Summary of
amendments to the Employment Act, 1955

Amendments were made to the Employment Act, 1955 and these changes took effect from 1st August 1998.  Some of these changes have been incorporated into the FAQ's where pertinent.  The rest are kept here for easy reference.

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(1) Approved Incentive Payment Scheme
(2) Part time Workers
(3) Suspension from Work
(4) Wage Period
(5) Advance of Wages
(6) Deductions from Salary
 
 
i) Indemnity In Lieu Of Notice
ii) Additional Powers of DG To Give Approval on Deduction
iii) Deduction Beyond 50% Limit

 
(7) Wages Paid Through Bank
(8) Shops Kept By Employers
(9) Priority of Wages
(10) Liability of Contractors and Principals
(11) Maternity Leave and Fine
(12) Rest Day Issues
(13) Changes to Work Hours Restrictions
(14) Exclusion of Periods on Leave of Absence
(15) Paid Sick Leave
(16) Ordinary Rate of Pay (ORP)
(17) New Provisions on Foreign Workers
(18) Register of Employees
(19) Sign Board for Estate
(20) Time Limit for complaints
(21) Interest for Late Payments
(22) Cases Under Industrial Relations Act 1967
(23). Employees Earning RM1500 upwards to RM5000
(24). Indemnity In Lieu Of Notice


1.

Approved Incentive Payment Scheme

This item has been included in the definitions section of the Act to mean "an incentive payment scheme approve by the director-General under and for the purposes of, section 60(I)"

So, it is a very specific definition for a very specific purpose, and that is to exclude it for the purposes of computing the Ordinary Pate of Pay. (or see definition)
Amendment Made to Definitions Under Section 2 of the Act

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2.

Definition of part time workers

Part time workers were never defined formerly - as a result the law never recognized that these were a different category of employees and consequently it led to certain anomalies - i.e. part time workers were entitled to the same minimum benefits as full time workers, although Part Time Workers do less hours (or days) of work in a year compared to full timers. 

The Law has been amended (thanks, ahem, to yours truly here, and the ruckus he kicked up some years back over the issue) to define part time workers as "a person.....whose average hours of work....do not exceed 70% of the normal hours of work of a full time employee" 

This also means that their benefits can now be proportionately less than the statutory minimum provided for full time workers.  But do note that at this point, this is the natural assumption as the new amendments does not specifically state as such.  Instead, the amendment included something that says that the Minister of HR can make regulations governing the benefits for these part-time workers.  Of course, as of now the Minister has not the time to make such regulations yet. 
Amendment Made to Definitions Under Section 2 of the Act

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3.

Suspension from work

In the past, Section 14(1c) merely stated that an employer may punish an employee found guilty of an offence by dismissing him, downgrading him or by imposing any other punishment he deems just and fit. 
An amendment has been added on to this last part which qualifies that if the punishment is in the form of suspension from work without pay, then such suspension is limited for up to 2 weeks. 
Amendment Made to Section 14(1c)

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4.

Wage period

It is now compulsory that a wage period "shall" not exceed one month. 

Amendment Made to Section 18(1)

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5.

Purpose of making advance on wages

In the past, an employer need not apply for approval of the DG to grant more than 1 month's  advance of wages to employees for purchasing, building or improving a house, purchasing land, purchase of motorcycle or bicycle only. 

Now, one more item is added to this list - advance for the purpose of buying shares in the employer's business where it is offered by the employer. 
Amendment Made to Section 22

Accordingly too, in line with the above, a provision has also been made to Section 24(2) allowing for deductions to be made from wages to recover such advances made for such purpose without having to apply for prior written permission of the DG of Labor.

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6.

Deductions from salary

i) An amendment has been made which disallows an employer from deducting indemnity in lieu of notice from the wages of an employee who is terminated by the employer for breach of contract of service under Section 15(2) or under Section 13(2).  The logic appears to be that if it is the employer who makes the decision to terminate the services of the employer, then the burden of giving notice (or paying indemnity) is no longer on the employee.

It is now clear that if an employee is absent from work for more than two days, the best recourse is for the employer to take action along the lines that the employee absconded without giving notice, instead of taking action to terminate him.  In this way, the employer retains the right to claim indemnity in lieu of notice.

ii) The amended law also now allows the DG of Labor added discretion to permit deductions beyond what has been specified in subsections 2, 3, 4 and 6. 
iii) In the past, when an employee leaves his job, employers are allowed to make "any deduction" from his final payment of wages without regard for the 50% limit that is normally imposed.  Now, that right to exceed the 50% limit is confined to "any payment due to the employer and remaining unpaid by the employee".  So, it is just not "any deduction" anymore - only monies owing by the employee to the employer.

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7.

Wages paid through a bank

An employer must have the written consent of an employee in order to  pay wages through a bank account.  An employee who has given consent may also withdraw his consent at any time by giving 4 weeks notice.  That is the old law, and it stays that way, except that amendments 
have been made that reduces the arbitrary right of any employee to withhold or withdraw his consent.  It now also states that the employee may not unreasonably withhold his consent, or unreasonably withdraw his consent.  If there is any argument as to what is reasonable for unreasonable, then the DG will decide.

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8.

Shops kept by employers 

There is now no need for employers to ask for permission when opening a shop sell foodstuff and provisions to employees.  This is because the entire Section 30 containing this requirement has been deleted.  No big deal - nobody I know of ever applied for permission any way. 

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9.

Priority of wages

With the new amendment, new items has been added to the meaning of wages for the purpose of settling wages due to employees when the assets of the employer are being auctioned off to settle the debts of a secured creditor.  For this purpose, termination and layoff benefits, public holiday pay, annual leave, pay, sick lave pay and maternity allowance are lumped together with the meaning of wages. This means that these items will also have priority likely wages over monies due to secured creditors.

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10.

Liability of contractors and principals  

Employers sometimes contract out part of their business to contractors.  These contractors engaged their own employees to perform such work.  It has happened before that sometimes a contractor will collect his payment and run off without paying wages to his own workers. Where there is such arrangement, then both the principal and the contractor are jointly and severally liable to pay the wages of the employee engaged by the contractor.  This means that if the contractor absconds and fails to pay his employees, the principal is just as liable to make up the of wages to the employees of the contractor. 

With the amendments, this liability has been increased to 3 months from 1 month previously. 
Amendment to Section 33

 

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11.

Getting back to work earlier during maternity leave
 

Now employees on maternity leave are allowed to go back to work before the 60 days is up.

What's the difference? Well, not all working ladies on maternity leave under the Employment Act are allowed to enjoy the maternity allowance as well.  Some are only allowed the 60 days without the allowance.  For those who get to enjoy the leave and the allowance, it does not make a difference.  But for the others, it means that they are given a chance to get back to work and start earning their salary again, instead of being forced to used up 60 days without pay or allowance.  There are conditions which must be satisfied though, i.e. 

The employer agrees to the employee's request and the employee obtains certification from a certified medical practitioner (a private doctor-lah, any doctor) that she is fit to resume work.

Incidentally, the fine for the offence dismissing a female employee who is on maternity leave has been increased from RM2000 to RM10,000.
Amendment in Section 40(3)

 

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12.

Rest day issues

i) An amendment has been made replacing the description "the second of such rest day" to "the last of such rest days".  This definitely clears the air for employer who practise giving more than 2 rest days on issues relating to payment for work on rest day and replacement of holidays that coincide with rest day etc.
ii) There is also an amendment that empowers the DG to allow (upon an application being made) any day of the month to be treated as an employee's rest day, thus enabling rest days in a month to be accumulated so that the employee takes all 4 days at one go.  This goes something like, your 26 straight working days and then 4 consecutive rest days.  The conditions remain that the rest days so replaced must still fall within the same month, and the DG has to give his approval before it can be implemented. 

This power used to be with the Minister to make exemption for an employer, so the amendment makes it easier for employers to seek approval. 
 Amendments to  Sections 59 (1) and (1B)
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13.

Changes to work hour restrictions 

i) The provision is that employees must be given a break of 30 minutes for every 5 hours of work.  This provision of course stays, but an amendment makes it clear that with regard to this 5 hour period, any break that is less that 30 minutes does not count as a break at all. So no more cheating by giving a short break during the 5 hour period to avoid giving the 30 minute break within it.
Amendments to  Sections 60A(1)(d)(i)
ii) The DG's however continues to have the power to grant exemptions to the restrictions on working hours (such as the 5 hour limit mentioned above, or the 8 normal hours of  work per day or spread over period or even the 48 hour of work in a week if an employer applies for such exemption and he is happy with the application.  What's new (Section 60(1A)is that he is now entitled to impose conditions to complement any approval he grants (including additional allowances I suppose).
iii) An additional phrase has been added to Section 60C.(1) which empowers the DG to grant approval to extend computation of the 48 hour weekly average working hours for shift workers from over a 3 week period to "over any period exceeding 3 weeks".  This means that employer can (with approval) extend the averaging period from 3 weeks to more than 3 weeks.

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14.

Excluding periods on leave of absence

Well first, I am  assuming that "Leave of Absence" means being "absent" with permission/ consent of the employer or "unpaid leave" and not just extensions to Annual Leave entitlement.  Now with that in mind, I interpret the amendment as now allowing employers to disregard unpaid leave from the computation of length of service.  This is definitely going to have an impact on apportionment of annual leave entitlement, retirement benefit, or any other issue that is tied to length of service, including notice period, maternity leave etc.
 

15.

Paid sick leave

i) An additional paragraph has been added to qualify the total number of paid sick leave days.  Specifically it says "Provided that the total number of days of paid sick leave in a calendar year which an employee is entitled to under this section shall be sixty days in aggregate".
ii) Well, umhmm, ahem!! I have no clue as to the significance of this addition as yet.  Maybe, one of you readers want to illuminate that dull spot in my head?  I think it must have its origins in some abuse of the original provisions which are still there, and this additional sort of covers the hole.

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16.

Items excluded from ORP computation

i) Payments under an "Approved Incentive Payment Scheme" as defined in Section 2 or payments for work done on any  gazetted public holidays (including substitutions) are now also excluded from the computation of the Ordinary Rate of Pay. 
ii) Approved Incentive Payment Scheme means something you need to get approval for in the first place. 

Amendment Section 60I (1D) removes an anomaly of the old previous provision by limiting the ORP computation for sick leave pay of daily-rated and piece-rated employees to only basic pay of an employee.  In the past, it was a fact that these employees can earn more while on sick leave than working.
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17.

New provisions on foreign workers

i) Foreign Worker - A definition has been included defining the foreign worker as an employee who is not a citizen of Malaysia. 
This is further differentiated from "Permanent Resident" who is also now included in the definition as "a person, not being a citizen who is permitted to reside in Malaysia without any limit of time imposed under any law relating to immigration, or who is certified by the Federal government to be treated as such in Malaysia"
The information provided here relating to foreign workers do not apply to permanent residents
ii) An employer who employ any foreign worker must notify the nearest Labor Office within 14 days of the foreign worker commencing work with him.
iii) The DG may at his discretion order any employer to submit specific returns on foreign workers as he deems necessary
iv) It is now specifically provided that the DG can investigate into any complaint by a local worker if he is being discriminated against in relation to foreign workers in respect of the terms and conditions of employment.  Foreign workers can also lodge complaint of discrimination in relation to local workers.
v) Employers are prohibited from terminating local workers to enable him to employee foreign workers 
vi) Employers must retrench a foreign workers before retrenching local workers in the similar capacities. 
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18.

Register of employees

The amendments now empower the DG to grant approval to any employer to maintain the employee register in any manner and also allow him to impose conditions for his approval.  This definitely brings the law up to date with IT developments in data storage.

Employer who want to do away with duplicate registry (manual and computer based) and move into IT based system only need apply to the DG now.

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19.

Estates and signboards

Estates located outside of the limits of local authorities are required to erect a sign board stating the name and address of the estate and the board must be in Bahasa Melayu.  This is necessary only if the size of the estate is 20 hectare or more  (used to be 25 acres and this is the change really).

Amendment to Section 64

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20.

Time limit for complaints

This applies to complaints against disciplinary action taken by employers. The time limit for such complaints by employees has been increased to 60 days, instead of 30 days in the past.

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21.

Interest for late payments

A new provision requires the DG to impose an interest of 8% per annum after the expiry of 31 days from the time an order has been issued for an employer to make payments to an employee, until such time the amount has been fully paid.  An employer who is unable to comply within the 31 day period need to apply to the DG to obtain a delay on imposing this interest.

Section 69(3A)

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22.

Cases under Industrial Relations Act 1967

An amendment has been made to this part which bars the Labor Office from taking on any case which is pending inquiry under the IRA, 1967, or which has been decided upon by the Minster of HR (i.e. he decides against referring the case to Industrial Court) OR which is pending in the Industrial Court.

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23.

Employees earning more than RM1500 and up to RM5000 per month 

This amendment is among the more significant changes.  In the past employees who earn more than RM1500 (except specific categories)  were totally excluded from the protection of the Employment Act, 1955.

The amendment to Section 69 here now allows this group of employees to seek the help of the Labor Office to enforce the terms of their contracts of employment, i.e. if their employer does not fulfill the terms of the contract like providing benefits, unilaterally withdrawing agreed benefits, failing to pay wages as agreed, failing to provide due notice upon termination or making other payments etc., they can lodge a complaint for inquiries to held and order to be made against the employer accordingly.

In the past, this group of employee have no such protection from the labor office, forcing them to turn to civil proceedings which is costly and time-consuming.

This amendment however does not change their status in terms of receiving minimum benefit as provided under the Act - they are still not entitled to the minimum protection.  This means that they continue to depend on their bargaining power to negotiate the terms and conditions of their employment.  Whatever has been agreed upon now becomes enforceable through the Labor Office.

Section 69(B)

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24.

Termination without notice

Bad news for those RM1500 - RM5000 employees. The amendments now open the way for the employer to take action against anyone including them for resigning without notice as agreed in the contract of service through the labor office - i.e. indemnity in lieu of notice.

In the past, if any of them walked out of their jobs without giving notice, the employer would have had to take civil action to claim indemnity in lieu of notice.  Well, the sword cuts both ways.

 

That's about it.  The rest are mainly technical issues which the lay-man or ordinary HR Practitioner is not quite concerned with.

 

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