Employment Laws Addressing Needs of Employers

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
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
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.

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.

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

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

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.

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.

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.

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

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.

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.

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.

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.

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
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)].

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.

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.

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.

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:
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

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
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)

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 ?

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

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.

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

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

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’.

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

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

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

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.

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

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

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?

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

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
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.

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’

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

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

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

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

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

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

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

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
( at 2000 constant prices in US$) Source: OECD Economic Outlook, December 2007. Vol. 82

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
RM2000
1
= RM2,000
RM6000
3.8
= RM1,579
RM1579
RM2000
= 79%( )

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

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

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

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

Employment Laws Addressing Needs of Employers

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