Learn more about the Employee Management in Malaysia

Employee management is a broad phrase that incorporates all areas of employee management, development, and communication. Thus, people management is concerned with assisting employees to perform at their peak every day in order to meet the company’s overall objectives. As a result, excellent employee management guarantees that the employer and employees have a positive working relationship. The employment relationship is the legal connection that exists between the employer and the employees. It exists when a person does work under specific circumstances for monetary compensation. Themis Partner provides you all the documents you will need to manage your employees such as Employment Contract, Warning Letter, Employee Confidentiality Agreement and many others.

Table of contents

What is the status of an employee in Malaysia?

An employee is someone who gets paid a salary in exchange for doing work. As a result, under labor law, an employee has a protected status. Salaried work indicates a legal subordination connection between employees and the person who hires them.

Workers in Malaysia are classified into three skill levels. Managers, professionals, technicians, and associate professionals are examples of skilled employees. Semi-skilled employees include those in secretarial assistance, sales, machine operators, and agricultural skilled laborers. Cleaners, assistants, and laborers are examples of low-skilled workers.

EA and Non-EA Employees

The contrast between EA Employees and non-EA Employees is significant, since non-EA Employees’ employment terms and conditions are normally freely changeable between employer and employee. In principle, most non-EA employees would be contractually entitled to benefits equal to or better than those given under the Employment Act.

EA workers are those who are legally protected under the Employment Act of 1955. You are an EA employee if you earn less than RM2,000 per month or if you work in physical labor regardless of your pay grade.

What are the laws governing employee management?

The Employment Act of 1955 (EA) and the Industrial Relations Act of 1967, constitute the legal basis for Malaysia’s employment and industrial relations ecosystem. It applies in Peninsular Malaysia and the Federal Territory of Labuan. As long as the employee is covered by the EA, any terms and conditions of the employment contract that are less favorable than the requirements of the EA or any other regulations imposed thereunder will be “invalid,” according to Section 7 of the EA.

How to hire foreign employees?

Companies that hire foreigners must acquire foreign quota permission from the Ministry of Home Affairs’ Local Centre of Approval.

Foreign workers are permitted to work for Malaysian enterprises in agriculture, construction, manufacturing, plantation, and services.

Employers must submit the required documentation to the Immigration Department after the criteria have been satisfied.

Following quota approval, the employer must submit to the Immigration Department the employment pass application and a letter stating why the post must be filled by a foreigner. A letter of approval for the employment permit will be given after it has been authorized.

Employers should be aware that only specific roles are open to foreigners, which are often highly skilled or technical professions that cannot be filled by locals. Among the roles available are:

➤ Top management positions in Malaysia for foreign firms
➤ Positions requiring advanced technical skills and expertise
➤ Professional or mid-level management jobs

What is the minimum wage in Malaysia?

According to the Department of Statistics’ 2020 Salaries and Wages Report, the median income in Malaysia in 2020 for high-skilled, semi-skilled, and low-skilled employees was RM4,011, RM1,593, and RM1,274 correspondingly. Based on the national median income, the RM1,500 pay floor delivers the highest salary boost for low-skilled workers, who account for 8% (about 750,000) of Malaysia’s 9.4 million people in paid employment.

However, the RM1,500 pay threshold affects low-skilled workers differently in various states. In Johor and Kuala Lumpur, the median pay for this category is close to or surpasses RM1,500. Given that the four states listed above account for around one-third of all low-skilled workers, a rough estimate estimates that only two-thirds of the nation’s 750,000 low-skilled workers will benefit from the wage increase.

What are the rules regarding employmee rights in Malaysia?

1. Hours of work

Under his service contract, an employee is NOT obligated to work:
More than 5 hours without a break of at least 30 minutes; more than 8 hours a day; more than 10 hours in one day; Over 48 hours in one week Special limits, regarded as protective rules, apply to women working in the industrial or agricultural sectors. They are not allowed to labor between the hours of 10 p.m. and 5 a.m.

2. Overtime

Overtime labor performed outside of normal working hours shall be compensated at a rate not less than one and one-half times the employee’s hourly rate of pay, regardless of the basis on which his or her rate of pay is determined. This implies that the agreed-upon workweek must be in writing, and any hours spent beyond that period must be compensated at the approved overtime rate.

3. Annual Leave

Section 60E provides that an employee is entitled to a minimum paid yearly leave of:

8 Days: Employed for a period of less than 2 years
12 Days: Employed for a period of 2 years or more but less than 5 years
16 Days: Employed for a period of 5 years of more

4. Public Holidays

Each state and federal territory has declared four to six state public holidays as of 2020, increasing the total number of (federal and state) public holidays to 20 in Sabah and Terengganu, 19 in Labuan, Penang, and Sarawak, and 18 in the remainder of the country.

5. Sick leave

Employees of EA are entitled to the following sick leave when no hospitalization is required:

➤ 14 days in total in each calendar year if the employee has been with the company for less than two years
➤ If the employee has been with the company for two years or more but less than five years, he or she is entitled to 18 days of vacation every calendar year
➤ If the employee has been with the company for 5 years or more, he or she is entitled to 22 days in total every calendar year

What are the rules for terminating an employee?

The Labour Relations Act (IRA) 1967 and the Employment Act 1955 govern employer-employee interactions in Malaysia.
Many people consider that the process for terminating an employee in Malaysia is excessively pro-employee. Some overseas enterprises are also concerned about a system that is viewed as unfair to employers when it comes to job termination. Malaysian labor law and termination of employment are based on fairness. It aims to strike a compromise between employee tenure security and employers’ rights or prerogatives to fire employees. Employers can fire an employee without causing unjust consequences to either the employer or the employee if they follow the proper procedures.

Termination letter must occur for “good reason or excuse.” There is no set or exhaustive list of appropriate grounds for an employer to terminate employment, although common causes include misbehavior, poor performance, redundancies, or business closure.
Employees (both EA and non-EA) are protected from wrongful termination.

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