Employment Act Amendments from 1 January 2023
The Employment (Amendment) Act 2022 has gone into effect on January 1, 2023, along with several major revisions to the First Schedule, which identifies employees who will be covered by the EA 1955.
Here are some major changes that Malaysian HR managers should be aware of:
1. EA 1955 now covers ALL employees irrespective of wages
Until now, the Employment Act 1955 only applied to employees earning RM2,000 or less each month (as well as other defined types of workers). This portion of the Act was undoubtedly long overdue for revision, and now, modifications to the First Schedule of the Act imply that all employees are covered regardless of salary, except for the following provisions which only apply to the categories that were previously covered under the Employment Act, with the wages limit increased to RM4,000 instead of RM2,000: overtime pay for work on normal workday, rest day or public holiday; shift work allowance; termination, lay-off and retirement benefits.
2. Working hours
The maximum working hours for employees will be reduced from 48 hours to 45 hours per week.
3. Increased (paid) maternity leave for mothers
Another good improvement is the expanded eligibility for paid maternity leave for working women who are recovering post-delivery. Previously, the EA 1955 only allowed for 60 days, but the 2022 amendment will provide new moms 98 days to recover.
4. Introduction of (paid) paternity leave
In keeping with this, the 2022 amendment will include (for the first time) paid paternity leave. This is a watershed moment in Malaysian labor law, with working fathers being entitled to 7 days of continuous, paid paternity leave under Subsection 60FA.
However, there are certain restrictions:
- The male employee must be married to the mother in question
- He must have been employed by the same employer for at least 12 months
- He must notify the employer at least 30 days from the expected confinement (or as early as possible)
5. Sick Leave and Hospitalization Leave
The Amendment Act now entitles employees to 60 days of paid sick leave if hospitalization is necessary, in addition to 14 to 22 days (subject to the length of service) if hospitalization is not necessary.
6. Calculation of wages for incomplete month’s work
The amendments also introduced a calculation basis for prorating salaries for new joiners or leavers and for unpaid leave.
Wages due for incomplete month’s work are to be calculated as Monthly wages / Number of days of the particular wage period x number of days eligible in the wage period. According to our enquiries with the Labour Office, ‘number of days’ refers to calendar days.
7. Flexible working
Part XIIC of the modified Employment Act now includes a critical part that allows for flexible working arrangements. This is especially relevant in the post-pandemic business scene, where flexible work arrangements and other modern work models are increasingly popular.
Employees can now apply in writing to their employers for flexible work arrangements under Sections 60P and 60Q. Employers must then react with a decision within 60 days, and in situations of rejection, employees must be provided reasons.
8. Protection for pregnant mothers against termination
The modifications for 2022 also include increased protection for pregnant female employees and those suffering from pregnancy-related ailments. Employers that terminate (or give notice of termination) to this kind of employee will now be breaking the law under the Employment Act of 1955 as of January 1, 2023, unless:
- Breach of contraction
- Closure of business
9. Notice on sexual harassment
Requirement to exhibit conspicuously at all times at the place of employment a notice to raise awareness of sexual harassment.
The penalty an employer faces for, among other things, failing to look into sexual harassment claims would double from RM10,000 to RM50,000.
10. Gig workers are now protected
The Act also includes a new clause that addresses the presumption of employment – even if there is no written contract. An individual shall be regarded as an employee under the law if the following conditions are met:
- Their manner of work is subject to the control or direction of another person;
- Their hours of work are subject to the control or direction of another person
- They are provided with tools, materials, or equipment by another person to execute work
- Their work constitutes an integral part of another person’s business
- Their work is performed solely for the benefit of another person; or
- Where payment is made to them in return for work done by them at regular intervals and such
This practically means that gig workers, such as delivery partners and for-hire drivers, can now rely on the amended Employment Act 1955 for employer protection.
11. Employment of foreign workers
Section 60K, which governs the employment of foreign workers, has also been amended. Employers who hire foreign employees were previously required to notify the Director-General of new foreign employees and provide details within 14 days of employment.
However, with the 2022 amendment, firms must now acquire prior approval from the Director-General before hiring foreign staff. Meanwhile, companies must notify the Director-General within 30 days after terminating foreign personnel.
Employees have undoubtedly benefited from the long-awaited amendments. Having said that, the revised Act will have a substantial impact on employers.
Previously, only some parts of the Act would apply to employees who did not fall under the First Schedule, and the employment contract would regulate the terms and circumstances of the employment. However, with the enlargement of the First Schedule, all employees, regardless of wage or type of job performed, will now have additional legal protection.
Employers are strongly advised to review their employment governance, particularly their employee handbooks and employment contracts, to ensure that they are in accordance with the Amendment Act.