Employment Act 1955

Introduction


The Employment Act 1955 is an Act, which provides for the protection of employees in Malaysia. It covers the sates of Peninsular Malaysia including the Federal Territory of Labuan whereas Sabah and Sarawak have their own Labor Laws in the form of Sabah Labor Ordinance and the Sarawak labor Ordinance. The Act specifies the term and conditions service like working hours, rest day, notice periods, wages, deduction and others. It also gives details of fringe benefit entitlement like medical leave, annual leave, public holidays and overtime rates.

The Act forms the basis of employment contracts between employer and employee because it spells out the minimum terms and conditions of employment for employees who are covered under the EA as per The First Schedule of The Act. However, employers are free to provide better terms but a penalty awaits organizations that provide inferior terms.

The Act

In work place, relationship between employer and employee is also sometime known as “master and servant” relationship. It begins once parties entered into a Contract of service whether in oral or writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employers as an employee.

In that respect both parties are offering and expecting something in return. Master for instance is offering a wages and expecting servant to come to work. Wages under the Act is basic wages and all other payments in cash payable to employee for work done. The Act has also stated the limitation related to wages in Part 3 of the Act.

Under section 19 (1) every employer shall pay the wages to his employee not later than the 7th day after the last day of wage period. The wage period shall not exceed one month as per section 18.

No employer shall make an advance of wages which exceeds the amount earned in the preceding month unless such advance is made to enable him under Section 22 (1)

(a) to buy or improve a house

(b) to buy land

(c) to buy livestock

(d) to buy motorcar, motorcycle or bicycle

(e) to buy shares in the company

(db)to buy a computer

(dc) to pay for medical expenses of self and immediate family members

(dd) to pay for daily expenses for temporary disablement

(de) to pay for educational expenses for self and immediate family.

Under Part 4, Section 24 (2), the Act allows employer to deduct employee’s wages (4.1) for the following purposes:

(a) Overpayment of wages made during the immediately three months

(b) Indemnity due to the employer by the employee arising from the unexpired days of notice terminating the CS

(c) Recovery of advance of wages

(d) Authorized by law i.e.; EPF, SOCCO, CP38 etc

(e) Requested in writing by the employee for union or co-operative society entrance fee, subscription, installments and interest on loan or other dues and payment of shares in the company

However, under section 8 of the Act, The total deduction in respect of any month shall not exceed 50% of the wages earned by the employee in that month. This limitation however under Section 9 shall not apply to:

(a) Deduction from the indemnity payable by employer to employee under section13 (1)

(b) Deduction from the final payment of the wages of an employee for any amount due to the employee on termination of the employee

(c) Deduction for the repayment of housing loan which subject to prior written permission from Director General.

Employer is required In Part 5, which specifies system of payment of wages to pay the wages into an account at a bank, finance company, financial institution or other institution licensed or established under Banking and Institutions Act 1989 in any part of Malaysia in the name of the employee. Section 25 (1)

* Malaysia's Industrial Court and Industrial Arbitration Tribunal, in some of their judgments, have indicated some factors that should be considered in determining wage rates and wage levels. In one Industrial Court case, the Court determined that in fixing wage levels, employers should;

(a) Compare their wage levels with that of similar or related industries.

(b) Consider whether their wage levels are fair, giving due consideration to the cost of living.

(c) Take into account their financial capacity to meet such wage levels.





In another case, the Industrial Arbitration Tribunal stated that due consideration should be given to the following factors in determining wage and salary levels and increases:

(a) The cost of living.

(b) The wages and salaries paid by comparable establishments in the same region.

(c) Any inconsistencies in the wage and salary structure of the company itself.

(d) The financial capacity of the company to institute wage and salary increases.

In addition, the Tribunal pronounced that employers should consider factors such as labor productivity, prevailing wage rates in similar industries in the same region and the present economic condition as well as the future prospects of the industry in determining wage levels

(*Source: Journal of Comparative International Management)

In return to the wages paid by company, employee is expected to provide their service and to come to work. Here, employer should observe part 10 of The Act which stresses on Rest days, Hours of works, Holidays and other condition of service.

Rest Day

Section 59 of the Act specifies that every employee shall be allowed in each week a rest day of one whole day. The rest day need not be Sunday or Friday but could be any day of the week so long as the employee has been informed trough a roster before the beginning of the month.

This rule on rest day will not apply if an employee is on maternity leave, sick leave, or temporary disablement leave under SOCSO or the Workmen’s Compensation Act.

If a company works on a five-day week with two off days, then the second off day is the official rest day. Conversely, if the company observes three rest day, for example, in a four crew shift cycle roster, then it is a third day which will be the official rest day, while the preceding two days would be off days entitling the employee to normal overtime rate if required by employer.

Under section 59(1B) of The Act, it makes it possible for the employer with the approval of the Director General, to grant the rest days on any day during the month. For example, if the employer wishes to permit the employees to accumulate their rest days and take four rest days consecutively like in the case of Genting Hingland’s workers.

For employees engaged in shift work, a rest day is a period of any 30 consecutive hours free from work.

Under section 60 (1), no employee shall be compelled to work on a rest day unless he is engaged in work which need to be carried on continuously or by a succession of shifts. Exceptions are when there is an emergency as provided for in section 60A (2) of The Act as follows:

• Accident, actual or threatened, in or with respect to his place of work

• Work, the performance of which is essential to the life of the community

• Work essential for the defense or security of Malaysia

• Urgent work to be done to machinery or plant

• An interruption of work which it was impossible to foresee

• Work to be performed by employees in any industrial undertaking essential to the economy of Malaysia or any essential services as defined in the Industrial Relations Act 1967.

Hours of Work

Section 60 A (1) of The Act specifies that no employee shall be required to work:

(a) more than 5 consecutive hours without a rest of not less than 30 minutes

(b) more than 8 hours a day

(c) more than a spread over period of 10 hours a day

(d) more than 48 hours a week

“spread over period” of work in “c” above means a continuous period calculated from the time employee starts work for the day, up to the time he stops work, including any period of rest or break within the continuous period. Example of work is personal drivers or waiters who do not perform continuous work during the day.

An employee who is engaged in work which must be carried on continuously and which requires his continual attendance, however, may be required to work for eight consecutive hours inclusive 45 minutes break. In addition, the Director General of Labor may on the written application of an employer, grant permission to the employer to enter into a contract of service to work in excess of these limits.

Employer must observe they agreed working hours with employee and must not force employee to work beyond the agreed hours. Industrial court of Malaysia in the case of Pn Vasanthi A/P Suvalingam Vs Price Solution Sdn Bhd has decided that Price Solution Sdn Bhd (a company) had breached the fundamental term of its contract (employment contract) when they had forced Pn Vasanthi to work more than her normal working hours.

Overtime

Overtime means the numbers of hours of work carried out in excess of the normal hours of work per day. Work on rest days and public holidays shall however not be construed as overtime.

The maximum hours of overtime allowed to be done are determined by the Minister of Human Resources. The current maximum overtime hours is 104 hours per month. Section 60A (7) states that no employee is allowed to work for more than 12 hours in any one day, except in emergencies like accident or urgent work to machinery as described earlier under section 60 A (2). This provision would mean that even if overtime is paid, the limit is still 12 hours.

Notwithstanding the above, an employee who is engaged in shift work may be required to work more than 8 hours a day or more than 48 hours a week but the average number of hours worked over any period of 3 weeks shall not exceed 48 hours per week

Holidays

All employees shall be entitled to a minimum of 11 paid public holidays in one calendar year (sec. 60D (1)). Five of these holidays are specified as follows;

I. The National Day

II. Birthday of the Yang di-Pertuan Agong

III. Birthday of the Ruler/Yang di-Pertua Negeri/Federal Territory Day

IV. The Workers' Day

V. Malaysia Day



If the paid public holiday falls on a rest day, then the Act provides that the following day shall be the substituted paid public holiday. The employer can then choose any six of the remaining public holiday for which employee will be paid. These six shall be exhibited clearly at the place of employment before the commencement of each calendar year, so that employer will know which the holidays to be observed in the company are. (sec 60D (1A))

Section 60D (2) states that any unexcused absence immediately before or after a public holiday will result in loss of holiday pay. If an employee is on sick leave on a paid public holiday, section 60D (1B) of the Act provides that the employer shall grant another day as a paid holiday in substitution. However, this substituted day off does not necessarily have to be the first working day following the holiday.

Annual Leave

Section 60E (1) of the Act provides an employee shall be entitled to paid annual leave as follows:

• Less than 2 years’ in service = 8 days a year

• 2 to 5 years’ service = 12 days a year

• More than 5 years’ service = 16 days a year

According to the Act, in proportioning annual leave, any fraction of a day which is less than half shall be disregarded, and where the fraction of the day is half or more, it shall be regarded as one day.

In the reported case of Kong Brothers Engineering Works Sdn. Bhd. v. Daniel Anmany Susemaikam (2004), the Court remarked that the act of leaving the work place without leave or deliberately staying away from work is a violation of discipline and amounts to willful insubordination.

OP Malhotra in his book “The Law of Industrial Disputes” (2nd Edition), said: “No employee can claim leave of absence as a matter of right, and remaining absent without leave will itself constitute gross violation of discipline. Hence, continued absence from work without permission will constitute misconduct justifying the discharge of a workman from service”.

Therefore, employee must inform or attempt to inform the company and obtained necessary approval prior to the leave.





Summary

The Act serves as a very important document to regulate master and servant relationship since it spells out must be provided to servant. Any master that does not provide the minimum terms and conditions as specified in the Act will be guilty of an offence and subject to penalties.

As an HR practitioner, one of our key objectives is to ensure legal compliance to all the labor legislation in the country, to ensure that the company is not subject to any penalties for breaking the law. Besides the cost involved when a company is penalized, it is important to avoid embarrassment to the image of the company.

The Act if it had been strictly adhered will helps to create industrial