A Quick Glance into the Future of Employment Standards in Malaysia

The long-awaited bill provides new amendments to the current EA provisions which include the alteration, introduction and deletion of certain clauses

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On the 25th of October 2021, the Human Resource Minister, Datuk Seri M. Saravanan, tabled the Employment (Amendment) Bill 2021 (the Bill) to amend the Employment Act 1955 (the EA). The long-awaited bill provides new amendments to the current EA provisions which include the alteration, introduction and deletion of certain clauses. The proposed amendments are to bring the Malaysian employment standards and practices in line with the requirement of the Malaysia-United States Labor Consistency Plan and the International Labour Organisation (ILO).

There are more than 20 clauses amended in the Bill. Here are some of the key proposed changes that employers should take note of;

Maternity Provision & Paternity Leave

The Bill proposed to increase the current maternity leave from 60 days to 90 days. The Bill also provides the restriction for employers to dismiss pregnant employees on grounds other than misconduct, willful breach of contract and closure of business.

The Bill introduces Paternity Leave which entitles male employees to receive three (3) consecutive days of paternity leave for each confinement, up to a maximum of five (5) confinements (regardless of the number of spouses). In order to successfully apply for this leave, the male employee must be working with the company for at least 12 months and subject to him notifying the employer at least 30 days from the expected confinement or as early as possible after the delivery.

Working Hours & Sick/Hospitalisation Leave

The Bill proposed to reduce the current working hours from 48 hours to 45 hours per week. This will instantly affect current employment contracts that provide fixed working hours and overtime schedules.

The Bill also includes the segregation of Sick Leave and Hospitalisation Leave entitlement. For example, an employee is entitled to 60 days hospitalisation leave if hospitalisation is necessary without touching the normal sick leave entitlement.

Flexible Working Arrangements (FWA)

In light of the working conditions adapted during this pandemic, the Bill allows employees to make an application in writing for FWA (i.e. an arrangement to vary the hours of work, days of work or place of work) to the employer. The employer has no obligation to approve the application; however, they are required to provide grounds/reasons for refusing to allow applications.

Prior approval from the Director-General of Labour to hire Foreign Employees

The Bill introduces a new requirement for employers to obtain prior approval from the Director-General of Labour (DGL) in order to hire foreign employees. Current practice only requires the employer to furnish particulars of a foreign employee to the DGL.

There are conditions set out for the application, and failure to get prior approval from the DGL would subject the employer to a fine not exceeding RM100,00 or to imprisonment for a term not exceeding five (5) years or to both.

The calculation for wages for incomplete month

Instead of following the existing “26 days” formula in the EA, the Bill introduces a formula for how wages are to be calculated when an employee has not completed a full month service, as follows:

(Monthly wages / Number of days in the wage period) x number of days eligible in the wage period).

Punishment for offences

The Bill proposed enhancement to the current punishment fines for offences under the EA, as follows:

General Penalty has been increased from RM10,000 to RM50,000.

Penalty for no compliance of the DGL order pursuant to any inquiry is to be increased from RM10,000 to RM50,000 with a daily fine for non-compliance increased from RM100 to RM1,000 per day.

The Bill also includes amendments to the apprentice contract requirements, discrimination inquiry, sexual harassment notice, extended powers of the labour court and etc. The Bill is in the second reading stage at the Dewan Negara (House of Representatives). Thus, there is no certainty that all of the proposed amendments will be passed eventually.

Nevertheless, employers are advised to take note of the proposed amendments to prepare for possible changes (once the Bill is passed) in the company’s employment terms and practices. Be mindful to comply with the existing laws and regulations and to seek a consultation to better safeguard the desired arrangements.