Earlier this year, the Employment (Amendment) Act 2022 – which brought radical changes to employer-employee relations – was passed in Parliament & received royal assent. On 15th August 2022, the Minister gazetted the Employment (Amendment Of First Schedule) Order 2022, which clarified the categories of employees affected. All these amendments will come into effect on 1st January 2023.
Practically Speaking, What Are The Effects Of These Amendments?
Before the amendments, the benefits under the Employment Act 1955 generally only apply to employees earning RM2,000 and below. For employees earning RM2,001 and above, their benefits are highly dependent on the terms of their respective contract of service.
However, starting from 1st January 2023, the general position is that all employees (regardless of their salary) are now entitled in law to the following benefits:
(1) Minimum Number of Paid Annual Leave
Employed less than 2 years – 8 days annual leave
Employed between 2-5 years – 12 days annual leave
Employer 5 years or more – 16 days annual leave
(2) Minimum Number of Paid Sick Leave
Where no hospitalization is necessary:
(a) Employed less than 2 years – 14 days sick leave
(b) Employed between 2-5 years – 18 days sick leave
(c) Employed 5 years or more – 22 days sick leave
If hospitalization is necessary, an employee is entitled to 60 days sick leave in aggregate in each calendar year.
(3) Paid Maternity Leave of 98 days (an increase of 60 days previously)
(4) Pregnant Employees Receive Some Legal Protection From Termination.
They can only be terminated if there is wilful breach of the contract of service, misconduct or closure of the employer’s business. The employer bears the burden of proving such termination is not on grounds of pregnancy or illness.
(5) Paid Paternity Leave of 7 Consecutive Days (none previously)
(6) Maximum Weekly Working Hours Is Shortened To 45 Hours (48 hours previously)
(7) Flexible Working Arrangements
An employee may apply to the employer to vary the hours of work, days of work or place of work. Employers must revert with their decision within 60 days. If the application is rejected, employers must give reasons.
(8) Discrimination Protection
The Director General (“DG”) of Labour can now inquire and make orders on complaints of discrimination between employees. Employers that fail to comply with any such orders could be subject to fines.
(9) Notice on Sexual Harassment
An employer shall, at all times, exhibit conspicuously at the place of employment, a notice to raise awareness on sexual harassment
(10) Special Requirements Relating to Foreign Workers
(a) Hiring: Employers must obtain prior approval from the DG of Labour before hiring a foreign employee. Failure to do so could result in a fine not exceeding RM100,000 or to imprisonment for a term not exceeding 5 years, or both.
(b) Termination: If a foreign employee is terminated by his employer, by reason of expiry of employment pass or by reason of deportation, the employer shall inform the DG of Labour within 30 days. If a foreign employee terminates his service or absconds from his workplace, the employer shall inform the DG of Labour within 14 days.
In addition to the above, all employees earning RM4,000 and below are further entitled to the following benefits:
(1) Overtime for Work Outside Normal Working Hours
For context, “normal working hours” means the number of hours agreed in the contact of service. However, such number of hours in the contract must conform to the limits set out in Section 60A(1), which states that an employee cannot be asked to:
(a) Work more than 5 consecutive hours without a period of leisure of at least 30 minutes
(b) Work more than 8 hours in 1 day
(c) Work in excess of a spread over period of 10 hours in 1 day
(d) Work more than 45 hours in 1 week
If any of these limits are breached, an employee is considered to be working outside “normal working hours”. If that happens, for any work done outside “normal working hours”, employers must pay overtime at a rate of at least 1 ½ an employee’s hourly rate of pay.
(2) Overtime for Work on Rest Days
For context, every employee is entitled 1 rest day every week.
The formula for overtime on rest days is generally as follows:
(a) if an employee works less than half of his/her normal working hours, he/she shall be paid 50% of his daily wages
(b) if an employee works more than half but not exceeding his/her normal hours of work, he/she shall be paid a full days’ wages
(c) if an employee works in excess of his/her normal working hours, he/she shall be paid twice his/her hourly rate of pay
(3) Overtime for Work on Public Holidays
If an employee is asked to work on a gazetted public holiday, he/she shall be paid twice his/her daily wages. If there is overtime work in excess of “normal working hours”, he/she shall be paid triple his/her hourly rate of pay for the same.
What if Employers Disobey The Above?
For certain benefits described above, there are specific penalties if there is a breach. In the absence of that, the general penalty for a contravention of the Employment Act 1955 is a fine of RM50,000 (an increase from RM10,000 previously). The Courts can also order the employers to pay any outstanding wages to the employees.
So What Should Employers Do Now?
The above changes are going to dramatically impact the distribution of wages & working arrangement of employees. This is especially true for the majority of employers (both large & SMEs) who have many employees paid a monthly salary of RM4,000 and less. Employers should revise their employment contracts, employee handbooks & internal policies from 1st January 2023 onwards, as well as carry out the necessary financial adjustments accordingly, so as to not run afoul of the law.
The above discussion is certainly not exhaustive. There may be exceptions & qualifications for each of the benefits stated above. It is best for employers to engage legal or human resource professionals for advice before taking their next course of action.
