Employment Law in Malaysia: How Labour Laws Apply to Foreign Workers

To prevent companies in Malaysia from mistreating or exploiting their employees, labour laws in Malaysia since its establishment. Such laws grant the employees the right to be employe in a fair and respected manner, and this applies to local workers and foreign talents who are working in the country.

The primary employment and labour laws in Malaysia include, among others:

• Employment Act 1955
• Industrial Relations Act 1967
• Employee’s Provident Act

What are the Employment Laws in Malaysia?

There are a few Acts and Orders under the Employment laws in Malaysia. The most common employment laws in Malaysia include:

1. The Employment Act of 1955

This is the primary law governing employment in Malaysia, and it protects any employee who falls under the First Schedule. After the 2022 amendment, the First Schedule includes not only employees earning less than RM2,000 per month or those involved in manual labour, but also those who enter contracts of service, subject to the Excluded Sections (S.60(3), S.60A(3), S.60C(2A), S.60D(3), S.60D(4) and S.60(J)).

This is the last table on rights as a foreign worker, taking into account the Amendments to the Employment Act starting from 1 Jan 2023:

It is also to note to employers that in the past, the Act only required employers to provide the Director General with details about the foreign employee within 14 days of their commencement of employment. Currently, getting prior approval of the Director General is mandatory before employers can hire a foreign employee.

As per Section 99A of the Employment Act, anyone who commits an offence under this act, or fails to follow the provisions of the act could face a fine of up to RM 100,000, imprisonment for a maximum of five years, or both penalties combined.

2. The Industrial Relations Act 1967

The Industrial Relations Act is applicable to every employee in Malaysia as well and it governs the relationship between employee and employers. It also specifies regulations and assists the settlements of any dispute that arises between employee and employers.

3. Trade Union Act 1959

This governs trade unions, protecting the rights and liabilities of all members of trade unions in the country.

4. Employee’s Provident Fund Act 1991 (EPF Act)

For the EPF Act, it requires all employers and their employees to contribute a certain amount from their salary to the EPF. This is similar to the Employee’s Social Security Act 1969 which provides social security from employers and employees by imposing compulsory rates. These Acts require both employees and employers to contribute funds at a certain prescribed rate.

5. The Occupational Safety and Health Act 1994

This Act governs the welfare, health, and safety of all individuals in a certain workplace.

6. Minimum Wage Order 2018

The Minimum Wage Order 2018 prescribes the minimum wage that all employees in Malaysia are to receive. The Minimum Retirement Age Act sets the minimum retirement age at the age of 60 and employers are unable to retire employees below the minimum age of 60 unless early retirement by the decision of the employee permission.

7. Personal Data Protection Act (PDPA)

This Act governs the privacy of employee’s personal and any sensitive information.

Application of the Employment Laws to Foreigners in Malaysia

Similar to any employees in Malaysia, foreign employees receive all the protections in the Employment Act 1955. Any employer holding the wages of an employee unlawfully and committing a crime that breaches the Employment Act 1955 will face a fine of up to RM 10,000 and will be liable for prosecution in a court of law.

Examples of mistreatment are as follows:

• Employers confiscate a foreign employee’s passport as a form of safekeeping but in reality, they are aiming to take complete possession of them
• The employer threatens these employees with deportation to enforce their demands
• As the employer is illegally retaining the employees’ passports, the immigrant department will have no way of knowing whether the firm would provide accurate information about the employees

Employers cannot make deductions from foreign employees unless Malaysia’s employment regulations stipulate it. These include:

• Deductions made due to overpayments made within the previous three months of the deduction
• Deductions for indemnity by the employee due to the employer as specified by law
• Deductions made from wages given as an advance as long as the advance has not accrued any interest charges
• Any other deductions which are necessary by law or regulation. All wages need to be paid in legal cash to avoid being declared null and void and so considered illegal.

As for female employees, they are on maternity leave and allowance for 60 days.

Employment Law for Rest Days, Holidays & Annual Leave in Malaysia

Every employee has the right to rest once every week and is entitled to a paid holiday at the ordinary pay rate on every public holiday in Malaysia of the calendar year. If a public holiday falls on a weekend, the next working day directly following will be as a public holiday. The annual leave entitlement under labor law is dependent on the number of years the employee is working with the company and ranges from 8 to 16 days a year.

Any noncompliance with the labor law will result in punishments in Malaysia. The general penalty is a fine not exceeding RM10,000 on the first offense. If repeated, the offender will be fined daily of not more than RM1,000 and will be sentenced to a five-year jail term or be forced to pay a fine of RM20,000.