Speech by YBhg Datuk Shamsuddin Bardan, Executive Director Malaysia Employers Federation, given in Labour Law Seminar held by Legal Plus Sdn. Bhd (www.legalplus.com.my) on Apr 9, 2015
Special Accounting Areas - Hire purchase agreement
Employment Laws Addressing Needs of Employers
1. EMPLOYMENT LAWS
ADDRESSING NEEDS OF EMPLOYERS
Labour Law Conference
Concorde Hotel, Kuala Lumpur, 9 & 10 April 2015
by
Datuk Hj. Shamsuddin Bardan
Executive Director, Malaysian Employers Federation
2. 2
MAIN EMPLOYMENT LAWS IN MALAYSIA
Employment Act 1955
Labour Ordinance (Sabah Cap. 67)
Labour Ordinance (Sarawak Cap. 76)
Industrial Relations Act 1967
Trade Unions Act 1959
Employees’ Social Security Act 1969
Employees Provident Fund Act 1991
Occupational Safety and Health Act 1994
National Wages Consultative Act 2011
Minimum Retirement Age Act 2012
Pembangunan Sumber Manusia Berhad Act 2001 (HRDF)
MALAYSIAN EMPLOYERS FEDERATION
3. 3
EMPLOYMENT ACT 1955
‘EA 1955’ gives the impression that the law is
archaic.
EA revised from time to time on ‘piece meal’ basis.
To streamline the provisions of Sabah Labour
Ordinace & Sarawak Labour Ordinance wih EA.
MALAYSIAN EMPLOYERS FEDERATION
4. 4
MEANING OF ‘WAGES’
Different meanings of “wages” under :
Employment Act ,
NWCC Act
EPF Act,
SOCSO Act,
HRDF Act and
Workmen’s Compensation Act.
Meaning of “wages” under all the employment laws need to
be streamlined for practical administration and application
to avoid confusion.
MALAYSIAN EMPLOYERS FEDERATION
5. 5
PRIORITY OF WAGES
OVER OTHER DEBTS
Section 31 EA
‘Wages’ includes termination and lay-off benifits, annual
leave pay, sick leave pay, public holiday pay and maternity
allowance
Companies Act 1965 (s. 292) does not treat wages
as secured debt. Only a maximum of RM1,500 has
priority
There should be harmonization of EA & SLOs and
Companies Act provisions on priority of wages
MALAYSIAN EMPLOYERS FEDERATION
6. 6
DIFFERENT SCOPE OF
EMPLOYEES UNDER EA & SLOs
Legislations Provisions Salary Ceiling
Employment Act
First Schedule -
Paragraph (1)
not > RM2,000
Sabah Labour
Ordinance
Schedule –
Paragraph (1)
not > RM2,500
Sarawak Labour
Ordinance
Schedule –
Paragraph (1)
not > RM2,500
MALAYSIAN EMPLOYERS FEDERATION
7. 7
MEANING OF ‘EMPLOYEE’
UNDER EA 1955 & SLOs
Irrespective of occupation, the person’s monthly wages not exceeding
RM2,000 (EA) or RM2,500 (SLOs) (excludes commission,
subsistence allowance and overtime).
Irrespective of amount of wages, the person is engaged in
manual labour
operation /maintenance of mechanically propelled vehicle
supervisor of manual labour engaged by the same employer
Skilled employees such as crane operators, truck drivers and welders
may earn very much more than RM2,000 a month.
It should not be the objective of EA & SLOs to cover such categories of
employees who earns high wages.
A capping be imposed based on wages only to avoid dispute.
MALAYSIAN EMPLOYERS FEDERATION
8. 8
LABOUR PERMITS/LICENCES
required to submit applications for exemptions from various
provisions of EA e.g.
Late payment of wages (Section 19)
Deductions of wages (Section 24)
Night Work for Women Workers (Section 34)
Working Overtime exceeding 104 hours a month [section
60A(4)(a)]
Letters in response to the employers’ application would be
issued by DG Labour upon the receipt of a ‘complete
application’.
Self regulations should be introduced with flexibility for ease of
doing business.
MALAYSIAN EMPLOYERS FEDERATION
9. 9
PROHIBITION OF NIGHT WORK
No employer shall require any female employee to work in
any industrial or agricultural undertaking between the
hours of ten o‘clock in the evening and five o’clock in the
morning ( S.34 EA)
Why should an employer be required to obtain consent
from female employees to work after 10pm?
Why should female employees be prohibited to work after
10pm?
Self regulations should be made instead of requirements
for permit to work at night.
MALAYSIAN EMPLOYERS FEDERATION
10. 10
WAGES DUE IN UNFORSEEN
CIRCUMSTANCES
Employer has to pay wages to his employees as
contractual obligations.
Wages should not be due when employer has to
temporarily stop operation as a result of eg:
water rationing,
disruption of elctricity supply, or
emergency if declared by the Government
MALAYSIAN EMPLOYERS FEDERATION
11. 11
WAGES REGISTER/
MATERNITY REGISTER ?
‘Register’ means a book or separate cards kept by every
employer containing information relating to employees and
include a register required to be maintained under Internal
Security (Registration of Labour) Regulations 1960
( Regulation 2 - Employment Regulations 1957).
Should allow the Register be kept in electronic form and be
centralised at company’s headquarters.
Internal Security Act 1966 abolished in 2012, thus the ISA
Register of Labour becomes obsolete.
MALAYSIAN EMPLOYERS FEDERATION
12. 12
NOTICE OF TERMINATION - S12 (3) (f) EA
& REG. 8 E. (T & LO BENEFITS) REG. 1980
It is mandatory for the employer to issue notice of
termination where there is a change of ownership of the
employer’s business.
Misunderstanding and anxiety on the part of the
employees.
The employer should not be required to give notice of
termination or to pay wages in lieu of notice where the
new owner offers continuous employment on terms and
conditions of employment which are not less favourable.
MALAYSIAN EMPLOYERS FEDERATION
13. 13
TIME-BANK CONCEPT
A concept under which overtime need not be paid in cash
immediately but is credited into time bank account of the
employee.
To provide employment security to employees thereby
minimising the need for retrenchment.
Greater level of flexibility to the employers and employees
to respond appropriately to both negative and positive
changes in market demand for the company’s product.
MALAYSIAN EMPLOYERS FEDERATION
14. 14
ANNUALISED WORKING HOURS
Under this arrangement, an employee shall be paid his normal
monthly salary regardless of the number of hours he works
during a week or month on condition that his total number of
hours of work per year does not exceed the contractual number
of hours per year or an average of not exceeding forty-eight per
week.
A flexible work arrangement under which an employer will be
able to adjust his operational requirement based on the market
demands.
Singapore has introduced effectively the concept of annualised
working hours.
MALAYSIAN EMPLOYERS FEDERATION
15. 15 MALAYSIAN EMPLOYERS FEDERATION
NEED FOR FLEXIBILITY IN
LABOUR LAWS
Flexible work schemes
New Amendment
Section 41A of EA of Singapore amended w.e.f. 1 Oct 2004
Empower Commissioner for Labour to exempt companies
from cash payments and/or at premium rates to
employees, for overtime/rest day/public holiday work
16. 16
PRODUCTIVITY LINKED WAGE
SYSTEM (PLWS)
Section 13(2A) of the Industrial Relations Act 1967
encouraged the implementation of PLWS. Unfortunately, it
does not mandate the implementation of PLWS.
EA of Singapore
An employer and his employees or a trade union representing his
employees may negotiate for and agree to a variable payment based
on the trading results or productivity or on any other criteria agreed
upon by the parties concerned [S. 48(2)].
A contract of service shall not provide for an annual wage
supplement exceeding one month’s wages
[S. 48(3)].
MALAYSIAN EMPLOYERS FEDERATION
17. 17
IMPACT OF MINIMUM RETIREMENT AGE
ACT 2012 ON FIXED TERM CONTRACTS
A common practice for companies in the private sector to engage
employees of senior managerial positions on a fixed term contract basis.
Section 5 of the MRA prohibits an employer to prematurely retire an
employee before he attains the minimum retirement age of 60 years.
SCHEDULE (h) MRA
MRA does not apply, inter alia, to a person who is employed on a fixed
term contract of service, inclusive of any extension, of not more than
twenty four (24) months.
It is possible for an employee on a fixed term contract of service of
more than twenty four (24) months and who has not attained the age
of sixty years to claim that the employer has prematurely retired him
before he attains the minimum retirement age if his contract comes to
an end.
MALAYSIAN EMPLOYERS FEDERATION
18. 18
ADRESSING FIXED TERM CONTRACTS
IN THE CONTEXT OF MRA
Fixed term contracts be for a period of not more than twenty four months.
Ensure sufficient break following the expiry of the fixed term contract before
entering into a fresh fixed term contract.
Employees under EA break of at least 31 days
Employees outside EA – 1 day break is sufficient
SOME THOUGHTS
MRA should not be applicable to all fixed term contracts as the issues on
whether a fixed term contract is genuine can be dealt with under Section 20(1)
of the Industrial Relations Act 1967.
The non-renewal of a fixed term contract should not be considered as a
retirement.
Alternatively, all fixed term contracts for employees whose earnings exceed a
certain limit (example RM20,000) per month should be excluded from the
application of the MRA.
MALAYSIAN EMPLOYERS FEDERATION
19. 19
ENTITLEMENT TO PAID HOLIDAYS SHOULD
BE PROPORTIONATE TO NUMBER OF
WORKING DAYS
Existing paid annual leave and paid sick leave were based on 6
work day/week
Majority of employers adopted 5 work day week
Annual Leave and paid sick leave should be reduced
proportionately.
For example, employees on 5-work day/week is
working about 207 days only per year and employees on 6-work
day/week is working about 259 days per year.
If an employee is given 14 days of annual leave, it is 5.4% of
working days for 6- work day/week and 6.8 % of working days
for 5-work day/week.
MALAYSIAN EMPLOYERS FEDERATION
20. 20
COST OF 1 DAY LEAVE TO
PRIVATE SECTOR EMPLOYERS
Cost of 1 day leave to employers based on 6,530
million formal private sector employees:
MALAYSIAN EMPLOYERS FEDERATION
Based on 2013 figures
EPF contributions from employers and employees
per year
RM50.580 billion
Total wages per year based on 24% EPF
contributions (RM50.580 billion /24 X 100)
RM210.750 billion
Wages per working day (5 day working week)
(210.750 billion / 206 working days)
RM1,023 billion
21. 21 MALAYSIAN EMPLOYERS FEDERATION
OTHER CHALLENGES
Higher cost of doing business
Recent Labour Policies That Impacted Cost Of Doing
Business
National Minimum Wages 1/1/2013
Minimum Retirement Age Act – July 2013
New Policies ?
Employment Insurance
National Health Insurance Scheme
22. 22
IMPLEMENTATION OF MW ORDER
Impact on economy of the country
Does MW encourages automation?
Automation not happening but foreign workers are
benefitting and instead attracting more inflow of FW
Remittances:
increased from RM20 billion to RM30 billion in 2014
(banking and financial institutions)
Up to RM50 billion
(Inclusive of unofficial sources of remittance)
MALAYSIAN EMPLOYERS FEDERATION
23. 23
IMPACT OF REVISED BUDGET
ON MW
Should MW be reviewed in the light
of revised National Budget?
Currently retrenchments going on
Share of wages to GDP
- 34%
- should it be raised to 40% in 2020 ?
MALAYSIAN EMPLOYERS FEDERATION
24. 24
EFFECT OF MW ON EMPLOYERS
Average labour cost per employee before
minimum wages about RM1,300 / month
(inclusive of accommodation, water, electricity
and transport)
Upon implementation of minimum wages, the
labour cost per employee > RM2,000 / month
MALAYSIAN EMPLOYERS FEDERATION
25. 25
EMPLOYMENT INSURANCE (EI)
Govt proposed to establish EI to enhance social safety net.
Termination Benefits provided under the Employment Act
1955 & SLOs.
Employers raised concerns on EI as retrenchment in view
of the existing labour safety net provisions under the
employment laws – EA, SLOs, EPF, SOCSO.
During the economic recession in 1990s, about RM25m
(5%) was not paid out of a total of about RM325m payable
as retrenchment benefits.
MALAYSIAN EMPLOYERS FEDERATION
26. 26
EMPLOYMENT INSURANCE
(Continued)
Administrative costs of collecting contributions and
disbursement of EI estimated at RM 325 Mil/year
Alternative to EI, employers and the employees are to
provide for their own need by contributing to a fund
equivalent to a total of 3 months’ wages and managed by
an institution.
Employees to withdraw equvalent to 3 months basic wages
from the fund upon termination of his service due to
retrenchment.
If not retrenched, employee may withdraw his /her own
fund upon retirement
MALAYSIAN EMPLOYERS FEDERATION
27. 27
SEPARATE LEGISLATION ON
DISMISSAL
A Workman who considers that he has been dismissed
without just cause/excuse may make representations in
writing to DG IR within 60 days of dismissal seeking
reinstatement under S. 20 of I R Act.
A separate law on dismissal akin to Law of Unfair Dismissal
in U.K.
S.20 IR Act offers no criteria on what is dismissal
with just cause and excuse
Result in inconsistency of Industrial Court Awards
MALAYSIAN EMPLOYERS FEDERATION
28. 28
SINGAPORE EXPERIENCE
Termination simpliciter is recognised in law and practice
No obligations on employer to provide reasons for
termination
Kim San Lawrence Bernard v. Robinson & Co. (S’pore) Pte.
Ltd. (2013) SGHC 279:.
‘ the bare fact of termination cannot be a ground to claim
damages other than what he would have been entitled to
under the employment contract for a lawful termination,
even if was constructively dismissed’.
MALAYSIAN EMPLOYERS FEDERATION
29. 29
SINGAPORE EXPERIENCE
No industrial tribunal like Industrial Court in
Malaysia to handle dismissal cases
Dismissal Cases handled by MOM Singapore and
decision made by Minister of Labour is final
MALAYSIAN EMPLOYERS FEDERATION
30. 30
UK EXPERIENCE
Qualifying period to contest wrongful dismissal is 2 years
of service
Allowable reasons for termination eg- retrenchment
Court of Appeal :
Employees beyond retirement age stays in employment at
the discretion of employers & employer has discretion to
terminate at any time
MALAYSIAN EMPLOYERS FEDERATION
31. 31
CASES THAT SHOULD BE
EXCLUDED FROM S. 20 IRA
EXAMPLES OF ALLOWABLE REASONS TO TERMINATE
Probationer
Employees with less than 2 years service
Employees earning more than RM10,000 per month
Fixed Term Contract employees
Redundancy/Retrenchment
Employees accepted voluntary retrenchment/MSS benefits
Employees beyond the retirement age /60 years
Cases settled amicably with settlement agreement
Employees refusing reinstatement
Termination on health reasons
Termination on conviction of a criminal offence
MALAYSIAN EMPLOYERS FEDERATION
32. 32
COURT OF APPEAL IN HONG LEONG
EQUITMENT v. LIEW FOOK CHUAN
Reinstatement may be offered by the employer at
the following stages:
Soon after dismissal before representation made under
section 20 IRA.
Reinstatement offered during conciliation at IRD.
Reinstatement offered after the case is referred to
Industrial Court.
MALAYSIAN EMPLOYERS FEDERATION
33. 33
RECOGNITION OF TRADE UNION
Current system of determining majority by way of
secret ballot
Qs on secret ballot
are you a member of TU ?
No verification on whether employee is really TU
member
MALAYSIAN EMPLOYERS FEDERATION
34. 34
RECOGNITION OF TU - CONTINUED
The current system of secret ballot leads to a lot of
dispute by both TU and employers
TU allege that it is unfair for authorities to consider that
employees eligible for voting limited to those in
employment on the date FORM A served on Company and
those who did not turn up for secret ballot as voting for
Company
Employers need to verify whether TU membership is
genuine
MALAYSIAN EMPLOYERS FEDERATION
35. 35
RECOGNITION OF TU - CONTINUED
Need to introduce verification on whether employee is a TU
member at the time when FORM A served on Company
Reintroduce requirements of TU to submit FORM C i.e –
List of TU members?
MALAYSIAN EMPLOYERS FEDERATION
36. 36
DE-RECOGNITION OF TRADE
UNION - PROPOSALS
Where a trade union has been accorded
recognition in respect of any workman or class of
workmen whether by a decision of the Minister or
otherwise, such trade union may be de-recognized
in the event the Director General determines that:
the trade union is no longer competent to represent the
workman or class of workmen as a result of a change in
the nature of business of the employer; or
the trade union has ceased to represent at least 50
percent of the workman or class of workmen
MALAYSIAN EMPLOYERS FEDERATION
37. 37
IMMUNITY TO TRADE UNION,
ITS OFFICER OR MEMBER
NEED FOR REVIEW
No suit or legal proceeding shall be maintainable in any civil
court against a trade union, its officer or member in respect
of act done in contemplation or in furtherance of trade
dispute (S.20 TUA)
Possible abuse of this provision of TUA by the union officers
or members
38. 38
PICKETING - PROPOSALS
Trade Union shall give notice to DGIR before commencing
picket.
The notice shall include inter alia the time, duration, place
and reason of the picket.
Such requirement is necessary to ensure peaceful picketing
with least interuption to the operations of the company’s
business.
MALAYSIAN EMPLOYERS FEDERATION
39. 39
SOCIAL SECURITY - PROPOSAL
SOCSO claims based on employment injury
Dispute arises on whether employee sustain employment
injury-caused a lot of administrative time to
Employers
Employees
SOCSO
Need to reevaluate on the necessity to introduce ‘NO FAULT
CLAIM’
MALAYSIAN EMPLOYERS FEDERATION
40. 40
SOCIAL SECURITY -PROPOSAL
Employment Injury Scheme – Coverage limited to
workplace employment injury
Majority of employers take GPA to supplement SOCSO
Employment Injury Scheme to provide for 24 hours
coverage.
GPA caused employers to incur additional costs
Need to make Employment Injury Scheme to cover injuries
sustained by Insured Person outside employment
MALAYSIAN EMPLOYERS FEDERATION
41. 41
ADEQUECY OF OLD AGE SAVINGS
EPF reports highlighted that > 75% of EPF
contributors have < RM 50,000 when they reach
55 years
Qs – Whether low amount of savings of majority of
EPF contributors due to inadequate monthly
contributions rate by employers/employees
Existing contributions rates to EPF reasonable
MALAYSIAN EMPLOYERS FEDERATION
42. 42
ADEQUACY OF OLD AGE SAVINGS
Low levels of savings at age 55 due to numerous
withdrawal schemes eg:
housing
education
healthcare
Need to review EPF withdrawal schemes
MALAYSIAN EMPLOYERS FEDERATION
43. 43
IMPACT OF EXTENSION OF MRA
Health cost issues – beyond 55 employees tend
to suffer major illnesses
Insurance premium increase due to increase in
retirement age
Insurance companies refuse to cover beyond 55
years
MALAYSIAN EMPLOYERS FEDERATION
44. 44
IMPACT OF EXTENSION
OF MRA ON EPF
Retirement age of private sector employees extended from
55 years to 60 years on 1/1/2013
One of the intentions of increasing retirement age to 60
years was to enhance employees savings
However withdrawal of EPF savings was retained at 55
years
EPF leakages can further reduce EPF savings
Need to review withdrawal to 60 years
MALAYSIAN EMPLOYERS FEDERATION
45. 45
PRIVATE RETIREMENT SCHEME
(PRS)
PRS introduced to encourage employees and self employed
to make adequate savings for retirement
However the response to PRS very poor
PRS not guaranteed by Government
Tax relief limited to RM3,000 per year
Need to introduce
guarantee by Govt. and
contribution to PRS be entitled to full tax relief
MALAYSIAN EMPLOYERS FEDERATION
46. 46
MERGER OF SOCSO WITH EPF ?
SOCSO and EPF part of Malaysia’s Social Safety net
SOCSO under MoHR
EPF under the MoF
Need to make Social Safety Net more efficient in
providing for employees wellbeing
MALAYSIAN EMPLOYERS FEDERATION
47. 47 MALAYSIAN EMPLOYERS FEDERATION
INTER COUNTRY COMPARISON
PRODUCTIVITY LEVEL
Malaysia 1.0
Korea 2.4
Singapore 3.8
Hong Kong 5.3
Taiwan 3.2
Ireland 5.2
Japan 6.4
Germany 4.1
USA 6.2
Norway 6.3
MALAYSIAN EMPLOYERS FEDERATION
( at 2000 constant prices in US$) Source: OECD Economic Outlook, December 2007. Vol. 82
48. 48 MALAYSIAN EMPLOYERS FEDERATION
UNIT COST OF PRODUCTION BASED
ON WAGES & PRODUCTIVITY
Example - Wages for new graduate teacher
Malaysia – RM 2,000
Singapore – RM 6,000
Cost of Production
Malaysia
Singapore
Therefore Singapore unit cost of production is 79% of Malaysia’s cost
Singapore unit cost of production 21% cheaper than Malaysia
MALAYSIAN EMPLOYERS FEDERATION
RM2000
1
= RM2,000
RM6000
3.8
= RM1,579
RM1579
RM2000
= 79%( )
49. 49
MOVING FROM SECURITY OF TENURE
TO EMPLOYMENT SECURITY
Job security - permanent full time job until retirement
Employment security enhanced when workers are able to
adapt to changes in economic conditions by:
constantly updating their skills through lifelong learning
are willing to accept greater geographical and professional mobility
EU model of flexicurity
Common flexicurity principles encompass four components:
flexible and reliable contractual arrangements
comprehensive lifelong learning strategies
effective active labour market policies
modern social security systems
MALAYSIAN EMPLOYERS FEDERATION
50. 50
MOVING FROM MINIMUM WAGES TO
SKILL BASED WAGES
Economic Transformation
Programme
3.3 million new jobs by 2020
46% require vocational
certification or diploma
Pay be based on certified
skills – e.g SKM 1
SKM 2
SKM 3
Certification of skills -
craftsmen
Licensing of jobs
Job rebranding
MALAYSIAN EMPLOYERS FEDERATION
51. 51
MOVING FROM LOCAL TO REGIONAL
MARKET UNDER AEC 2015 AND BEYOND
ASEAN market – 650 million people
Average Productivity per employee per year in 2013
Malaysia – RM60,437
Singapore – RM173,000
Productivity growth in 2013 at 2.3% - indicating low
technology utilization and insufficient quality improvements
Challenges:
Creation of a pool of certified skill workers with
increasing automation and higher technology
MALAYSIAN EMPLOYERS FEDERATION
52. 52 MALAYSIAN EMPLOYERS FEDERATION
GOVERNMENT POLICIES
Government policies should focus on:
Creation of conducive business friendly environment
for productivity improvement & enhancement of
competitiveness
Constant dialogues and consultations with
TRIPARTITE stakeholders – Employers and Trade
Unions