CHAPTER 2

THE MALAYSIAN LEGAL

ENVIRONMENT
(Persekitaran perundangan di Malaysia)

1
Learning objectives
Students should be able to:

1. Explain the importance of laws in human resource management;

2. Discuss the various labor laws in Malaysia.

2
Introduction

 Human resource management practices should abide by the laws of

a country.
 Human resource managers must have the basic knowledge about
laws related to HRM.
 Knowledge about laws is beneficial to employees and organizations.

Objective of labour laws in Malaysia:

 To administer and monitor all things related to jobs, which involve
various groups of people, especially the management/employers and
employees.

3
 ROLE OF THE MINISTRY OF HUMAN RESOURCES
(Peranan Kementerian Sumber Manusia)

 The Ministry of HR is responsible for establishing a work environment

in the country that encourages workers to be productive and for setting
minimum labour standards.
 sets policies;

 prepares draft employment legislation;

 enforces the employment legislation;

 Establishes codes of practices as guidelines to employers and

employees.

4
 ORGANIZATION CHART
MINISTRY OF HUMAN RESOURCES
Ministry of
Human
Resources

Department Department Department

Department
of Trade of Industrial of Occupational
of Labour
Union Affairs Relations Safety and Health

Department
of Manpower

Department
of Skills
Development

5
 OTHER ORGANIZATIONS OF RELEVANCE TO HRM
(Statutory bodies/companies)

The Employees Social Security Organization

(Pertubuhan Keselamatan Sosial Pekerja)

Pembangunan Sumber Manusia Bhd

National Institute of Occupational Safety and Health

(Institut Keselamatan & Kesihatan Pekerjaan Negara)

Skill Development (Loan) Fund Corporation

(Perbadanan Tabung Pembangunan Kemahiran)

The Employees Provident Fund

(Kumpulan Wang Simpanan Pekerja)

6
 Labour laws in Malaysia
(Undang-undang buruh di Malaysia)

Laws providing for basic benefits:

 Employment Act 1955 (Akta Kerja)
 National Wages Consultative Council Act 2011(Akta Majlis Perundingan Gaji
Negara 2011)
 Children and Young Persons (Employment) Act 1966 (Akta (Penggajian)
Kanak-kanak dan Orang Muda)
 Workers Minimum Standards of Housing and Amenities Act 1990 (Akta
Standard Minimum Perumahan dan Kemudahan Pekerja)

Social security laws:

 Workmen’s Compensation Act 1952 (Akta Pampasan Pekerja)
 Employees Provident Fund Act 1991 (Akta Kumpulan Wang Simpanan
Pekerja)
7  Employees Social Security Act 1969 (Akta Keselamatan Sosial Pekerja)
cont’d......

Safety laws
 Factories and Machinery Act 1967 (Akta Kilang dan Jentera)
 Occupational Safety and Health Act 1994 (Akta Keselamatan dan
Kesihatan Pekerja)

Laws establishing the industrial relations framework

 Trade Unions Act 1959 (Akta Kesatuan Sekerja)
 Industrial Relations Act1967 (Akta Perhubungan Industri)

Law relating to training of employees

 Pembangunan Sumber Manusia Bhd Act 2001

8
 Employment Act 1955
(Akta Kerja 1955)

 1st implemented in Peninsular Malaysia on 1 June 1955.

 Enforced by the Labor Department (jabatan buruh).
 Sets minimum labor standards for workers and seek to protect
them from exploitation.
 Apply to Peninsular Malaysia and the Federal Territory of Labuan
only.
 The employees in East Malaysia is covered under The Sabah and Sarawak
Labor Ordinances
 Covers
 Employees in the private sector earning not more than RM1500 per
month.
 those who work as manual labors, supervise manual labors, operate or
maintain machines.
9
 Employment Act 1955 (cont’d)

 areas covered:
 contracts of service (kontrak perkhidmatan),
 payment of wages (bayaran gaji),
 employment of women (penggajian wanita),
 working hours and holidays (waktu kerja dan cuti),
 registers, returns, complaints and inquiries

10
 Employment Act 1955: Contract of Service

 An agreement whereby one person agrees to employ another as

an employee and that the other agrees to serve his employer as an
employee (EA1955; sec.3 OSHA 1994).
 Such agreement can be oral, in writing, express or implied. (boleh
dibuat secara lisan, bertulis, nyata atau tersirat)

11
 Employment Act 1955 : Payment of wages
 A contract of service must specify a wage period not exceeding 1
month.
 If the contract does not state this, the period is deemed to be 1
month.
 Wages must be paid not later than the 7th day after the end of the wage
period.
 Employees must be given a statement showing details of wages,
allowances earned & lawful deduction during the wage period.
 In the case of normal termination with notice, wages, less
deductions, must be paid not later than the day on which contract
terminates.
 When an employee terminates the contract of service without
notice, the employer must pay the wages not later than the 3rd day
after the day on which the contract of service is so terminated.
12
 Employment Act 1955: Employment of Women

 no employer shall require any female employee to work in any

industrial or agricultural undertaking between the hours of
10 o'clock in the evening and 5 o'clock in the morning.
 nor commence work for the day without having at least 11
consecutive hours of rest.
 No female employee shall be employed in any underground
working.

13
 Employment Act 1955: Employment of Women

Maternity Protection (Perlindungan bersalin)

 Every female employee shall be entitled to maternity leave for
a period of not less than 60consecutive days.
 A female employee shall be entitled to receive maternity
allowance for the eligible period from her employer if:
 she has been employed by the employer at any time in the 4 months
immediately before her confinement; and
 she has been employed by the employer for a period of, or periods
amounting in the aggregate to, not less than 90 days during the nine
months immediately before her confinement.
 The employer was informed within 4 months before her
confinement.
 Not entitled to have maternity allowances if already having 5
or more surving children.
14
Employment Act 1955 : Working Hours and Holidays

 Rest day (cuti rehat)

 Every employee shall be allowed in each week a rest day of one whole
day
 Hours of work
 an employee shall not be required under his contract of service to
work:
 more than 5 consecutive hours without a period of leisure of not less than
30 minutes duration;
 more than 8 hrs in one day;
 in excess of a spread over period of 10 hours in one day;
 more than 48 hours in one week.

15
Employment Act 1955 : Working Hours and Holidays

Working on. Pay rate Overtime Pay

Work day Normal rate 1.5 x normal rate

Rest day 1 day x normal rate (for < ½

his normal hours of work ) 2 x normal rate
2 days x normal rate (for >
½ his normal hours of work )

Public 2 x normal rate 3 x normal rate

holidays

16
Employment Act 1955 : Holidays and Leaves
Years of Public Holidays Annual Medical
Service Leave Leave

< 2 YEARS 11** days public holidays including: 8 days 14 days*

 The National Day
2 – 5 YEARS  The Birthday of the Yang di- 12 days 18 days*
Pertuan Agong

> 5 YEARS  The Birthday of the Ruler or the 16 days 22 days*

Yang di-Pertua Negeri
 The Labour Day
 Malaysia Day

*All employees cover under EA 1955 entitled for 60 hospital leave (If hospitalized).
**Effective 1st April 2012, the minimum number of paid public holidays is now 11
days with Malaysia Day - September 16 as a paid public holiday which must be
granted under Section 60D(1)(a)
17
 Employment Act 1955: Domestic Inquiry (Siasatan dalaman)

 Is an internal hearing held by an employer to ascertain whether an

employee is guilty of misconduct.
 The purpose of a domestic inquiry is to find out the truth of the
allegations made against the employees and to gather evidence.
 An employer can, on grounds of misconduct, after due inquiry, dismiss
an employee.
 An employer can suspend an employee on half-pay for not more than 2
weeks.
 If the inquiry does not disclose any misconduct, the employer must
pay full wages for the suspended period of 2 weeks.

18
 National Wages Consultative Council Act 2011
(Akta Majlis Perundingan Gaji Negara 2011)
 Administered by Labour Department
 All the Orders under Wages Council Act 1947 (Akta Majlis
Penetapan Gaji 1947) will be REVOKED on 1 January 2013
 The act allows for the formation of National Wages
Consultative Council to determine the minimum pay.
 Under Minimum Wages Order 2012:
 An employer who employs > 5 employees; and
 Regardless of the number of employees employed, an employer who
carries out a professional activity classified under the Malaysia
Standard Classification of Occupationals (MASCO)

19
 National Wages Consultative Council Act 2011
(Akta Majlis Perundingan Gaji Negara 2011)
Regional areas Minimum wages rate
Monthly Hourly

Peninsular Malaysia RM900 RM4.33

Sabah, Sarawak and RM800 RM3.85

Federal Territory of
Labuan

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 The Children and Young Persons (Employment)
Act 1966
(Akta Kanak-kanak dan Orang Muda (Pekerjaan) 1966)

 Only applies to Peninsular Malaysia.

 Sabah & Sarawak are regulated by the Labour Ordinances.

 “Child” means any person who is below 14 years old age.

 “Young persons” means any person who is 14 years old and above but
not completed his 16th year of age.
 To prevent the exploitation of child labor:
 Under 14 yrs – only light work in family’s business
 14-16 yrs
 In light work that does not involve the use of machinery; and
 A maximum of 7 hrs per day
 May not work between 8pm – 6am
21
 Workers’ Minimum Standards of Housing
and Amenities Act 1990
(Akta Standard Minimum Perumahan dan Kemudahan Pekerja 1990)

 Administered by Labour Department.

 To monitor the minimum quality in employee housing and other basic
needs provided by employers.
– Water supply and electricity, child care centre, community hall, and
others
 Farming and mining sectors except within the area administered by a
City Hall or Federal Territory
 Farms – agricultural land with the area of more than 20 hectar

22
 The Workman’s Compensation Act 1952
(Akta Pampasan Pekerja 1952)

 Enforced by the Labor Department

 To provide compensation to foreign workers who have accidents at
work or who contract employment-related diseases.
 Malaysian workers are not covered under the Workmen's
Compensation Act 1952 with effective from 1st July 1992.
 Covers:
 Foreign workers earning less than RM 500 per month.
 Work as manual labour with unlimited pay
 Employers must take out an insurance policy to cover liability under
the act.
23
 The Workman’s Compensation Act 1952 (cont’d)

 Responsibilities of employers:
– Pay insurance premiums of RM86 annually fo each employee.
– Payment of insurance premiums must not be deducted from an
employee’s pay.
– Insurance policies can be bought from any insurance companies
registered with the Labour Department.
– Must inform the Labour Department of any accident involving
foreing worker within 10 days of its occurrence.
– Deposit the payments of compesation to the Labour Department
and not directly to the accounts of employees’ dependents.

24
 The Workman’s Compensation Act 1952 (cont’d)
 Senarai syarikat insurans sehingga 30 September 2011 :-
1) Allianz General Insurance Malaysia Berhad
2) Overseas Assurance Corporation (M) Bhd.
3) AXA Affin General Insurance Berhad
4) Berjaya Sompo Insurance Berhad
5) Chartis Malaysia Insurance Berhad
6) ING Insurance Bhd
7) Jerneh Insurance Berhad
8) Kurnia Insurans (Malaysia) Berhad
9) Tokio Marine Insurans (M) Berhad.
10) Uni. Asia General Insurance Berhad.
11) ETIQA Takaful Berhad
12) Malaysian Assurance Alliance Berhad
13) MSIG Insurance (Malaysia) Berhad
14) MUI Continental Insurance Berhad
15) Multi–Purpose Insurance Berhad.
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16) Oriental Capital Assurance Bhd.
17) AmG Insurance Berhad
18) The Pacific Insurance Berhad.
19) TProgressive Insurance Berhad.
20) QBE Insurance (M) Berhad.
21) RHB Insurance Berhad.
22) Syarikat Takaful Malaysia Berhad.
23) Takaful Ikhlas Sdn Bhd.
24) Lonpac Insurance Berhad
25) ETIQA Insurance Berhad
26) Prudential BSN Takaful Bhd.
27) Hong Leong MSIG Takaful Bhd
28) MAA Takaful Berhad
 The Employees Provident Fund Act 1991
(Akta Kumpulan Wang Simpanan Pekerja 1991)

 Administered by the Employees Provident Fund Board.

 To ensure workers have funds available on their retirement.
 Covers:
 All employees in Malaysia (16 years old and above)
 Before 1 August 1998: Expatriats and foreign workers are not
required to contribute (but can choose to contribute)
 After 1 August 1998: Expatriats and foreign workers earning less
than RM2,500 are required to contribute.

26
 The Employees Provident Fund Act 1991 (cont’d)

 Those who are exempted from making the compulsory

contribution are
 employees or workers holding Employment Pass or expatriates holding
Visit Pass (Temporary Employment) whose monthly wages is not less
than RM2,500
 Thai workers who enter Malaysia with a Territorial Pass
 Seamen
 Foreign domestic maids
 Self-employed persons
 Out-workers who do cleaning and alteration repair works
 Persons detained in custody, in prison, Henry Gurney School and
mental hospital
 Pensioners

27
  Contributions

% of contribution
Employer Employee
All employees except 13* 11
expatriates and foreign
workers
Expatriates and foreign RM5/per 11
workers (except for those person
excluded)

*Note: Effective from January 2012, percentage of contribution for employer is

increase to 13% for the workers who earn RM5,000 and less per month.

28
 The Employees Provident Fund Act 1991 (cont’d)

 Members’ Account: 3 separate accounts

 Account 1 (60%): for pension
 Account 2 (30%): for purchase of house and computer
 Account 3 (10%): for medical costs

However…..

29
 The Employees Provident Fund Act 1991 (cont’d)

 Effective from 1 Jan 2007, the first account is divided into 2 sub-
accounts:
 Account 1: 70%
 For pension and investments.
 Account 2: 30%
 Withdrawals are allowed for the following reasons:
 Reaching the age of 50 years
 Down payment for purchasing the first house
 To settle the remaining first housing loan
 Payments for the education of an employee’s children
 To supplement the medical costs of an employee and employee’s
family.
30
 The Employees Social Security Act 1969
(Akta Keselamatan Sosial Pekerja 1969)

 Enforced by the Social Security Organization.

 For employees in the private sector who earns less than
RM3000 per month.
 An employee must be registered with the SOCSO
irrespective of the age.
 The principle “ once in, always in”.
 To provide protection to workers who may be involved in an
accident at work or who contract some occupational disease.

31
 The Employees Social Security Act 1969 (cont’d)

 SOCSO does not cover the following categories of persons :

 A person whose wages exceed RM3,000 a month and has never been
covered before.
 Government employees.
 Domestic servants employed to work in a private dwelling house which
includes a cook, gardeners, house servants, watchman, washer woman
and driver.
 Employees who have attained the age of 55 only for purposes of
invalidity but if they continue to work they should be covered under the
Employment Injuries Scheme.
 Self-employed persons.
 Foreign workers.

32
The Employees Social Security Act 1969

 Accidents at work :
 On the way to work through normal route from the
worker’s house/ residence to the workplace and back.
 Travelling to and from specified destinations while on duties.
 Travelling between a workplace and an eating area/place
during the permitted resting hour.
 Condition/provided that: the employee use the normal
route and no detour or stopping is done due to personal
engagements.

33
 The Employees Social Security Act 1969

 Occupational diseases
 Consequences due to jobs done.
 Such as:
 Hearing disability due to long exposure to noise at workplace.
 Difficulty in breathing or athma due to inhaling dust or flour for
workers who work in sawmills, talcum powder and flour mills,
etc.

34
 The Employees Social Security Act 1969 (cont’d)

 SOCSO provides coverage to eligible employees through 2

schemes namely
 Employment Injury Insurance Scheme (skim bencana pekerjaan)
 The contribution payment is made by both the employer (0.5%
from monthly pay) and employee (0.5% from monthly pay)
 Covers workers due to:
 Accidents at workplace
 Occupational diseases (Penyakit khidmat)
 Invalidity Pension Scheme (skim pencen ilat)
 provides twenty four (24) hours coverage for workers from
invalidity or dies irrespective of the cause of death.
 contribution is paid by employer only (1.25 % from total
monthly pay)
35
 The Employees Social Security Act 1969 (cont’d)

 These schemes are classified into 2 categories of contributions:

 First Category
- Employment Injury Insurance Scheme and Invalidity Pension Scheme.
- For employees below 55 years of age
 Second Category
- Employment Injury Insurance Scheme Only.
- for employee above age of 55, who is not eligible for coverage under the
Invalidity Pension Scheme

 These schemes provide the benefits of invalidity pension,

invalidity grant, survivors pension, rehabilitation, funeral
benefit, constant attendance allowance and educational benefit.

36
 The Employees Social Security Act 1969 (cont’d)

 An insured person or dependants will be entitled to the

following benefits :
 Periodical payments in the case of disablement suffered as a result of an
employment injury.
 Periodical payments to the dependants of an insured person who dies as
a result of an employment injury.
 Payments for funeral benefit or expense on the death of an insured
person as a result of an employment injury.
 Periodical payments to an insured person who is in receipt of invalidity
pension or disablement benefit and is so severely incapacitated or
disabled as to require the personal attendance of another person.
 Medical treatments for the attendance on insured persons suffering from
disablement.
 Periodical payments to dependants of an insured person who dies while
in receipt of invalidity pension.
37
 Factories and Machinery Act 1967
(Akta Kilang dan Jentera 1967)

 Enforced by the Department of Occupational Safety and Health

 the act is applied to factories only
 Any premise where persons are employed in manual labour in any
process.
 Gives protection in terms of health and safety for all workers
working in factories regardless of sex.
 Applied to workplace with 5 workers or more.
 However this act has limited scope
 Does not take into consideration many technological changes.
 Responsibilities for safety being given to the government rather than
to employers & employees.
38
 The Occupational Safety and Health Act 1994
(Akta Keselamatan dan Kesihatan Pekerjaan 1994)

 Gazetted on the 24 February 1994 by the Malaysian Parliament.

 Enforced by the Department of Occupational Safety and Health.
 To ensure that all parties at the workplace are held equally for safety
& health (self-regulation)
 To ensure safety at the workplace
 Carry out inspections at workplaces
 Organize promotional activities
 Assist government departments with technical expertise
 Carry out activities aimed at improving safety and health

39
 The Occupational Safety and Health Act 1994 (cont’d)

 Applied to the following sectors

 Manufacturing
 Mining and Quarrying
 Construction
 Agriculture, Forestry and Fishing
 Utilities:
 Electricity;
 Gas;
 Water; and
 Sanitary Services
 Transport, Storage and Communication
 Wholesale and Retail Trades
 Hotel and Restaurants
 Finance, Insurance, Real Estate and Business Services
 Public Services and Statutory Authorities
40
The Occupational Safety and Health Act 1994 (cont’d)

 General duties of employers and self-employed persons to their employees

 the provision and maintenance of plant and systems of work that are, so far as is
practicable, safe and without risks to health;
 the making of arrangements for ensuring, so far as is practicable, safety and
absence of risks to health in connection with the use or operation, handling,
storage and transport of plant and substances;
 the provision of such information, instruction, training and supervision as is
necessary to ensure, so far as is practicable, the safety and health at work of his
employees;
 so far as is practicable, as regards and place of work under the control of the
employer or self-employed person, the maintenance of it in a condition that is
safe and without risks to health and the provision and maintenance of the means
of access to and egress from it that are safe and without such risks;
 the provision and maintenance of a working environment for his employees that
is, so far as is practicable, safe, without risks to health, and adequate as regards
facilities for their welfare at work.
41
 The Occupational Safety and Health Act 1994 (cont’d)

 General duties of employees at work

 to take reasonable care for the safety and health of himself and of other
persons who may be affected by his acts or omissions at work;
 to co-operate with his employer or any other person in the discharge of
any duty or requirement imposed on the employer or that other person
by this Act or any regulation made thereunder;
 to wear or use at all times any protective equipment or clothing
provided by the employer for the purpose of preventing risks to his
safety and health; and
 to comply with any instruction or measure on occupational safety and
health instituted by his employer or any other person by or under this
Act or any regulation made thereunder.

42
 Trade Unions Act 1959
(Akta Kesatuan Sekerja 1959)

 Objective: to set rules in forming a trade union and planning

activities in a trade union.
 Administered by the Trade Unions Department.
 Permitting workers to form and join trade unions provided these are
registered organizations
 Provides:
 The procedures for applying for registration, the use of union funds,
the rights and liabilities of unions, and other matters relating to the
constitution of unions.

43
 Industrial Relations Act 1967
(Akta Perhubungan Industri 1967)

 Objective: encourage harmonious relations between employers and

employees.
 Enforced by the Industrial Relations Department
 To provide systems which will encourage industrial harmony
 Is applicable throughout Malaysia and provides for the regulation
of relations between employers and workmen or employee and
their trade union and the prevention and settlement of trade
disputes.
 Emphasizes on direct negotiation between employers and
workmen or employees and their trade unions to settle their
differences and to regulate their collective relationship.
44
 The Industrial Relations Act 1967 (cont’d)

 Protects the legitimate rights of employers and workmen or

employees and their trade unions.
 provides the procedure relating to submissions of claims for
recognition and scope and representation of trade union and
collective bargaining.
 Does not allow matters relating to promotion, recruitment,
dismissal, transfer, retrenchment, reinstatement and allocation of
duties and prohibition of strikes and lockouts over any of these
matters to be included in the proposal for collective bargaining.
 provides for speedy and just settlement of trade disputes by
conciliation or arbitration where direct negotiation fails.
 provides the power to the Ministry of Human Resources to
intervene and to refer at any stage any trade dispute to the
Industrial Court for arbitration.
45
 Human Resources Development Bhd Act 2001
(Akta Pembangunan Sumber Manusia Bhd 2001)

 Objective: To ensure employers conduct training for their workers

so as to upgrade their skills and abilities.
 Enforced in January 1993.
 Led to the establishment of the Human Resources Development
Fund (HRDF).
 Administered by the Human Resources Development Council
(HRDC)/(PSMB).
 Currently, the categories of employers covered under the Act are
as follows:
 Employers with 50 employees and above in the manufacturing
sector .
 Employers with 10 to 49 employees and a paid-up capital of RM2.5
46 million and above in the manufacturing sector
  Employers with 10 employees and above in 20 selected industries in the
services sector, namely:
a) the hotel industry, tour operating business (in-bound tour only),
shipping, air transport, telecommunication, computer services,
advertising, postal & courier services and freight forwarding (w.e.f. 1
January 1995);
b) private higher education, training and the energy sector (w.e.f. 17
February 2000); and
c) direct selling, port services, engineering support & maintenance
services, research & development, warehousing services, security
services, private hospital services and hypermarkets, supermarkets &
departmental stores.
d) For hypermarkets, supermarkets and departmental stores, only
employers with 50 employees and above are required to register.

 Employers in the manufacturing sector with 10 to 49 employees and a

paid-up capital of less than RM2.5 million are given the option to
register with PSMB .
47
Manufacturing companies contribute as follows:

Companies that employ 50 employees and above 1% of employees'

monthly wages
(Effective from 1 January 1993)

Companies that employ less than 50 to a 1% of employees'

minimum of 10 employees, with a paid-up capital monthly wages
of RM2.5 million or more

(Effective from 1 January 1995)

Companies that employ less than 50 to a 0.5% of employees'
minimum of 10 employees, with a paid-up capital monthly wages
of less than RM2.5 million are given the option to
register with PSMB.

(Effective from 2 August 1996)

48
  Employers can apply for training grant or financial aid from
the fund.
 The rate of financial aid is determined by HRDC/PSMB.
 Or employers can claim from the fund.

49