employment laws addressing needs of employers

PERSEKUTUAN MAJIKAN-MAJIKAN MALAYSIA MALAYSIAN EMPLOYERS FEDERATION

EMPLOYMENT LAWSADDRESSING NEEDS OF

EMPLOYERS

Labour Law ConferenceConcorde Hotel, Kuala Lumpur, 9 & 10 April 2015

by

Datuk Hj. Shamsuddin BardanExecutive Director, Malaysian Employers Federation

2

MAIN EMPLOYMENT LAWS IN MALAYSIA

Employment Act 1955 Labour Ordinance (Sabah Cap. 67) Labour Ordinance (Sarawak Cap. 76) Industrial Relations Act 1967 Trade Unions Act 1959 Employees’ Social Security Act 1969 Employees Provident Fund Act 1991 Occupational Safety and Health Act 1994 National Wages Consultative Act 2011 Minimum Retirement Age Act 2012 Pembangunan Sumber Manusia Berhad Act 2001 (HRDF)

MALAYSIAN EMPLOYERS FEDERATION

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EMPLOYMENT ACT 1955

‘EA 1955’ gives the impression that the law

is archaic.

EA revised from time to time on ‘piece meal’

basis.

To streamline the provisions of Sabah Labour

Ordinace & Sarawak Labour Ordinance wih

EA.


4

MEANING OF ‘WAGES’

Different meanings of “wages” under : Employment Act , NWCC Act EPF Act, SOCSO Act, HRDF Act and Workmen’s Compensation Act.

Meaning of “wages” under all the employment laws need to be streamlined for practical administration and application to avoid confusion.


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PRIORITY OF WAGES OVER OTHER DEBTS

Section 31 EA

‘Wages’ includes termination and lay-off benifits, annual leave pay, sick leave pay, public holiday pay and maternity allowance

Companies Act 1965 (s. 292) does not treat wages as secured debt. Only a maximum of RM1,500 has priority

There should be harmonization of EA & SLOs and Companies Act provisions on priority of wages


6

DIFFERENT SCOPE OF EMPLOYEES UNDER EA & SLOs

Legislations Provisions Salary Ceiling

Employment ActFirst Schedule -Paragraph (1) not > RM2,000

Sabah Labour Ordinance

Schedule –Paragraph (1)

not > RM2,500

Sarawak Labour Ordinance

Schedule –Paragraph (1)

not > RM2,500


7

MEANING OF ‘EMPLOYEE’ UNDER EA 1955 & SLOs

Irrespective of occupation, the person’s monthly wages not exceeding RM2,000 (EA) or RM2,500 (SLOs) (excludes commission, subsistence allowance and overtime).

Irrespective of amount of wages, the person is engaged in manual labour operation /maintenance of mechanically propelled vehicle supervisor of manual labour engaged by the same employer

Skilled employees such as crane operators, truck drivers and welders may earn very much more than RM2,000 a month.

It should not be the objective of EA & SLOs to cover such categories of employees who earns high wages.

A capping be imposed based on wages only to avoid dispute.


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LABOUR PERMITS/LICENCES required to submit applications for exemptions from

various provisions of EA e.g. Late payment of wages (Section 19) Deductions of wages (Section 24) Night Work for Women Workers (Section 34)

Working Overtime exceeding 104 hours a month [section 60A(4)(a)]

Letters in response to the employers’ application would be issued by DG Labour upon the receipt of a ‘complete application’.

Self regulations should be introduced with flexibility for

ease of doing business.MALAYSIAN EMPLOYERS FEDERATION

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PROHIBITION OF NIGHT WORK

No employer shall require any female employee to work in any industrial or agricultural undertaking between the hours of ten o‘clock in the evening and five o’clock in the morning ( S.34 EA)

Why should an employer be required to obtain consent from female employees to work after 10pm?

Why should female employees be prohibited to work after 10pm?

Self regulations should be made instead of requirements for permit to work at night.


10

WAGES DUE IN UNFORSEEN CIRCUMSTANCES

Employer has to pay wages to his employees as contractual obligations.

Wages should not be due when employer has to temporarily stop operation as a result of eg: water rationing, disruption of elctricity supply, or emergency if declared by the Government


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WAGES REGISTER/MATERNITY REGISTER ?

‘Register’ means a book or separate cards kept by every employer containing information relating to employees and include a register required to be maintained under Internal Security (Registration of Labour) Regulations 1960

( Regulation 2 - Employment Regulations 1957).

Should allow the Register be kept in electronic form and be centralised at company’s headquarters.

Internal Security Act 1966 abolished in 2012, thus the ISA Register of Labour becomes obsolete.


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NOTICE OF TERMINATION - S12 (3) (f) EA & REG. 8 E. (T & LO BENEFITS) REG. 1980

It is mandatory for the employer to issue notice of termination where there is a change of ownership of the employer’s business.

Misunderstanding and anxiety on the part of the employees.

The employer should not be required to give notice of termination or to pay wages in lieu of notice where the new owner offers continuous employment on terms and conditions of employment which are not less favourable.


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TIME-BANK CONCEPT

A concept under which overtime need not be paid in cash immediately but is credited into time bank account of the employee.

To provide employment security to employees thereby minimising the need for retrenchment.

Greater level of flexibility to the employers and employees to respond appropriately to both negative and positive changes in market demand for the company’s product.


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ANNUALISED WORKING HOURS

Under this arrangement, an employee shall be paid his normal monthly salary regardless of the number of hours he works during a week or month on condition that his total number of hours of work per year does not exceed the contractual number of hours per year or an average of not exceeding forty-eight per week.

A flexible work arrangement under which an employer will be able to adjust his operational requirement based on the market demands.

Singapore has introduced effectively the concept of annualised working hours.


15 MALAYSIAN EMPLOYERS FEDERATION

NEED FOR FLEXIBILITY IN LABOUR LAWS

Flexible work schemes New Amendment

Section 41A of EA of Singapore amended w.e.f. 1 Oct 2004

Empower Commissioner for Labour to exempt companies from cash payments and/or at premium rates to employees, for overtime/rest day/public holiday work

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PRODUCTIVITY LINKED WAGE SYSTEM (PLWS)

Section 13(2A) of the Industrial Relations Act 1967 encouraged the implementation of PLWS. Unfortunately, it does not mandate the implementation of PLWS.

EA of Singapore An employer and his employees or a trade union

representing his employees may negotiate for and agree to a variable payment based on the trading results or productivity or on any other criteria agreed upon by the parties concerned [S. 48(2)].

A contract of service shall not provide for an annual wage supplement exceeding one month’s wages

[S. 48(3)].MALAYSIAN EMPLOYERS FEDERATION

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IMPACT OF MINIMUM RETIREMENT AGE ACT 2012 ON FIXED TERM CONTRACTS

A common practice for companies in the private sector to engage employees of senior managerial positions on a fixed term contract basis.

Section 5 of the MRA prohibits an employer to prematurely retire an employee before he attains the minimum retirement age of 60 years.

SCHEDULE (h) MRA

MRA does not apply, inter alia, to a person who is employed on a fixed term contract of service, inclusive of any extension, of not more than twenty four (24) months.

It is possible for an employee on a fixed term contract of service of more than twenty four (24) months and who has not attained the age of sixty years to claim that the employer has prematurely retired him before he attains the minimum retirement age if his contract comes to an end.


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ADRESSING FIXED TERM CONTRACTS IN THE CONTEXT OF MRA

Fixed term contracts be for a period of not more than twenty four months.

Ensure sufficient break following the expiry of the fixed term contract before entering into a fresh fixed term contract.

Employees under EA break of at least 31 days

Employees outside EA – 1 day break is sufficient

SOME THOUGHTS

MRA should not be applicable to all fixed term contracts as the issues on whether a fixed term contract is genuine can be dealt with under Section 20(1) of the Industrial Relations Act 1967.

The non-renewal of a fixed term contract should not be considered as a retirement.

Alternatively, all fixed term contracts for employees whose earnings exceed a certain limit (example RM20,000) per month should be excluded from the application of the MRA. MALAYSIAN EMPLOYERS FEDERATION

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ENTITLEMENT TO PAID HOLIDAYS SHOULD BE PROPORTIONATE TO NUMBER OF WORKING DAYS

Existing paid annual leave and paid sick leave were based on 6 work day/week

Majority of employers adopted 5 work day week

Annual Leave and paid sick leave should be reduced proportionately.

For example, employees on 5-work day/week is

working about 207 days only per year and employees on 6-work day/week is working about 259 days per year.

If an employee is given 14 days of annual leave, it is 5.4% of working days for 6- work day/week and 6.8 % of working days for 5-work day/week.


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COST OF 1 DAY LEAVE TO PRIVATE SECTOR EMPLOYERS

Cost of 1 day leave to employers based on 6,530 million formal private sector employees:


Based on 2013 figures

EPF contributions from employers and employees per year RM50.580 billion

Total wages per year based on 24% EPF contributions (RM50.580 billion /24 X 100)

RM210.750 billion

Wages per working day (5 day working week)(210.750 billion / 206 working days)

RM1,023 billion


OTHER CHALLENGES

Higher cost of doing business

Recent Labour Policies That Impacted Cost Of Doing Business

National Minimum Wages 1/1/2013 Minimum Retirement Age Act – July 2013

New Policies ? Employment Insurance National Health Insurance Scheme

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IMPLEMENTATION OF MW ORDER

Impact on economy of the country

Does MW encourages automation?

Automation not happening but foreign workers are benefitting and instead attracting more inflow of FW

Remittances:

increased from RM20 billion to RM30 billion in 2014 (banking and financial institutions)

Up to RM50 billion (Inclusive of unofficial sources of remittance)


23

IMPACT OF REVISED BUDGET ON MW

Should MW be reviewed in the light of revised National Budget? Currently retrenchments going on Share of wages to GDP

- 34%

- should it be raised to 40% in 2020 ?


24

EFFECT OF MW ON EMPLOYERS

Average labour cost per employee before minimum wages about RM1,300 / month (inclusive of accommodation, water, electricity and transport)

Upon implementation of minimum wages, the labour cost per employee > RM2,000 / month


25

EMPLOYMENT INSURANCE (EI)

Govt proposed to establish EI to enhance social safety net.

Termination Benefits provided under the Employment Act 1955 & SLOs.

Employers raised concerns on EI as retrenchment in view of the existing labour safety net provisions under the employment laws – EA, SLOs, EPF, SOCSO.

During the economic recession in 1990s, about RM25m (5%) was not paid out of a total of about RM325m payable as retrenchment benefits.


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EMPLOYMENT INSURANCE (Continued)

Administrative costs of collecting contributions and disbursement of EI estimated at RM 325 Mil/year

Alternative to EI, employers and the employees are to provide for their own need by contributing to a fund equivalent to a total of 3 months’ wages and managed by an institution.

Employees to withdraw equvalent to 3 months basic wages from the fund upon termination of his service due to retrenchment.

If not retrenched, employee may withdraw his /her own fund upon retirement


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SEPARATE LEGISLATION ON DISMISSAL

A Workman who considers that he has been dismissed without just cause/excuse may make representations in writing to DG IR within 60 days of dismissal seeking reinstatement under S. 20 of I R Act.

A separate law on dismissal akin to Law of Unfair Dismissal in U.K.

S.20 IR Act offers no criteria on what is dismissal with just cause and excuse

Result in inconsistency of Industrial Court Awards MALAYSIAN EMPLOYERS FEDERATION

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SINGAPORE EXPERIENCE

Termination simpliciter is recognised in law and practice

No obligations on employer to provide reasons for termination

Kim San Lawrence Bernard v. Robinson & Co. (S’pore) Pte. Ltd. (2013) SGHC 279:.

‘ the bare fact of termination cannot be a ground to claim damages other than what he would have been entitled to under the employment contract for a lawful termination, even if was constructively dismissed’.


29

SINGAPORE EXPERIENCE

No industrial tribunal like Industrial Court in Malaysia to handle dismissal cases

Dismissal Cases handled by MOM Singapore and decision made by Minister of Labour is final


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UK EXPERIENCE

Qualifying period to contest wrongful dismissal is 2 years of service

Allowable reasons for termination eg- retrenchment

Court of Appeal :

Employees beyond retirement age stays in employment at the discretion of employers & employer has discretion to terminate at any time


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CASES THAT SHOULD BE EXCLUDED FROM S. 20 IRA

EXAMPLES OF ALLOWABLE REASONS TO TERMINATE Probationer Employees with less than 2 years service Employees earning more than RM10,000 per month Fixed Term Contract employees Redundancy/Retrenchment Employees accepted voluntary retrenchment/MSS benefits Employees beyond the retirement age /60 years Cases settled amicably with settlement agreement Employees refusing reinstatement Termination on health reasons Termination on conviction of a criminal offence


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COURT OF APPEAL IN HONG LEONG EQUITMENT v. LIEW FOOK CHUAN

Reinstatement may be offered by the employer at the following stages:

Soon after dismissal before representation made under section 20 IRA.

Reinstatement offered during conciliation at IRD.

Reinstatement offered after the case is referred to Industrial Court.


33

RECOGNITION OF TRADE UNION

Current system of determining majority by way of secret ballot

Qs on secret ballot are you a member of TU ?

No verification on whether employee is really TU member


34

RECOGNITION OF TU - CONTINUED

The current system of secret ballot leads to a lot of dispute by both TU and employers

TU allege that it is unfair for authorities to consider that employees eligible for voting limited to those in employment on the date FORM A served on Company and those who did not turn up for secret ballot as voting for Company

Employers need to verify whether TU membership is genuine


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RECOGNITION OF TU - CONTINUED

Need to introduce verification on whether employee is a TU member at the time when FORM A served on Company

Reintroduce requirements of TU to submit FORM C i.e – List of TU members?


36

DE-RECOGNITION OF TRADE UNION - PROPOSALS

Where a trade union has been accorded recognition in respect of any workman or class of workmen whether by a decision of the Minister or otherwise, such trade union may be de-recognized in the event the Director General determines that: the trade union is no longer competent to

represent the workman or class of workmen as a result of a change in the nature of business of the employer; or

the trade union has ceased to represent at least 50 percent of the workman or class of workmen


37

IMMUNITY TO TRADE UNION, ITS OFFICER OR MEMBER

NEED FOR REVIEW

No suit or legal proceeding shall be maintainable in any civil court against a trade union, its officer or member in respect of act done in contemplation or in furtherance of trade dispute (S.20 TUA)

Possible abuse of this provision of TUA by the union officers or members

38

PICKETING - PROPOSALS

Trade Union shall give notice to DGIR before commencing picket.

The notice shall include inter alia the time, duration, place and reason of the picket.

Such requirement is necessary to ensure peaceful picketing with least interuption to the operations of the company’s business.


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SOCIAL SECURITY - PROPOSAL

SOCSO claims based on employment injury

Dispute arises on whether employee sustain employment injury-caused a lot of administrative time to

Employers

Employees

SOCSO

Need to reevaluate on the necessity to introduce ‘NO FAULT CLAIM’


40

SOCIAL SECURITY -PROPOSAL

Employment Injury Scheme – Coverage limited to workplace employment injury

Majority of employers take GPA to supplement SOCSO Employment Injury Scheme to provide for 24 hours coverage.

GPA caused employers to incur additional costs

Need to make Employment Injury Scheme to cover injuries sustained by Insured Person outside employment


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ADEQUECY OF OLD AGE SAVINGS

EPF reports highlighted that > 75% of EPF contributors have < RM 50,000 when they reach 55 years

Qs – Whether low amount of savings of majority of EPF contributors due to inadequate monthly contributions rate by employers/employees

Existing contributions rates to EPF reasonable


42

ADEQUACY OF OLD AGE SAVINGS

Low levels of savings at age 55 due to numerous withdrawal schemes eg: housing

education

healthcare

Need to review EPF withdrawal schemes


43

IMPACT OF EXTENSION OF MRA

Health cost issues – beyond 55 employees tend to suffer major illnesses

Insurance premium increase due to increase in retirement age

Insurance companies refuse to cover beyond 55 years


44

IMPACT OF EXTENSION OF MRA ON EPF

Retirement age of private sector employees extended from 55 years to 60 years on 1/1/2013

One of the intentions of increasing retirement age to 60 years was to enhance employees savings

However withdrawal of EPF savings was retained at 55 years

EPF leakages can further reduce EPF savings

Need to review withdrawal to 60 years


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PRIVATE RETIREMENT SCHEME (PRS)

PRS introduced to encourage employees and self employed to make adequate savings for retirement

However the response to PRS very poor PRS not guaranteed by Government

Tax relief limited to RM3,000 per year

Need to introduce guarantee by Govt. and

contribution to PRS be entitled to full tax relief


46

MERGER OF SOCSO WITH EPF ?

SOCSO and EPF part of Malaysia’s Social Safety net

SOCSO under MoHR

EPF under the MoF

Need to make Social Safety Net more efficient in providing for employees wellbeing



INTER COUNTRY COMPARISONPRODUCTIVITY LEVEL

Malaysia 1.0

Korea 2.4

Singapore 3.8

Hong Kong 5.3

Taiwan 3.2

Ireland 5.2

Japan 6.4

Germany 4.1

USA 6.2

Norway 6.3


( at 2000 constant prices in US$) Source: OECD Economic Outlook, December 2007. Vol. 82


UNIT COST OF PRODUCTION BASED ON WAGES & PRODUCTIVITY

Example - Wages for new graduate teacher Malaysia – RM 2,000 Singapore – RM 6,000

Cost of Production

Malaysia

Singapore

Therefore Singapore unit cost of production is 79% of Malaysia’s cost

Singapore unit cost of production 21% cheaper than Malaysia MALAYSIAN EMPLOYERS FEDERATION

RM20001

= RM2,000

RM60003.8

= RM1,579

RM1579RM2000

= 79%( )

49

MOVING FROM SECURITY OF TENURE TO EMPLOYMENT SECURITY

Job security - permanent full time job until retirement

Employment security enhanced when workers are able to adapt to changes in economic conditions by:

constantly updating their skills through lifelong learning are willing to accept greater geographical and professional

mobility

EU model of flexicurity Common flexicurity principles encompass four components:

flexible and reliable contractual arrangements comprehensive lifelong learning strategies effective active labour market policies modern social security systems MALAYSIAN EMPLOYERS FEDERATION

50

MOVING FROM MINIMUM WAGES TO SKILL BASED WAGES

Economic Transformation Programme

3.3 million new jobs by 2020 46% require vocational

certification or diploma

Pay be based on certified skills – e.g SKM 1

SKM 2 SKM 3

Certification of skills - craftsmen

Licensing of jobs Job rebranding


51

MOVING FROM LOCAL TO REGIONAL MARKET UNDER AEC 2015 AND BEYOND

ASEAN market – 650 million people

Average Productivity per employee per year in 2013

Malaysia – RM60,437

Singapore – RM173,000

Productivity growth in 2013 at 2.3% - indicating low technology utilization and insufficient quality improvements

Challenges:

Creation of a pool of certified skill workers with increasing automation and higher technology



GOVERNMENT POLICIES

Government policies should focus on:

Creation of conducive business friendly

environment for productivity improvement &

enhancement of competitiveness

Constant dialogues and consultations with

TRIPARTITE stakeholders – Employers and Trade

Unions

employment laws addressing needs of employers

Law

ea wages

hrdf act

health act

socso act

nwcc act epf act

malaysia employment

high wages

industrial relations