable to employees in East Malaysia) regulate and Matters related to employment in Malaysia, except for civil servants and persons working in statutory bodies. The Employment Act and the Labor Regulations apply to employees who earn monthly wages within prescribed limits, which is MYR 2,000 under the Employment Act and MYR 2,500 under the Labor Regulations, regardless of occupation. Certain specific categories of employees (such as manual workers, supervisors of manual workers, drivers of commercial vehicles) are also regulated by the Employment Act and the Labor Regulations, regardless of the monthly salary they receive. As for other employees, their benefits will be governed by their employment contract and, in individual cases, common law.

Key areas covered by the Employment Act and Labor Regulations include: termination, deductions and advances from wages, liability of responsible persons and contractors for payment of wages, maternity protection, working hours and days, annual leave, sick leave, public holidays, Termination and layoff benefits. In early 2012, the Employment Act was amended to include provisions for sexual harassment in the workplace, better maternity leave benefits and the employment of non-Malaysians.

There was generally no statutory minimum wage in Malaysia except for employees in certain industries (such as cinema staff, shop assistants, hotel and catering workers, porters and stevedores). Benefits and related terms of employment are left to the parties to agree, subject to the minimum standards set out in the Employment Act and Labor Regulations, where applicable. However, with the promulgation of the National Wage Consultative Council Act 2011, Malaysia issued the Minimum Wage Order in 2012, which stipulates the minimum legal basic wage for employees based on the region where the employee belongs. The minimum wage in West Malaysia is MYR 900 per month (RM 4.33 per hour), while in East Malaysia the minimum wage is MYR 800 per month (RM 3.85 per hour). The minimum wage comes into effect in two phases. For employers who carry out professional activities (classified under the Malaysian Standard Classification of Occupations (MASCO)) and/or have 5 or more employees, the implementation date is 1 January 2013; while for employers with less than 5 employees , the execution date is July 1, 2013. Under the Minimum Wage Order 2016, the minimum wage in West Malaysia was revised to MYR 1,000 per month (RM 4.81 per hour), while in East Malaysia it was MYR 920 per month (RM 4.42 per hour). Git). The National Wages Consultative Council Act 2011 stipulates that the minimum wage will be reviewed every two years from 1 July 2016.

There is no “at will” employment practice in Malaysia. All terminations must be for “just cause or cause” and must be subject to certain procedures and requirements related specifically to the grounds for termination. The former employer may ultimately be held liable for unfair dismissal by the Industrial Court. If an unfair dismissal claim is successful, the compensation awarded can be substantial and no order will be made as to legal costs regardless of the outcome. The mediation and adjudication process will take several years. Therefore, any dismissal of employees (including non-Malaysian employees) must be handled with extreme caution to manage the risk of unfair dismissal.

The seller of a business is responsible for paying termination benefits (i.e., severance pay) to covered employees covered by the Employment Act or Labor Regulations (“covered employees”) unless the buyer pays the covered employees within 7 days of the change in ownership of the business. The protected employee makes an offer to continue to employ the relevant employee on terms and conditions that are no less favorable than before, unless the protected employee unreasonably rejects the offer. Relevant welfare arrangements payable when dismissal due to redundancy can be stipulated in the service contract or collective agreement.

The Minimum Retirement Age Law (“Minimum Retirement Age Law”) came into force on 1 July 2013. The Minimum Retirement Age Act sets the legal minimum retirement age for private sector employees at 60 years. However, this provision does not prohibit employers from setting a retirement age above 60 years.

The Minimum Retirement Age Act does not apply to employees on probation, apprentices, non-citizens, domestic workers, fixed-term employees whose employment period does not exceed 24 months (including any extension), students who are temporarily employed or whose average working hours do not exceed full-time Individuals who work 70% of the employee’s normal working hours. The Minimum Retirement Age Act also does not apply to an individual who retired at age 55 or over before the date of commencement of the Act but was subsequently re-employed.

Under the Minimum Retirement Age Law, employers are not allowed to retire their employees early before they reach the minimum retirement age. It is an offense for an employer to fail to comply with the Minimum Retirement Age Act. If found guilty, the employer may face a fine of RM10,000 for each offence.

Although the Minimum Retirement Age Law stipulates a minimum retirement age, the Minimum Retirement Age Law also provides for optional retirement before the minimum retirement age. According to the Implementation Guidelines for the Minimum Retirement Age Law issued by the National Wage Consultation Council, employers can determine the early retirement age in service contracts or collective agreements with the consent of employees. When an employee reaches the optional retirement age, he may elect to retire.

The Employees Provident Fund Act, 1991 (the “Employees Provident Fund Act”) requires employers and employees to make contributions to the Provident Fund. Since there is no mandatory retirement age for private sector employees, the retirement age is determined as a contractual matter or, if not agreed upon, by reference to the employer’s customary practices. The retirement age of 55 is not set by law but is adopted by most employers as a general practice. However, the Minimum Retirement Age Act, 2012 (the “Minimum Retirement Age Act”) provides for a mandatory minimum retirement age of 60 years (i.e. an employee shall not be allowed to retire before the age of sixty), except for employees (and only employees) ) may choose not to implement this provision.

Currently, the employer’s contribution to an employee’s salary above MYR 5,000 is 12% of the employee’s salary, while the employee’s contribution to his or her own account is 11%. For employees with a salary equal to or less than MYR 5,000, the employee’s contribution remains unchanged at 11%, while the employer’s contribution is 13% (employers can claim income tax deductions on contributions to the Employees’ Provident Fund, up to 19%).

Previously, the Employees Provident Fund Act required employers and employees to make contributions to the Employees Provident Fund before the employee reached the retirement age of 55 years. To be consistent with the Minimum Retirement Age Act, employers and employees are required to continue to contribute at the rate of 12% and 11% respectively until the employee reaches the age of 60.

Prior to June 1, 2016, employers were required to pay Social Security Organization (SOCSO) contributions for all employees whose monthly salary did not exceed MYR 3,000, and those whose initial monthly salary did not exceed MYR 3,000 but whose subsequent salary exceeded Employees with a limit of MYR 3,000 and who have previously contributed to the social security institution. Effective June 1, 2016, employers and employees are required to contribute approximately 1.75% and 0.5% of employees’ wages, respectively, to the insurance scheme operated by the Social Security Institution, up to a maximum monthly salary of MYR 4,000. This contribution must be made even though the employer may have insured its employees individually under a group insurance plan or a personal accident insurance policy.

The Whistleblower Protection Act (the “Whistleblower Protection Act”) became effective on December 15, 2010. Its goal is to encourage reporting of misconduct by ensuring that whistleblowers will not be subject to retaliation after making a report that is protected under the Whistleblower Protection Act.

The Whistleblower Protection Act will have widespread and potentially significant impacts on all employers in Malaysia, regardless of the nature of the business and the employee’s position. Therefore, employers should take a proactive self-regulatory approach and implement comprehensive whistleblower protection policies to facilitate whistleblowing.

As the Personal Data Protection Act 2010 (the “Personal Data Protection Act”) came into effect on 15 November 2013, where the whistleblower and the alleged wrongdoer are both employees, the employer is required to Find the right balance.

The Personal Data Protection Law was enacted to regulate the collection and use of personal data. Simply put, the Personal Data Protection Act imposes statutory obligations on employers (as data users) who process the personal data of employees (as data subjects). Employers are required to obtain employees’ consent before processing their personal data, inform employees by means of written notice that their personal data is being processed, state the reasons for collecting personal data, be responsible for protecting personal data, ensure the accuracy of personal data, and allow employees to access it. Review the personal data collected.

Under the Personal Data Protection Act 2013 (Personal Data Protection (Types of Data Users) Order), certain types of data users are required to register.

Source of this article:
Wong&Partners Baker & McKenzie, Malaysian law firm