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1. CHAPTER 16 – THE EMPLOYMENT
ACT AND SABAH AND SARAWAK
LABOUR ORDINANCES

2. KEY CONCEPTS AND SKILLS
➲ Categories of employees covered by the
Employment Act and the Sabah and Sarawak
Labour Ordinances
➲ What is a contract of service and different ways a
contract of service can be terminated
➲ Differences between a contract of service and a
contract for service
➲ Provisions for the protection of women under the
employment laws
➲ Minimum benefits provided for employees under
the employment laws

3. CHAPTER OUTLINE
➲ Application of the laws
➲ Contract of service
➲ Termination of contract
➲ Termination due to misconduct
➲ Termination due to absence without prior leave
➲ Contract for service
➲ Probation
➲ Wages
➲ Payment of wages
➲ Advances and deduction of wages
➲ Employment of women
➲ Maternity protection
➲ Conditions of service

4. INTRODUCTION
Employment Act, Sabah Labour Ordinance, and
Sarawak Labour Ordinance
➲ Laws which provide for protection of employees in
Malaysia
➲ Specify terms and conditions of service and
provide details of minimum fringe benefit
entitlements
➲ Employment Act covers employees in Peninsula
Malaysia
➲ Sabah and Sarawak Labour Ordinances cover
employees in Sabah and Sarawak respectively.

5. APPLICATION OF THE LAWS
➲ First Schedule of Employment Act specifies
classes of people
➲ Sabah and Sarawak Labour Ordinances, specified
in Subsection (2) of Section 2 of Schedule
➲ Employment Act covers all employees, irrespective
of occupation or job title, whose wages do not
exceed RM1,500 per month
➲ Sabah and Sarawak Labour Ordinances cover all
employees whose wages do not exceed RM2,500
per month.

6. APPLICATION OF THE LAWS
➲ Employment Act also covers following
classifications of employees, irrespective of wages
1. Those engaged in manual work.
2. Those engaged in the operation or maintenance of
any mechanically propelled vehicle. This would
include van and lorry drivers, and even pilots.
3. Those who supervise or oversee other employees
engaged in manual labour employed by same
employer in and throughout performance of their
work
4. Those who are engaged in ships except
certificated officers.
5. Those engaged as domestic servants.

7. APPLICATION OF THE LAWS
➲ Sabah and Sarawak Labour Ordinances cover
following classifications of employees, irrespective
of wages
1. Those engaged in manual work.
2. Those engaged in the operation or maintenance of
any mechanically propelled vehicle.
3. Those who supervise or oversee other employees
engaged in manual labour employed by the same
employer in and throughout the performance of
their work.
4. Those engaged in recruiting employees.
5. Those who are engaged in ships except
certificated officers.
6. Those engaged as domestic servants.

8. APPLICATION OF THE LAWS
➲ Section 69B of Employment Act [Section 7C Sabah
Labour Ordinance and Section 8C of Sarawak
Labour Ordinance] grant additional powers to
Director-General of Labour in Peninsula Malaysia
and Director of Labour for Sabah or Sarawak to
cover employees whose wages per month do not
exceed RM5,000
➲ Extended power limited to disputes in respect of
wages or other payments in cash due to the
employee under the contract of service.

9. APPLICATION OF THE LAWS
➲ Section 69C of Employment Act [Section 7D
Sabah Labour Ordinance and Section 8D of
Sarawak Labour Ordinance],
➲ Director-General of Labour or Director of Labour
for Sabah or Sarawak may inquire into and decide
claims for indemnity for termination of contract
without notice

10. CONTRACT OF SERVICE
➲ An agreement, whether oral or in writing, and
whether express or implied, whereby one person
agrees to employ another as an employee and that
other agrees to serve him.
➲ A contract of service for a specified period of time
exceeding one month shall be in writing.
➲ Written contract of service shall also include a
clause setting out manner in which such contract
may be terminated by either party.
➲ Terms and conditions in a contract of service
cannot be less favourable than those in the law

11. CONTRACT OF SERVICE
➲ Contract of service cannot restrict rights of any
employee to join, participate or organise a trade
union
➲ However, Section 5 (2) of Industrial Relations Act
states that a person appointed or promoted to a
managerial position can be required not to be a
member of a trade union catering for workmen
➲ Also those employed in a confidential capacity in
matters relating to staff relations

12. TERMINATION OF CONTRACT
➲ Notice period for termination of contract shall be
same for both employer and employee and shall
be in writing
➲ If no provisions in writing then notice period shall
follow that specified in law
➲ Period can be less if written in contract of service
YEARS OF SERVICE NOTICE
less then two years' service 4 weeks
two to five years' service 6 weeks
more than five years' service 8 weeks
➲ If notice of termination due to reasons related to
redundancy, then notice of termination shall not be
less than what is in the law

13. Termination and Lay-Off Benefits
Regulations
➲ Provides for following benefits in event of
termination or lay-off:
(a) ten days' wages for every year of employment
under a continuous contract of service if he has
been employed for a period of less than two years
(b) fifteen days' wages for every year of employment if
he has been employed for two years or more but
less than five years; and
(c) twenty days' wages for every year of employment
if he has been employed for five years or more;
➲ and pro-rata as respect an incomplete year,
calculated to the nearest month.

14. TERMINATION DUE TO MISCONDUCT
➲ An employer may dismiss an employee on
grounds of misconduct after due inquiry
➲ In such a case, no notice period is required and
employee may be dismissed immediately.

15. TERMINATION DUE TO ABSENCE
WITHOUT PRIOR LEAVE
➲ An employee shall be deemed to have broken his
contract of service with the employer if he has
been continuously absent from work for more than
two consecutive working days without prior leave
from his employer, unless he has a reasonable
excuse for such absence and has informed or
attempted to inform his employer of such excuse
prior to or at the earliest opportunity during such
absence.

16. TERMINATION DUE TO ABSENCE
WITHOUT PRIOR LEAVE
➲ An employee who is on medical leave but does not
inform or attempt to inform his employer of such
leave within forty-eight hours of the
commencement thereof shall be deemed to absent
himself from work without the permission of his
employer and without reasonable excuse for the
days on which he is so absent from work

17. CONTRACT FOR SERVICE
➲ Contract for service should not be confused with
contract of service
➲ Contract for service defined as a contractual
arrangement by which one person agrees to
provide workplace services to another and neither
is the employer or the employee

18. PROBATION
➲ No provision in Employment Act or Sabah or
Sarawak Labour Ordinances for probation period
➲ Practice in most organisations that new employees
employed initially on probation
➲ Probation means a trial period where new
employee given opportunity to prove he is capable
to satisfaction of employer before he can be
considered for permanent employment.

19. PROBATION
➲ At end of probationary period employer can either
confirm or not confirm employee, or give employee
an extension of probationary period
➲ If no communication by employer, probationer will
continue as probationer but employer cannot
continue to extend his probationary period
indefinitely
➲ Probationer still a workman under Industrial
Relations Act and entitled to protection from unfair
dismissal under law
➲ Except for misconduct, a probationer cannot be
terminated before end of his probationary period.

20. WAGES
➲ Wages means basic wages and all other payments
in cash payable
➲ Includes all allowances that employee is entitled
➲ Annual bonus not part of wages.
Ordinary Rate of Pay
➲ Wages which an employee is entitled to receive for
the normal hours of work for one day.

21. PAYMENT OF WAGES
➲ Wages shall be paid in legal tender (i.e. cash)
➲ With employee’s written consent, employer may
pay wages into bank or by cheque
➲ Illegal for employer to impose condition as to place
or manner or person wages paid to be spent
➲ No employer shall pay wages in taverns (pubs) or
places of amusement or retail shops except in
cases of employees employed in such places.

22. PAYMENT OF WAGES
➲ Wage periods may not exceed one month
➲ Wages shall be paid not later than seven days
after last day of any wage period

23. ADVANCES AND DEDUCTION OF
WAGES
➲ Except for certain specified advances or loans to
employees not to exceed what employee has
earned in previous month

24. ADVANCES AND DEDUCTION OF
WAGES
No deductions can be made from wages of an
employee except for
➲ deductions to the extent of any overpayment of
wages made during the immediately preceding
three months from the month in which deductions
are to be made, by the employer to the employee
by the employer’s mistake
➲ deductions for the indemnity due to the employer
by the employee
➲ deductions for the recovery of advances of wages
made provided no interest is charged
➲ deductions authorized by any other written law.

25. ADVANCES AND DEDUCTION OF
WAGES
Following deductions shall only be made at request in
writing of the employee:
➲ deductions in respect of the payments to a
registered trade union or co-operative thrift and
loan society of any sum of money due to the trade
union or society by the employee on account of
entrance fees, subscriptions, instalments and
interest on loans, or other dues
➲ deductions in respect of payments for any shares
of the employer’s business offered for sale by the
employer and purchased by the employee.

26. ADVANCES AND DEDUCTION OF
WAGES
Following deductions shall not be made except at
request in writing of employee and with prior
permission of D G/Director of Labour:
➲ deductions in respect of payments into any
superannuation scheme, provident fund,
employer’s welfare scheme or insurance scheme
➲ deductions in respect of repayments of advances
of wages where interest is levied
➲ deductions in respect of payments to a third party
➲ deductions in respect of payments for purchase of
any goods of employer’s business offered for sale
➲ deductions in respect of rental for accommodation
and cost of services, food and meals.

27. ADVANCES AND DEDUCTION OF
WAGES
➲ Total deduction in any one month shall not exceed
50 % of employee’s wages except:
➲ cases of indemnity for termination of contract
without notice
➲ deductions from final payment of wages
➲ If employee has housing loan, then 50 % limit may
be raised to 75 % with prior written approval

28. EMPLOYMENT OF WOMEN
➲ Except with written approval of Labour, no female
worker shall work in an industrial or agricultural
undertaking between 10.00 p.m. and 5.00 a.m.
➲ Nor commence work for day without having had a
period of 11 consecutive hours free from such work
➲ No female employee shall be employed in any
underground working.

29. MATERNITY PROTECTION
➲ Every female employee shall be entitled to
maternity leave of not less than 60 consecutive
days for each confinement
➲ Except if at time of confinement she has five or
more surviving children
➲ Employee on maternity leave who is given medical
leave shall not be entitled to sick leave

30. MATERNITY PROTECTION
➲ Maternity leave not earlier than 30 days before
confinement or later than day immediately
following confinement
➲ Employer may with approval of a doctor require
her to begin maternity leave at any time during a
period of 14 days preceding her confinement
➲ Any employee who at any time during 4 months
immediately preceding confinement was employed
by an employer not less than 90 days during 9
months preceding confinement shall be entitled for
maternity leave

31. MATERNITY PROTECTION
➲ A female employee who worked for more than one
employer during 9 months preceding confinement
entitled to maternity leave from last employer who
is then entitled to claim as civil debt from other
previous employers.
➲ If employee dies during maternity leave, her
nominee or legal representative will receive
payment up to day immediately preceding death.
➲ Employee cannot be dismissed during period in
which she is entitled to maternity leave
➲ If after 60 days maternity leave still medically unfit
for work, cannot be terminated until such absence
exceeds 90 days after end of maternity leave.

32. CONDITIONS OF SERVICE
Rest Days
➲ Rest day of one whole day in each week
➲ Will not apply if employee on maternity leave, sick
leave, or temporary disablement leave under
SOCSO or Workmen’s Compensation Act
➲ If company works five-day week, then second off
day is official rest day.
➲ For shift work, rest day is any continuous period of
not less than 30 hours free from work.
➲ No employee shall be compelled to work on a rest
day unless engaged in work which needs to be
carried on continuously or by succession of shifts
➲ Exceptions are when there is an emergency

33. CONDITIONS OF SERVICE
Hours of Work
➲ No employee shall be required to work:
(a) more than five consecutive hours without a period
of leisure of not less than thirty minutes duration;
(b) more than eight hours in one day;
(c) in excess of a spread over period of ten hours in
one day;
(d) more than forty-eight hours in one week.

34. CONDITIONS OF SERVICE
Overtime
➲ Overtime is number of hours of work carried out in
excess of normal hours of work
➲ Work on rest days and public holidays not
construed as overtime.
➲ Maximum hours of overtime allowed determined by
Minister of Human Resources and current
maximum is 104 hours per month
➲ No employer shall require any employee to work
for more than 12 hours in any one day
➲ Only exception is during emergencies like accident
or urgent work to machinery

35. CONDITIONS OF SERVICE
Overtime
➲ For public holidays, an employee may be required
to work on public holidays and be paid at
prescribed rates

36. CONDITIONS OF SERVICE
Holidays
➲ Employment Act = minimum of 10 paid public
holidays in one calendar year
➲ Sabah Labour Ordinance = minimum of 14 days
➲ Sarawak Labour Ordinance = minimum of 16 days
➲ Four of the public holidays are specified as follows:
1. National Day
2. Birthday of Yang di Pertuan Agong
3. Birthday of State Ruler (or Federal Territory Day)
4. Workers’ Celebration Day.

37. CONDITIONS OF SERVICE
Holidays
➲ Also paid public holiday on any day declared public
holiday under Section 8 of Public Holidays Act 1951
➲ If paid public holiday falls on rest day, then following
day shall be substituted paid public holiday.
➲ By agreement between employer and employee,
any other day or days may be substituted for one of
the remaining paid public holidays.
➲ If sick leave on paid public holiday, employer shall
grant another day as paid holiday in substitution.
➲ Any unexcused absence immediately before or after
a public holiday will result in loss of holiday pay for
employee

38. CONDITIONS OF SERVICE
Annual Leave
➲ Employee shall be entitled to paid annual leave as
follows:
YEARS OF SERVICE LEAVE
ENTITLEMENT
less then two years' service 8 days
two to five years' service 12 days
more than five years' service 16 days
➲ If employee on annual leave given medical leave
or maternity leave, then annual leave deemed to
have not been taken

39. CONDITIONS OF SERVICE
Sick Leave
➲ Sick leave after employee has been examined at
expense of employer by registered medical
practitioner appointed by employer
➲ Exception is if company does not appoint doctor or
due to nature of illness, company doctor’s service
not available within reasonable time or distance,
then another doctor may be consulted
➲ Employee also entitled to paid sick leave after
examination by a qualified dental surgeon

40. CONDITIONS OF SERVICE
Sick Leave
➲ Sick leave entitlement where no hospitalisation is
necessary is as follows:
YEARS OF SERVICE LEAVE
ENTITLEMENT
less then two years' service 14 days
two to five years' service 18 days
more than five years' service 22 days
➲ If employee is hospitalised, then maximum number
of days is 60 days less number of sick leave days
taken
➲ If doctor certifies that employee is ill enough to
need to be hospitalised but is not hospitalised,
leave still considered hospitalisation leave.

41. CONDITIONS OF SERVICE
Sick Leave
➲ Employee who absents himself on sick leave is not
certified deemed to be absent without permission
and without reasonable excuse.
➲ Even if sick leave obtained if employee does not
inform or attempt to inform company within 48
hours, will be deemed to be absent without
permission and without reasonable excuse.