Malaysia: Employment Act amendments and minimum wage

• Several amendments to Malaysia’s Employment Act (EA) came into operation on 1 April 2012.
• Key changes include a new sexual harassment regime, the extension of maternity leave entitlements, notification requirements for a foreign employee’s termination of employment and personal liability for officers of corporate entities.
• The wages threshold which determines whether the EA applies to a non-manual worker has also been raised from MYR1500 to MYR2000.
• On 1 May 2012, the Prime Minister announced the national minimum wage rates to apply to most workers and which are due to come into effect later this year.

Key amendments to the Employment Act

The most significant changes to the Employment Act (EA) include: 

• Higher wages threshold: The wages threshold which determines whether the EA applies to a non-manual worker has been raised from MYR1500 to MYR2000.
• New regime for sexual harassment: A new regime for the handling of complaints of sexual harassment between employers and employees has been introduced.
• Maternity leave entitlements: Maternity leave entitlements are now extended to all female employees regardless of salary earned.
• Dismissal of pregnant employees: Dismissal of pregnant employees during the period in which they are entitled to maternity leave is an offence. This protection extends to all female employees regardless of salary earned.
• Termination of foreign employees: Employers of foreign employees must notify the Director General within 30 days of a foreigner’s employment being terminated or a foreigner absconding from the workplace.
• Personal liability for officers: Liability for offences under the EA, including those arising under the new sexual harassment regime, will be extended to individual directors and other officers of a corporate entity.
• Public holiday: Employees covered by the EA are entitled to an extra day of paid leave on Malaysia Day.

National minimum wage

As explained in our December 2011 post, the National Wages Consultative Council Act 2011 which came into force on 1 January 2012) established the Council earlier this year and a legal framework for the introduction of minimum wage in Malaysia.

The minimum wage rates, announced by the Prime Minister on 1 May 2012, have been set on the advice of the National Wage Consultation Council, and depend on the locality of the employment. The national minimum wage will be MYR900 per month for employees in Peninsular Malaysia; while employees in Sabah, Sarawak and the Labuan Federal Territory will be entitled to a minimum of MYR800 per month.

Implications for Employers

Employers must ensure that company policies and practices reflect the changes to the EA and take any necessary action to ensure active compliance (eg the introduction of diversity training to educate employees in the prevention of sexual harassment at work).

 Employers should also start to review their pay structures in light of the proposed introduction of a national minimum wage and make any amendments where necessary to comply with the applicable legislation.

 This article was written by Celia Yuen and Rachael Wong.