Full Guide on Malaysia’s Employment Law 2025 – Latest Amendments and Updates
Introduction
The Employment Act 1955 (Act 265) is Malaysia’s primary legislation governing labour and employment relationships in Peninsular Malaysia and the Federal Territory of Labuan. It protects employees’ rights while balancing employers’ obligations. Updated as of January 1, 2023, this Act covers vital matters like wages, working hours, maternity rights, sexual harassment, termination, and foreign worker regulations.
This guide simplifies the legal language and serves as a reference for employees, employers, HR personnel, and anyone working in Malaysia.
1. Who is Covered Under the Employment Act?
1.1 Application Scope
- Applies in Peninsular Malaysia and Labuan
- Not applicable in Sabah and Sarawak (separate ordinances)
1.2 Definition of an Employee
Employees covered include:
- Generally all employees who have entered into a contract of service (If salary exceeds RM 4,000.00, certain provisions are excluded)
- Engaged in manual labour regardless of salary
- Domestic workers
- Transport, machine operation, and maintenance workers
- Extended via Ministerial orders to specific groups
2. Contracts of Service – What Every Employee and Employer Should Know
2.1 Written Contract Requirement
Contracts exceeding one month must be written and contain:
- Termination clauses
- Terms of work
- Salary details
2.2 Favorable Terms
- Employers must comply with minimum protections in the Employment Act 1955
- More favourable terms (bonuses, extra leave) are legal and encouraged
2.3 Freedom to Join Trade Unions
- Employees have the right to join, organize, and participate in union activities
3. Wages and Payment Provisions
3.1 Payment Period and Deadlines
- Wages paid no later than the 7th day after each wage period
- Overtime and public holiday payments must be paid by the next wage cycle
3.2 Calculation for Incomplete Month
Formula:
empl(Monthly Salary / Total Days in the Month) x Days Worked
3.3 Lawful Deductions
Permitted deductions:
- Overpayments
- Advance repayments
- Approved loans
- EPF, SOCSO, EIS, tax
- Cooperative payments (with written consent)
3.4 Payment Methods
- Must be through financial institutions
- Cash or cheque allowed only with written employee consent and Labour Department approval
4. Working Hours, Overtime, and Rest Days
4.1 Hours of Work
- Max 8 hours per day / 45 hours per week
- Must include adequate breaks and meal time
4.2 Overtime Rates
- 1.5x hourly rate (normal)
- 2x (public holidays)
- 3x (rest days)
4.3 Rest Days and Public Holidays
- Minimum 1 rest day per week
- 11 paid public holidays annually
4.4 Flexible Work Arrangement (2023 Update)
- Employees can apply for flexi-hours (subject to employer approval)
5. Annual Leave, Sick Leave, and Benefits
5.1 Annual Leave
- 1-2 years: 8 days
- 2-5 years: 12 days
- Above 5 years: 16 days
5.2 Sick Leave
- 14 to 22 days (depends on service length)
- 60 days hospitalization leave
5.3 Paternity Leave (New 2023 Amendment)
- 7 days paid paternity leave for married male employees
6. Maternity Protection
6.1 Maternity Leave Rights
- Increased to 98 days paid leave (2023 update)
- Not eligible if the employee has 5 or more surviving children
6.2 Maternity Allowance Eligibility
- Must work 90 days in the 9 months before childbirth
- Paid at normal daily rate
6.3 Protection Against Termination
- Employers cannot terminate a pregnant employee or during maternity leave, except for misconduct
7. Termination, Layoff, and Retrenchment
7.1 Notice Period Requirements
- Less than 2 years: 4 weeks
- 2-5 years: 6 weeks
- Over 5 years: 8 weeks
7.2 Immediate Termination (Indemnity in Lieu of Notice)
- Either party can terminate by paying wages equal to the notice period
7.3 Retrenchment
- Must follow fair practices and give termination benefits
8. Foreign Workers and Domestic Employees
8.1 Foreign Workers Regulation
- Employers must register foreign employees
- Prohibited from replacing local workers with foreigners without just cause
8.2 Domestic Employees (Housemaids, Drivers, Gardeners)
- Entitled to termination rights
- Employers cannot deduct wages unfairly or abuse domestic staff
9. Sexual Harassment Protection
9.1 Definition
Any unwanted sexual conduct (verbal, visual, or physical) that is offensive or humiliating.
9.2 Employer’s Legal Obligation
- Mandatory inquiry on complaints
- Must display anti-sexual harassment notices
9.3 Penalty for Non-Compliance
- Fines up to RM50,000
10. Complaint, Enforcement, and Court Processes
10.1 Role of Director General of Labour (DGL)
- Investigate wage disputes, complaints
- Issue orders for payments
10.2 Complaint Procedure
- File with Jabatan Tenaga Kerja (JTK)
- No legal fees required
10.3 Appeal Process
- Appeal DGL decisions to the High Court
11. Offences and Penalties
11.1 General Penalty
- Up to RM50,000 fine for breaches (e.g., non-payment of wages)
11.2 Compounding of Offences
- Some offences can be settled by paying a fine
11.3 Corporate and Director Liability
- Company officers may be personally liable
12. Major 2023 Amendments – What Changed?
| Provision | Previous | After 2023 Amendments |
|---|---|---|
| Maternity Leave | 60 days | 98 days |
| Paternity Leave | None | 7 days paid |
| Maximum Work Hours | 48 hours/week | 45 hours/week |
| Flexible Work Rights | Not covered | Employees may apply for flexibility |
| Broader Employee Coverage | RM2,000 cap rigid | Minister can extend coverage |
13. Best Practices for Employers
- Draft proper written contracts
- Regularly review HR policies in line with the latest amendments
- Maintain accurate attendance, salary, and leave records
- Provide training on sexual harassment prevention
- Fair retrenchment practices during business restructuring
14. Frequently Asked Questions (FAQs)
Q1: Can employers deduct for damages or losses?
A: Only with employee’s written consent and Labour Department approval.
Q2: Are part-time employees protected?
A: Yes, under specific conditions outlined in the Act.
Q3: How do I claim unpaid wages?
A: File a complaint with Jabatan Tenaga Kerja (JTK).
Q4: Can I be terminated while pregnant?
A: No. Pregnancy is a protected status unless for valid misconduct.
15. Conclusion – Know Your Rights, Stay Protected
The Employment Act 1955 (Act 265) is Malaysia’s cornerstone law for employment. Whether you’re a worker, HR personnel, or employer, understanding this Act protects you from unfair practices and ensures compliance.
For the latest updates or to file a complaint, visit:
Ministry of Human Resources: https://www.mohr.gov.my
Jabatan Tenaga Kerja (JTKSM): https://jtksm.mohr.gov.my
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Disclaimer: The above proposition is subject to actual facts and circumstances and shall never be referred as the actual law without seeking legal advice. Consult us for more information!