chap2 legal

8/12/2019 Chap2 Legal

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Chapter 2LEGAL ASPECT IN HUMAN

RESOURCE MANAGEMENT

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Learning Objectives

At the end of this chapter, you should be

able to:

1. Discuss various labour laws in Malaysia.

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Introduction

Human resources manager must be aware of and keep up-to-date with the current and new laws concerning

employment in the country.

The compliance of labour law by the organisation can

enhance motivation and morale of employees becausethey will feel that there is justice in the organisation, where

their rights are protected.

Non-compliance with the stipulated rules and regulations

will have a serious impact on the organisationsbusinesses, because the organisation may have to face the

legal allegations.

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Labour Laws in Malaysia

Employment Act 1955 Minimum Wages Order 2012

Minimum Retirement Age Act 2012

Children and Young Persons (Employment) Act 1966

Workers Minimum Standards of Housing and AmenitiesAct 1990

Workmens Compensation Act 1952

Employees Social Security Act 1969

Employees Provident Fund Act 1991

Trade Union Act 1959

Industrial Relations Act 1967

Occupational Safety and Health Act 1994

Pembangunan Sumber Manusia Berhad Act 20014


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Employment Act 1955

It is administered and enforced by the Department of

Labour Peninsular Malaysia.

It contains provisions on the minimum standards for

setting terms and conditions of employment of employees

in the private sector located within the states of PeninsularMalaysia and Territory of Labuan.

The major aim of this Act is to set minimum labour

standards for employees and to protect them from

exploitation.

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The Employment Act 1955 only covers and protects:

1. private sector employees, whose salary is not more than

RM2,000 per month.

2. those who work as manual labourers, supervise manual

labourers, operate, or maintain mechanically propelled

vehicles, or domestic servants, irrespective of theirmonthly wages.

3. foreign workers, part-timers, temporary/fixed-term contract

employees as long as they satisfy the criteria 1 and 2.

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Main Areas Covered by the

Employment Act 1955

1. Contract of Service

Is an agreement when a person agrees to employ another

person as an employee and that other person agrees to serve

as an employee.

Can be in an oral or written form and can also be expressed orimplied.

For employees who are covered by a valid Collective

Agreement that is signed between the employer and its union,

the terms and conditions as stipulated in the collectiveagreement will apply.

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Although a contract of service may be made orally or in

writing, the following terms shall be given to the employee in

writing on or before he/she starts the job:

(a) employees name and number of identity card;(b) type of employment and position;

(c) wages rate;

(d) period of wages;

(e) other allowances/incentives payable and payment rates; (f)

other additional benefits;

(g) normal hours of work per day;

(h) overtime rates;

(i) number of days entitled for annual leaves, public holidays,

medical & hospitalisation leaves, and other leaves with pay;(j) the period of notice for termination or wages in lieu of notice

as agreed;

(k) retrenchment benefits.

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2. Payment of Wages

The Employment Act 1955 had defined wages as basic

wages and all other payments in cash payable to an employeefor work done in respect of his/her contract of service.

However, the wages do not include the following:

a) The value of any house accommodation; the supply of food,fuel, light, water, or medical attendance; any approved

amenity; or approved service;b) Any contribution paid to the pension fund, provident fund,

superannuation scheme, retrenchment, termination, lay-offor retirement scheme, thrift scheme;

c) Any other fund or scheme established for the benefit orwelfare of the employee;

d) Any travelling allowance or the value of any travellingconcession;

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e) Any sum payable to the employee to defray specialexpenses entailed on him/her by the nature of his/her e

mployment;

f) Any gratuity payable on discharge or retirement;

g) Any annual bonus or any part of any annual bonus.

The wages of an employee can be calculated based on

monthly, weekly, daily, hourly, piece rate basis. An employees wage must be paid at least once a month.

The payment of wages must be made not later than sevendays after the end of the wage period.

If an employee terminates the contract of service withoutproper notice or leaves before the end of the notice period, thewage must be paid within three days from the day theemployee left.

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In case of normal termination with proper notice, wages

must be paid not later than the day on which the contract

terminates.

The employer shall issue a statement to an employee to

show the details of wages, allowances earned, and lawful

deduction during the wage period.

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3. Employment of Women

Employers should not request their female employees to work

between the hours of 10o clock in the evening and 5o clock inthe morning.

A female employee must be given a rest of at least 11 hours

before commencing work for the day.

Female employees are not allowed to be employed for any

underground works.

Maternity Leave and Allowance

Female employees are entitled to maternity leave andallowances for a period of not less than 60 consecutive days of

each birth.

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The female employees are allowed to take 14 days earlier than

the date originally determined, if certified by a registered

medical practitioner.

A female employee irrespective of her wages and position

shall be entitled to receive maternity allowance for the eligible

period from her employer if:

a) She has been employed at any time in the four months prior

to her confinement;

b) She has worked for a period of 90 days during the nine

months before her confinement.

A female employee must within a period of 60 days before her

confinement informs her employer regarding her pregnancyand the date from which she intend to start her maternity

leave.

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The maternity allowances can be suspended by the employer

if the female employee failure to notify it to the employer. A female employee shall not entitle to any maternity allowance

if at the time of her confinement she has five or more surviving

children.

Confinement is defined as giving birth after at least 22weeks of pregnancy, irrespective of whether the baby is born

dead or alive.

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4. Working Hours and Holiday

Section 60A of the Employment Act 1995 has restricted therights of employer to require its employees to work:

a) more than five consecutive hours without a period of rest of

not less than 30 minutes duration;

b) more than eight hours per day;c) more than 48 hours per week; and

d) in excess of a spread over period of 10 hours in one day.

Every employee is entitled to have a rest day of one whole dayin a week.

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Every employee is also entitled to have 11 paid public holidays.

The five public holidays, which are compulsory to be granted to

the employees, are:a) National Day

b) Malaysia Day

c) Labour Day

d) Yang di-PertuanAgongsbirthdaye) The birthday of the Sultan or the Governor of the State

where the employee mainly works.

These five paid public holidays cannot be substituted for another

day or other types of holiday.

The remaining six paid public holidays can be selected by the

employer or be substituted to other days with the agreement

between the employer and the employees.

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When an employee works beyond normal hours of work in a day,

he/she is entitled to claim for overtime pay.

The limit of overtime work should be a total of 104 hours in any

one month, which should exclude overtime hours on rest day andpublic holidays.

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Days Pay Rate Overtime Pay

Normal work days *Ordinary rate of pay (O.R.P) 1.5 number of hours

Rest day 1 days wage

O.R.P (if theemployee works less than half of

his/her normal hours of work).

2 days wages O.R.P (if the

employee works more than half but

does not exceed his/her normalhours of work)

2

number of hours

Public holidays 2 days O.R.P 3 number of hours


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Every employee is also entitled to paid annual leave.

An employee is not entitled to annual leave, if his/her

absenteeism exceeds 10% of the working days during the 12

months of his/her entitlement to annual leave.

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Years of Services Annual

Leave

Medical

Leave

Hospitalisatio

n Leave

Less than 2 years 8 days 14 days60 days*(including the

numbers of

medical leave

entitled for an

employee)

Two years and

above but less than

5 years

12 days 18 days

Five years and

above

16 days 22 days

*Every employee is entitled for 60 days of hospitalisation leave irrespective

of his/her years of services within an organisation.


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5. Registers, Returns, Complaints, and Inquiries

The book of registrations must be updated within three daysafter the end of each wage period and kept in the office of

the organisation where the employees are employed.

The Employment Act 1955 also outlines the provisions of

employees reinstatement due to constructive dismissal,

employees grievance, and domestic inquiry.

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Minimum Wages Order 2012

Effective from 1 January 2013, all the Wages Council Ordersmade under the Wages Council Act 1947 [Act 195] shall be

revoked and replaced with the Minimum Wages Order 2012.

This Order has to be read together with the National Wages

Consultative Council Act 2011 [Act 732].

Minimum wages is defined as basic wages. But, the

definition of wages is also cross-referred to the definition of

wages in the Employment Act 1955, Sabah and Sarawak

Labour Ordinances.

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The minimum wages rate payable to an employee shall be not

less than:a) RM900 per month or RM4.33 per hour for the employees

who work at Peninsular Malaysia.

b) RM800 per month or RM3.85 per hour for the employees

who work at Sabah, Sarawak, and the Federal Territoryof Labuan.

This Order does not cover domestic servants as defined under

Section 2 of the Employment Act 1955.

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Minimum Retirement Age Act 2012

Effective from 1 July 2013, it is compulsory for all employersin Malaysia who employ employees regardless of the amount

of salary paid to fix the minimum retirement age of an

employee as 60 years.

An employer must not prematurely retire an employee beforethe employee attains the minimum retirement age.

An employee may choose for early retirement once he/she

attains the age of optional retirement as agreed in the

contract of service or collective agreement.

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This Act does not apply to the following categories of

employees:

1) A person who is employed on a permanent, temporary orcontractual basis and is paid emoluments by the Federal

Government of any State, any statutory body or any local

authorities;

2) A person who works on a probationary term;

3) An apprentice who is employed under an apprenticeship

contract;

4) A non-citizen employee;

5) A domestic servant;

6) A person who is employed in any employment with average

hours of work not exceeding 70 per cent of the normal

hours of work of a full-time employee;

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7) A student who is employed in any contract for a temporary

term of employment but does not include employee onstudy leave and employee studying on part-time basis;

8) A person who is employed on a fixed-term contract of service

inclusive of any extension, of not more than 24 months;

9) A person who, before the date of coming into operation of thisAct, has retired at the age of 55 years or more and is

subsequently re-employed after he has retired.

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Children and Young Persons

(Employment) Act 1966

This Act regulates the employment of children and young

persons to give them rights and protection from mistreatment

in the course of their employment.

Effective from 1 March 2011, a childis defined as a person

who has not completed 15 years of age, while a youngpersonis referred to as a person who is 15 years of age and

above, but has not completed 18 years of age.

Refer Table 4.3 (pg. 45) for the working hours and the type of

work permitted for children and young persons.

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Workers Minimum Standards of

Housing and Amenities Act 1990

The objective of this Act is to monitor and control the

minimum quality of housing facilities and other social

amenities provided by the employer to the employees.

Only protects employees who work in the farming (i.e.,

agricultural land of more than 20 hectares) and mining

sectors exceptthose located within the area administered

by a City Hall or Federal Territory.

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Workmens Compensation Act 1952

Effective from 1 July 1992, this Act only covers foreign workers

who earn less than RM500 per month and all manual workersirrespective of the wage.

The objective of this Act is to provide compensation payment to

foreign workers who have accidents at work or who contract

employment-related diseases.

It also provides for the payment of compensation to the

employees dependants if the employee dies in the event of a

fatal accident or contracting an occupational disease.

it compulsory for all the employers who employ foreign workers

to purchase workmens compensation insurance from anyinsurance companies registered with the Department of

Labour.

The employer is not allowed to deduct the earnings of an

employee for the payment of insurance premium. 28


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Employees Social Security Act 1969

This Act was administrated and enforced by the SocialSecurity Organization (SOCSO).

The objective of this Act is to provide protection to employees

who may be involved in an accident at work or who contract

some occupational disease.

This Act only covers local employees who work at the private

sector earning monthly wages of RM3,000 or less.

This Act does not cover government employees, domestic

servants, self-employed persons, foreign workers, business

owners, and spouses of sole-proprietorship or partnership.

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The registration of SOCSO is based on the principle of once

in, always in.

The employer and the employee must pay monthlycontribution according to the rates specified under the SOCSO

Contribution Schedule.

The rates of contribution are based on the total monthly wages

received by an employee.

Wages are all cash remuneration payable to an employee,

which does not include:

1) payments by employer for any pension or provident fund for

employees;

2) mileage claims;

3) gratuity payments for dismissal or retrenchments;

4) annual bonus.

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SOCSO provides coverage to eligible employees through

two social protection schemes:

1) Employment Injury Insurance Scheme This scheme provides protection to employees who are

engaged in occupational accidents and diseases.

The scheme also protects employees from accidents that

occur while:a) working at the workplace;

b) travelling from the route between the place of residence

and work; the place where the employee takes his/her

meal during permitted resting hours; specifieddestination while on official duties with the conditions

that the employee use the normal route and no detour

or stopping due to personal engagements.

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2. Invalidity Pension Scheme

This scheme provides 24 hours protection for employees from

invalidity or death, irrespective of the cause of death.

The scheme is to ensure that the employees dependants

receive compensation payment when an unexpected incident

occurs to the employee.

The two schemes (i.e., employment injury insurance scheme

and invalidity pension scheme) are categorized into two

categories:

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a) First Category

This category consists of employment injury insurance scheme

and invalidity pension scheme.

Only covers employees below 60 years of age.

The contribution is paid by both the employer and the employee.

b) Second Category

Only consists of invalidity pension scheme.

Protects employees above 60 years of age and still working;

employees above 55 years of age when first registered and

contributed to SOCSO; and an insured person receiving

invalidity pension who is still working and receiving wages that isless than 1/3 of the average monthly wages before invalidity.

The contribution is only paid by the employer.

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An insured employee or dependant will be entitled to the

following benefits:

1) Periodical payments in the case of disablement suffered as

a result of an employment injury.2) Periodical payments to the dependants of an insured

person who dies as a result of an employment injury.

3) Payments for funeral benefit or expense on the death of an

insured person as a result of an employment injury.4) Periodical payments to an insured person who is in receipt

of invalidity pension or disablement benefit and is so

severely incapacitated or disabled as to require the

personal attendance of another person.

5) Medical treatments for the attendance on insured persons

suffering from disablement.

6) Periodical payments to dependants of an insured person

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Employees Provident Fund Act 1991

This Act was administered and enforced by the Employees

Provident Fund Board. The main objective of this Act is to ensure that employees have

funds available after their retirement.

This Act covers three categories of employees:

1) all local private sector employees who are employed by anemployer under a contract of service or apprenticeship ;

2) non-pensionable public sector employees;

3) expatriates and foreign workers who earn less than

RM2,500 per month4) those who have opted to contribute before 1 August 1998.

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The categories of employees who are exempted from making

the mandatory contribution:

1) Domestic servants or foreign domestic maids

2) Out-workers who do cleaning and alteration repair works

3) Any persons who are detained in any prison, custody, place

of detention, Henry Gurney School, mental hospital, orrehabilitation centre

4) Any workers holding Employment Pass or expatriates

holding Visit Pass (Temporary Employment) whose

monthly wages are not less than RM2,500

5) Self-employed persons

6) Pensioners

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The amount of contribution is calculated based on the monthlywages of an employee.

Wages are all remuneration in money received by anemployee under his/her contract of service, which includessalary, bonus, commission, or allowance payable by theemployer, but does not include the following:

1) Service charge;

2) Overtime payment;3) Gratuity;

4) Retirement benefit;

5) Retrenchment, lay-off, or termination benefits;

6) Travelling allowance or the payments for any travellingconcession;

7) Any other remuneration or payment exempted by theMinister

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For employees who received monthly wages of RM5,000 and

below, the portion of employers contribution is 13% of theemployees monthly wages, while the employee contributes

11%.

For employees who receive wages more than RM5,000 per

month, the employees contribution is 11%, while theemployers contribution is 12% the employees monthly wages.

For expatriates and foreign workers (except for those

excluded), the percentage of employees contribution is 11% of

their monthly wages, while the employers contribution is RM5

per person.

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Both the employers and the employees contribution that

remits to the fund is divided into two accounts as follow:

1) Account No. 1

This constitutes 70% of the savings for the purpose of

retirement.

The employee may withdraw the savings upon reaching theretirement age.

2) Account No. 2

This constitutes 30% of the savings for housing, education, and

medical purposes.

The employee may withdraw the savings for the reasons of :

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- reaching the age of 50 years;

- down payment for purchasing the first house; settling the

remaining first housing loan;

- financing for higher education for self or his/her child;

- medical costs;

- exceeds one million ringgit in his/her account.

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This Act was enforced by the Department of Trade Union Affairs.

This Act had regulated the procedures for applying for registration ofa union, the use of union funds, the rights and liabilities of unions,

and other matters relating to the constitution of unions as stipulated.

Every trade union must apply to be registered and recognised under

the Trade Union Act 1959 to become a certified union to represent its

member in the trade disputes. This Act has stipulated that all employees who are:

1) above the age of 16 years, but have not completed 21 years of

age, have the right to join a certified trade union. However, he/she

is not eligible to be elected as an officer or trustee of the union;

2) have not attained the age of 18 years are not entitled to vote on

matters regarding strike, lock-out, imposition of a levy, dissolution

of the union, and the amendment of the rules of the trade union.

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The Act has also regulated that the officers of a trade union

should be:

1) a Malaysian citizen;

2) he/she should have been engaged for a period of at least

one year in any established union;

3) he/she should have never served as an executive in any

union that has been cancelled or withdrawn;

4) he/she should not be an officer or employee in a political

party;

5) he/she should have never been convicted with criminal act;

6) he/she should not be a bankrupt person.

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According to the Guidelines for Establishment and Registration

of Trade Union, the employees who intend to form a trade

union must apply to the Director General of Trade Unions for

registration within one month from the date of its formation byfollowing the process given below:

Step 1: Initial meeting

- Meeting needs to be held among the union members.

- There is no limitation about the attendance.

Step 2: Register with Director General of Trade Union

- Every application for registration should be signed by at least

seven members or officers of the trade union.

- There are few forms and documents that should be filled andprepared before submitting to the Director of General for

registration.

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Industrial Relations Act 1967

This Act was enforced by the Industrial Relations

Department. This Act provides for the regulation of relations between

employers and employees or employees and their trade

unions and the prevention and settlement of trade disputes.

The main objective of this Act is to encourage harmoniousrelations between employers and employees (or their trade

unions) through direct negotiation to settle their differences

with minimal government intervention.

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This Act has set out the regulations regarding:

1) the legitimate rights of employers, employees, and their trade

unions;2) the procedure relating to submissions of claims for recognition

and scope and representation of trade union and collective

bargaining;

3) the matters relating to promotion of employees, internal

transfers, recruitment of employees, dismissal, retrenchment,

and reinstatement of employees, and allocation of duties over

any of these matters are not allowed to be included in the

proposal for collective bargaining.

4) the procedure of trade dispute settlement;5) the power of Ministry of Human Resources to intervene and to

refer any trade dispute to the Industrial Court for arbitration.

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The regulated that the employer is not permitted to do the

following:

1) state any condition in the contract of service restraining the

right of an employee to join a trade union;

2) refuse to employ a person if he/she is a member of a trade

union;

3) compel an employee to join a trade union;

4) discriminate, dismiss, or threaten an employee on the

grounds that he/she is a member of a trade union;

5) induce an employee not to join a trade union by offering

certain advantages.

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The Act also imposes that an employee and their trade union is

not permitted to do the following:

1) persuade an employee to join the trade union during the

working hours except when permitted by the employer;

2) threaten or injure any person to be or not to be a member or

officer of the trade union;

3) induce an employee or officer of the trade union by offering

certain advantages.

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Occupational Safety and Health Act 1994

This Act is enforced by the Department of Occupational Safety

and Health.

This Act provides the legislative framework to secure the safety

and health among all Malaysian workforces and to protect

others against risks to safety and health in connection with the

activities of workers at work. The objective of this Act is to promote safety and health

awareness, and establish effective safety and health

performance through self-regulation schemes designed to suit

the needs of the particular organisation.

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This Act applies throughout Malaysia in the following industries

(except armed forces and board ships governed by the

Merchant Shipping Ordinance):

1) Manufacturing2) Mining and quarrying

3) Construction

4) Agriculture, forestry, and fishing

5) Utilities (including electricity, gas, water, and sanitaryservices)

6) Transport, storage, and communication

7) Wholesale and retail trades

8) Hotels and restaurants

9) Finance, insurance, real estate, and business services

10) Public services and statutory authorities.

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There are three main principles that have been taken as the

foundation in the drafting of this Act:

1) Self-regulation.- An employer must establish a comprehensive and clear

safety and health policy to handle issues relating to

workplace injuries and illnesses.

2) Consultation

- Employers, employees, and the Department of

Occupational Safety and Health must negotiate to

settle issues and problems relating to safety and health at

workplace.

3) Co-operation

- Employers and employees must cooperate to upgrade the

standards of safety and health at workplace.

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The Act has regulated that all employers with more than five


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The Act has regulated that all employers with more than fiveemployees are required to formulate a written Safety andHealth Policy.

A well-written Safety and Health Policy shall include three

parts:1) General policy statement

- Provide a summary of safetys goals, responsibilities ofmanagement on the issues of employees safety andhealth, the importance of safety and health to overallbusiness performance.

2) Organisation

- Describe the roles and responsibilities of each personwithin the organisation to ensure the quality of safety and

health at the workplace.3) Arrangement

- Specify the actions to be taken to ensure that the Safetyand Health Policy is being effectively implemented.

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The duties of employers as stipulated in the Act are as

follows:

1) Provide and maintain a safe and healthy workingenvironment, including system of work;

2) Ensure that the use, operation, handling, storage, and

transport of plant, equipments, and substance are safe;

3) Establish safety and health policy as required under the Act;4) Provide adequate safety information, instructions, training,

and supervision;

5) Ensure that the working area and the means of access to

and the way out are safe; 6) Provide adequate facilities for welfare of employees.

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The general duties of an employee may include the following:

1) Take reasonable care for the safety and health of self andother persons who may be endangered by his/her

activities;

2) Cooperate with the employer or other persons to carry out

the duties imposed by the Act and the safety regulations;3) Wear or use personal protective equipment and clothing

provided by the employer at all times;

4) Comply with any rules, instructions, or measures on

occupational safety and health.

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Pembangunan Sumber Manusia

Berhad Act 2001

The purpose of this Act is to encourage employers to conduct

training for their workers so as to upgrade their skills and

abilities through the imposition and collection of a human

resource development levy.

The human resources development levy is the mandatory levy

payment imposed by the PSMB ACT 2001.

The HRDF is a pool of funds that consists of human resources

development levy contributed by the employers.

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The categories of employers who are eligible to pay the levy


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The categories of employers who are eligible to pay the levy

include:

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Categories of Employers Paid-up Capital Rate of Levy

Manufacturing sector With 50 employees and above Any amount 1 per cent of the

employees

monthly wages

With 10 to 49 employees RM2.5 million or

more

1 per cent of the

employees

monthly wages

With 10 to 49 employees (optional) Less than

RM2.5 million

0.5 per cent of the

employees

monthly wages

Service sector

With 10 employees and above in 21 selected

industries

Any amount 1 per cent of the

employees

monthly wages With 50 employees and above in the industries

of hypermarket, supermarket, or departmental

stores

Any amount 1 per cent of the

employees

monthly wages


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The amount of levy is calculated based on the monthly wages

of the employees across the organisation.

The PSMB ACT 2001 has defined wages as the basic salary

and fixed allowances or other remuneration paid in cashreceived by the employee as the return of their services to the

organisation, but does not include the following:

1) pension fund, provident fund, superannuation scheme,

retrenchment, termination, lay-off or retirement scheme,or any other fund or scheme offered for the benefit and

welfare of the employee;

2) travelling allowances;

3) bonus or commission;4) gratuity payable on discharge or retirement;

5) reimbursement of expenses;

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6) allowances paid to an apprentice under apprenticeship

contract;

7) unfixed allowances;

8) Any other remuneration or payment exempted by the

Minister.

The employers who are registered with PSMB and pay thelevy are eligible to apply for training grants.

The training programmes must be in the area of direct benefit

to their employees skills upgrading and the organisations

business performance.

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