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LEGAL ASPECTS OF HRM
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Why compliance with labour laws is important?
The historical background of Malaysia’s labour law
The role of the Ministry of Human Resources and its
departments in administering labour laws
Some significant provisions in major labour laws
Managerial decisions and practices that will avoid legal
liability
Contents
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It helps you do the right thing to do
Recognise the limitations of your firm’s HR
department
Minimise your firm’s potential liability
WHY COMPLIANCE WITH LABOUR
LAWS IS IMPORTANT
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The development and enforcement of labour laws in
Malaysia began to take shape upon the arrival of migrantlabourers from China and India during British colonialrules in the 19th century.
The labour laws established pertained mainly to matters
concerning immigration, entry of forced labour, housing,and health.
In 1912, the first labour office was established in theStraits Settlement and Federated Malay States.
THE HISTORICAL BACKGROUND OF
MALAYSIA’S LABOUR LAW
THE EARLY ERA
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The basic principles that govern the relationship
between the employer and the employees in
Malaysia were derived from three main sources:
– English Common Law
– Malaysia’ Written Statutes, – Decisions of the Civil and Industrial Courts.
THE HISTORICAL BACKGROUND OF
MALAYSIA’S LABOUR LAW
THE CONTEMPORARY LABOUR LAWS
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MAJOR LAWS INFLUENCING
EMPLOYMENT PRACTICES 1. The Employment Act 1955
2. The Wages Council Ordinance 1947
3. Employment (Termination and Lay-Off Benefits) Regulations 1980
4. The Children and Young Persons (Employment) Act 1966
5. The Employment (Restriction) Act 1968
6. The Employees Social Security Act (SOCSO) 1969
7. The Workmen’s Compensation Act 1952
8. Employees Provident Fund Act (EPF) 1951
9. Occupational Safety and Health Act 1944
10. The Trade Unions Act 1959
11. The Industrial Relations Act 1967
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THE MINISTRY OF HUMAN
RESOURCESThe basic objectives of the Ministry are:
To protect the welfare of workers – their safety,
health and rights;
To promote good employer-employee relationshipsthrough a stable and peaceful industrial relations
system;
To equip the unemployed with basic industrial skills
and to improve the skill level of the work force; and To assist in maximising the country’s manpower
resources through manpower planning.
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Department of Labor Enforces the:
The Employment Act, 1955
The Workmen’s Compensation Act, 1952 The Wages Councils Act, 1947
The Children and Young Persons Act (Employment), 1966
The Employment (Restriction) Act, 1968
The Workers Minimum Standards of Housing and Amenities Act,
1990
The South Indian Labor Fund Ordinance, 1958 (revoked in 1999)
This department can also convene the labor court
Industrial Court
National Vocational Training Council
THE MINISTRY OF HUMAN
RESOURCES
Departments in the Ministry:
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Department of Industrial Relations Administers:
The Industrial Relations Act, 1967 and helps in settling disputes
between employers and employees through conciliation
THE MINISTRY OF HUMAN RESOURCES,
cont’d.
Department of Trade Unions
Enforces:The Trade Unions act, 1959. It has the authority to register and de-
register trade unions, check a union’s annual accounts and generally
to investigate complaints made against a trade union.
Department of Occupational Safety and Health Enforces:
The OSHA, 1994 and the Factories and Machinery Acts, 1967
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SIGNIFICANT PROVISIONS OF
MAJOR LABOR LAWS
1. The Employment Act 1955
Employment (Amendment) Act 20002. The Children and Young Persons
(Employment) Act 1966
3. The Employment (Restriction) Act1968
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This Act sets the minimum labor standards for workers and
seeks to protect them from exploitation.
THE EMPLOYMENT ACT 1955
The main areas covered in this Act are:
Definition and types of employees covered
Contracts of service (Section 6-17)
Payment of wages (Section 18-32)
Employment of women (Section 34-44) Hours of work and holidays (Section 58-60H)
Termination and layoffs (Section 60J)
Complaints and inquiries (Section 69-81)
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THE EMPLOYMENT ACT 1955, cont’d.
Employees Covered Under The Act:
All employees who earn less than RM1,500 per
month;
Employees, irrespective of their wages, who work – as manual laborers
– supervise manual laborers
– operate or maintain a mechanically propelled
vehicle – engage in any capacity in any vessel registered in
Malaysia (except officers)
– engaged as a domestic servant.
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Section 63A of the Act requires employers to inform the nearest
Labor Department's office of their business operations within 90
days of formation/ registration or commencement of their business.
ADMINISTRATIVE REQUIREMENTS
• the registered name, address and nature of business
• the name of the manager or persons in charge
• a statement of the categories and total number of workers
employed.
An employer who fails to provide such information or who gives false
information is liable, upon conviction, to a fine of RM2,000.
The information required to be furnished includes:
THE EMPLOYMENT ACT 1955, cont’d.
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employees’ personal information (names, sex, age, home
address, work permit, etc.); terms and conditions of employment (wage rates, allowances,
rates for overtime work, working hours, period of notice of
termination, paid holidays, etc.);
up-to-date details of wages and allowances earned during each
wage period.
A REGISTER OF EMPLOYEES
Section 61 of the Act requires employer to maintain a register of
employees containing:
The employer should keep the register at the place of employment
and should be made available for inspection by officers from the
Labor Department.
This register must be preserved for a period of not less than six years.
THE EMPLOYMENT ACT 1955, cont’d.
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THE EMPLOYMENT ACT 1955, cont’d.
CONTRACT OF SERVICE
Definition: A contract executed, whether orally
or in writing and whether by expressed orimplied condition, whereby one person agrees
to employ another as an employee and that
the other agree to serve his employer as an
employee.
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A contract of service must be in writing if the period of employment
is more than 1 month.
The contract of service is detailed out in the letter of appointment,
and that the contract is deemed to have been accepted by the
employee once he reports for work upon receiving the letter.
The content of the contract of service that must be in writing should
have the occupation, rates of wages and wage period, allowances,
working hours, paid public holidays, annual leaves entitled,
benefits, and notice of termination.
RESTRICTIONS: Conditions of contract cannot be less favorable
than those stipulated in the Act, and that it cannot restrict the right
of an employee to join, participate in activities of, or organize a
trade union.
THE EMPLOYMENT ACT 1955, cont’d.
CONTRACT OF SERVICE
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. . . is the usual hours of work per day less any
intervals and rest for tea breaks and meals.
THE EMPLOYMENT ACT 1955, cont’d.
NORMAL HOURS OF WORK
. . . . the number of hours worked in excess of
the normal hours of work per day.
Currently, the EA 1955 do not allow an employee to work
overtime more than 104 hours a month.
OVERTIME WORK
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Employees can not be required to work:
– More than 8 hours a day (except where an employee
works less than eight hours on any days he can be
required to work up to nine hours on other days); – More than 10 hours a day working intermittently (i.e.
that is in excess of a spread over a period of 10 hours
in one day);
– More than 48 hours in one week.
THE EMPLOYMENT ACT 1955, cont’d.
NORMAL HOURS OF WORK, cont’d.
NOTE:
Employees can not be asked to work more than 5 hours without a break of
at least 30 minutes (except where work should be continuously performed,
they can be given a total of 45 minutes rest within the 8 hours).
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Currently, there is no minimum wage legislation.
The wages paid is subject to negotiations:
– between an employer and an employee, or
– between a trade union and an employer.
NOTE:
However, under the Wages Councils Ordinance 1947, certain
categories of occupations (not unionized) are subjected to a
minimum wage.
– shop assistants, hotel and catering industry workers, Penang
stevedores, and cinema workers.
Currently, the minimum wage for these groups of employees is
RM250 per month.
THE EMPLOYMENT ACT 1955, cont’d.
WAGES
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DEFINITION OF WAGES:
All payments in cash payable to an employee for work
done in respect of his contract of service including his
basic pay but excluding: – housing and utility allowances,
– contribution to funds or schemes established for the benefit of
the employee,
– traveling allowances, – termination benefits,
– bonuses,
– commissions
– overtime payment.
THE EMPLOYMENT ACT 1955, cont’d.
WAGES, cont’d.
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The wage period should not exceed one month.
– Wages must be paid, in legal tender, within seven days after the
end of the wage period.
Upon a written request from the employee, the employercan deduct an employee’s wage for payment to:
– trade unions
– cooperative societies.
Employers can deduct employees’ wages without firstobtaining employees’ consent or permission for
deductions authorized by law (e.g. EPF, SOCSO, etc.).
– The total deduction of an employee’s wage should not exceed
50 percent of the wages.
THE EMPLOYMENT ACT 1955, cont’d.
WAGES, cont’d.
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The rate of pay for a day of paid leave (e.g. maternity leave, public
holiday, annual leave and sick leave) and the basis for the
payment for work on a public holiday, a rest day, or for overtime
work is known as the ordinary rate of pay (ORP).
ORP includes basic wages and contractual bonuses but excludes
housing and utility allowances, contribution to funds or schemes
established for the benefit of the employee, traveling allowances,
termination benefits, non-contractual bonuses, commissions,overtime payment, and payments for any work done on rest days
and public holidays
THE EMPLOYMENT ACT 1955, cont’d.
ORDINARY RATE OF PAY
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Section 60(I) provides the method for determining ORP.
For a daily rated or a piece rate employee:
Total wages earned in the preceding wage period*
Actual No. of days worked in that wage period*
*excluding the ten chos en publ ic hol id ays/ rest days/any paid hol idays s ubst i tuted
For a weekly rated employee:
Weekly rate of
6 days
For a monthly rated employee:
Monthly rate of pay
26 days
THE EMPLOYMENT ACT 1955, cont’d.
ORDINARY RATE OF PAY, cont’d.
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The hourly ORP is derived by dividing the ORP per day
with the number of normal hours of work (usually 8
hours).
Section 7A of the EA 1955 allows any employer to
provide employees more favorable terms and
conditions of service than those required in the EA
1955
Thus, an employer may adopt any other method for
calculating the above rate of pay, as long as the results
are not less than the rate determined by the above
method.
THE EMPLOYMENT ACT 1955, cont’d.
ORDINARY RATE OF PAY, cont’d.
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THE EMPLOYMENT ACT 1955, cont’d.
WAGE RATE FOR OVERTIME WORK DURING A
NORMAL WORKING DAY
An employee who works overtime during anormal working day should be paid at least
1½ times his hourly ORP.
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NORMAL HOURS OF WORK:
– For a daily, hourly or other similar rated employee:
Half a day or less: 1 day’s wage
More than half a day but less than 1 day: 2 day’s wages
– For a piece -rated employee: Twice the ORP per piece
– For a monthly rated employee:
Half a day or less: half day’s wage
More than half a day but less than 1 day: 1 day’s wages
BEYOND NORMAL HOURS (OVERTIME)
– Overtime payment at the rate of 2 times his hourly ORP
THE EMPLOYMENT ACT 1955, cont’d.
WAGE RATE FOR WORK DURING A REST DAY
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NORMAL HOURS
– Two days wages at his/her ORP, in addition tohis/her pay he is entitled to for that day.
BEYOND NORMAL HOURS
– 3 times his hourly ORP.
THE EMPLOYMENT ACT 1955, cont’d.
WAGE RATE FOR WORK DURING PAID PUBLICHOLIDAY
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REST DAY
– one whole day in each week
– where an employee is allowed more than one rest day in a week,that day is also considered a rest day.
– No employee can be compelled to work on a rest day unless
he/she is engaged in work of a continuous nature in two or more
shifts.
THE EMPLOYMENT ACT 1955, cont’d.
REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE
NOTE:
An employer may require any employee to work overtime or to work in
situations such as accidents, work essential for the life of the
community, urgent work to be done to machinery or plant, and
unforeseen interruption of work.
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ANNUAL LEAVE
THE EMPLOYMENT ACT 1955, cont’d.
REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE, cont’d.
Year of Completed Service With the SameEmployer
Annual LeaveEntitled
(No. of Days)
One year and over but less than two years 8
Two years or more but less than five years 12
Five years or more 16
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PUBLIC HOLIDAYS
THE EMPLOYMENT ACT 1955, cont’d.
REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE, cont’d.
• Every employee is entitled to a minimum of ten gazetted public
holidays in a calendar year, inclusive of four compulsoryholidays:
• National Day
• King’s Birthday
• Head of State’s Birthday
• Labor’s Day • The employer can choose the other six days from the list of
public holidays as announced by the government (e.g., Hari
Raya Puasa, Hari Raya Haji, Chinese New Years, Christmas,
Deepavali, etc.).
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SICK LEAVE
THE EMPLOYMENT ACT 1955, cont’d.
REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE, cont’d.
Length of Service No. of Days EntitledPer Year
Less than two years 14
Two years but less than five years 18
Five years or more 22
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Female employees in agricultural and industrial
undertakings are not allowed:
– To work between 10:00 p.m. and 5:00 a.m. (exceptwith the approval of the Director General of Labor)
– To work continuously for 11 hours without a break
– To work underground.
THE EMPLOYMENT ACT 1955, cont’d.
EMPLOYMENT OF WOMEN
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She is entitled to maternity leave of 60 days if she
– had been employed for 90 days during the nine
months and 1 day during the four months preceding
her confinement,
– does not have 5 surviving natural children, and
– has notified her employer.
She is entitled to receive maternity allowance at her
normal rate of pay or RM6.00 a day, whichever is
higher.
THE EMPLOYMENT ACT 1955, cont’d.
EMPLOYMENT OF WOMEN, cont’d.
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Notice of termination:
< 2 years of service - 4 weeks
2 - 5 years of service - 6 weeks > 5 years of service - 8 weeks
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION REQUIRING NOTICE, cont’d.
In lieu of notice:
The party terminating the contract pays to the other partya sum equal to the wages accrued during the period of
notice.
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Termination for Special Reasons
a) If the employee commits misconduct the employer may
dismiss him/her without notice after due inquiry (or
downgrade or impose any lesser punishment).b) If the employee or his dependents are threatened by danger
of violence or disease he can terminate the contract without
notice.
Breach of Contract
a) By employer - if he fails to pay wages within 7 days at the
end of the wage period, or he fails to provide work or wages.
b) By employee - if he is absent for more than 2 consecutive
days without reasonable excuse and without informing or
attempt to inform the employer
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION OF CONTRACT OF SERVICE, cont’d.
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Regulation 5 of The Employment Ordinance 1980
– states that an employee is deemed to have been
laid-off if: he is not assigned any work for 12 or more
normal working days within a period of 4
consecutive weeks;
he is not paid for the period in which he is notassigned any work.
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION OF CONTRACT OF SERVICE, cont’d.
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The Employment (Termination and Lay-off
Benefits) Regulations 1980 states that the employer
is not liable to pay any termination or lay-off benefitsunder the following categories of termination of services:
upon attaining the age of retirement as stipulated in
the contract of service;
dismissal as a result of misconduct after due inquiry(i.e. a proper domestic inquiry);
voluntary termination of service for personal reason;
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION & LAY OFF BENEFITS
Cont’d. on next slide
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renewal of contract of service or re-engagement made
by the same employer under a new contract of service
on the terms and conditions which are not less
favorable than the previous contract;
renewal or re-engagement takes effect on the ending
of his employment under the previous contract;
renewal of contract of service or re-engagement under
a new contract, has been offered at least 7 days before
the date of termination of service and the terms and
conditions are not less favorable than the previous
contract;
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION & LAY OFF BENEFITS, cont’d.
Cont’d. on next slide
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offer of renewal or re-engagement has been
unreasonably refused by the employee;
after receiving notice of termination of contract of
service, the employee leaves the service without prior
consent of the employer, or without paying the employer
the indemnity due in accordance with the EA 1955;
where there is a change of ownership of the business,
the new owner, within 7 days of the change offers to
continue to engage the employee under the terms and
condition of employment not less favorable than those
before and the employee unreasonably refuse the offer.
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION & LAY OFF BENEFITS, cont’d.
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Regulation 3 of The Employment Ordinance 1980 stipulates that an employer can be liable for payment
of termination or lay-off benefits to employees if:
– the contract of service of the employee is
terminated;
– if the employee is being laid off (retrenched)
– the employee has worked for at least 12 months
continuously for the same employer and the period
between the date of resignation and the date of re-
employment exceeds 30 days.
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION & LAY OFF BENEFITS, cont’d.
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Regulation 6 of The Employment Regulations 1980
stipulates that the lay-off benefits depends on the
employees length of service:
THE EMPLOYMENT ACT 1955, cont’d.
TERMINATION & LAY OFF BENEFITS, cont’d.
Length of Completed Service
No. of Days’ WagesEntitlement for eachYear of Employment
1 Year but less than two years 10
Two years but less than five years 15Five years or more 20
Pro-rata basis for an incomplete year, calculated to the nearestmonth.
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PURPOSE: Prevent exploitation of child labor. A child (under 14 yrs.) can only engaged in light work
in a family business
Young persons (14-16 yrs.) are restricted to working: – in light work which does not involve the use ofmachinery
– a maximum of 7 hours a day
– not later than 8:00 p.m.
THE CHILDREN AND YOUNG PERSONS
(EMPLOYMENT) ACT 1966
THE EMPLOYMENT (RESTRICTION) ACT 1968
All non-Malaysian citizens are required to hold valid work
permits before they can be employed locally.
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PRACTICES THAT CAN AVOID LEGAL LIABILITY
PROVIDE TRAINING
• Provide supervisors, managers, and executives withregular updates on labor law and other related issues
through regular, focused training sessions.
• Employers should focus on communicating to
employees their commitment to a fair and justtreatment of all employees.
ESTABLISH A COMPLAINT RESOLUTION PROCESS
• Establish a process for the internal resolution of
employee complaints
• Employee morale can be improved when employees
are able to pass along their concerns to upper level
management.
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PRACTICES THAT CAN AVOID LEGAL
LIABILITY, cont’d.
Document HR Decision
– The nature of any HR decision, and the rationale
for it, should be clearly documented. In cases
involving lawsuits, written documents provide
easier preparation for the legal challenge.