Employee Benefits
Advantages of Being an Employee
Employee salaries or wages may vary based on factors such as academic qualifications, skills, work experience, and technical expertise related to the job offered by the organization. Compensation can also be structured according to daily working hours or sales commissions.
Effective February 1, 2025, Malaysia has increased its minimum monthly wage from RM1,500 to RM1,700. This adjustment applies to employers with five or more employees and those in professional sectors, regardless of workforce size.
Wage Regulations and Employment Act Compliance
The Employment Act 1955 (Amendments 2012) sets minimum terms and conditions, primarily related to monetary benefits, for specific categories of workers. Under this Act:
- Employers must pay employees no later than the 7th day of the month.
- In the event of normal contract termination, final salary payments must be made on the same day the contract ends.
Monetary Advances to Employees
Employers may provide salary advances, but the total amount must not exceed the wages earned by the employee in the preceding month, except in cases where the advance is granted for:
- Purchasing, building, or improving a house.
- Acquiring land.
- Buying livestock.
- Purchasing a motorcar, motorcycle, or bicycle.
- Acquiring shares of the employer’s business offered for sale.
Wage Deductions
Wages are not payable during periods when an employee is:
- Imprisoned
- Attending court, except as a witness on behalf of the employer
Employers are generally prohibited from making unauthorized deductions from wages. However, deductions are permitted under specific circumstances, including:
- Correction of overpayment – if an error occurred within the past three months.
- Indemnity payments owed by the employee to the employer.
- Recovery of wage advances.
- Deductions required by law, such as EPF, SOCSO, and PCB contributions.
- Deductions requested in writing by the employee, including:
- Payments to a registered trade union or cooperative society.
- Employee Share Option Scheme (ESOS) contributions.
- Payments to third parties on behalf of the employee.
- Purchases of goods from the employer’s business.
- Rent, food, or other services provided by the employer under the contract of service.
The total deductions must not exceed 50% of an employee’s monthly wages, except for:
- Indemnity payments due to the employer.
- Final salary payments for any outstanding debts owed to the employer.
- Housing loan repayments, which may have an additional limit of 25%.
Additional Employee Benefits
Employers are legally allowed to provide non-cash benefits, such as housing, food, utilities, medical services, or other approved amenities in addition to wages. However, they cannot include intoxicating liquor as part of an employment contract.
Beyond wages, employees may also receive fringe benefits, which are non-wage compensations such as insurance, bonuses, allowances, and other perks designed to enhance employee well-being.
Employment of Women
Employers are prohibited from requiring female employees to work in any industrial or agricultural sector between 10:00 PM and 5:00 AM. Additionally, female employees must be given a minimum of 11 consecutive hours of rest before starting their next work shift.
However, the Director-General may grant exceptions upon request, allowing specific female employees or groups of employees to work during restricted hours, subject to any conditions imposed.
Maternity Protection
In Malaysia, maternity protection has been significantly enhanced to support female employees. As of January 1, 2023, under the Employment (Amendment) Act 2022, the maternity leave entitlement has been extended from 60 to 98 consecutive days for each confinement.
Eligibility for Maternity Leave and Allowance:
A female employee is entitled to receive maternity leave and allowance if she:
- Has been employed within four months preceding her confinement.
- Has worked at least 90 days in the nine months immediately before her
Commencement of Maternity Leave:
Maternity leave should begin no earlier than 30 days before the expected confinement date and no later than the day following the confinement.
Protection Against Dismissal:
Employers are prohibited from terminating a female employee during her maternity leave or due to pregnancy-related illnesses, unless there is:
- A willful breach of the employment contract.
- Misconduct.
- Closure of the business. wolterskluwer.com
Payment of Maternity Allowance:
If a female employee passes away during her maternity leave, the maternity allowance is payable to her nominee.
Post-Maternity Leave Illness:
Should a female employee be unable to return to work after her maternity leave due to a pregnancy-related illness, certified by a registered medical practitioner, the employer cannot terminate her employment for a period extending up to 90 days post-maternity leave.
These provisions underscore Malaysia’s commitment to safeguarding the rights and well-being of female employees during and after pregnancy.
Working Hours
In Malaysia, the Employment Act 1955 governs working hours to ensure employee well-being and productivity. As of January 1, 2023, the Act stipulates the following regulations:
Standard Working Hours:
- Daily Limit: Employees should not work more than 8 hours per day.
- Weekly Limit: The total working hours must not exceed 45 hours per week, reduced from the previous 48-hour limit. sql.com.my
- Spread-Over Period: The working period, including breaks, should not surpass 10 hours in a day.
- Rest Intervals: Employees are entitled to a minimum 30-minute break after 5 consecutive hours of work.
Exceptions:
Employers may require employees to work beyond these limits under specific circumstances, such as:
- Emergencies or accidents.
- Work essential to community well-being or national security.
- Urgent repairs to machinery or infrastructure.
- Unforeseen interruptions requiring immediate attention.
In such cases, employers must ensure that any additional work complies with overtime regulations and that employees are compensated accordingly.
Overtime Regulations:
- Definition: Any work exceeding the standard 8 hours per day or 45 hours per week is considered overtime.
- Compensation Rate: Overtime must be compensated at a rate of at least 1.5 times the employee’s regular hourly wage.
- Monthly Overtime Cap: Employees should not be required to work more than 104 hours of overtime in any one month.
| Category | Overtime on Working Days | Work on Rest Days | Work on Public Holidays |
| Definition | Work beyond normal working hours. | Work performed on a designated rest day. | Work performed on an official public holiday. |
| Pay Rate | Minimum 1.5 times regular hourly wage. | 2 times the regular hourly wage for up to 8 hours. | 2 times the regular hourly wage for up to 8 hours. |
| Beyond 8 Hours | 2 times regular hourly wage. | 3 times the regular hourly wage. | 3 times the regular hourly wage. |
| Maximum Overtime Limit | 104 hours per month. | No fixed limit but must comply with rest requirements. | Subject to employment contract or collective agreements. |
| Compulsory Rest | Not specified but encouraged to ensure work-life balance. | Employees are entitled to at least 1 rest day per week. | If an employee is required to work on a public holiday, an additional paid replacement leave must be provided. |
| Category | Overtime on Working Days | Work on Rest Days | Work on Public Holidays |
| Definition | Work beyond normal working hours. | Work performed on a designated rest day. | Work performed on an official public holiday. |
| Pay Rate | Minimum 1.5 times regular hourly wage. | 2 times the regular hourly wage for up to 8 hours. | 2 times the regular hourly wage for up to 8 hours. |
| Beyond 8 Hours | 2 times regular hourly wage. | 3 times the regular hourly wage. | 3 times the regular hourly wage. |
| Maximum Overtime Limit | 104 hours per month. | No fixed limit but must comply with rest requirements. | Subject to employment contract or collective agreements. |
| Compulsory Rest | Not specified but encouraged to ensure work-life balance. | Employees are entitled to at least 1 rest day per week. | If an employee is required to work on a public holiday, an additional paid replacement leave must be provided. |
Employers are encouraged to monitor working hours diligently to ensure compliance with the Employment Act and to promote a healthy work-life balance for their employees.
Sick Leave
Under the Employment Act 1955 of Malaysia, employees are entitled to paid sick leave contingent upon their length of service and medical certification.
Entitlement to Paid Sick Leave:
- Without Hospitalization:
- Employed less than 2 years: 14 days per calendar year.
- Employed between 2 to 5 years: 18 days per calendar year.
- Employed 5 years or more: 22 days per calendar year.
- With Hospitalization: Regardless of tenure, employees are entitled to 60 days of sick leave per calendar year if hospitalization is necessary, as certified by a registered medical practitioner or medical officer. This 60-day entitlement is inclusive of the regular sick leave days.
Conditions for Sick Leave:
- Medical Certification: Sick leave must be certified by a registered medical practitioner, medical officer, or dental surgeon.
- Notification: Employees are required to inform or attempt to inform their employer of the sick leave within 48 hours of its commencement. Failure to do so may result in the leave being considered as absence without reasonable excuse.
Payment During Sick Leave:
- Employers are obligated to pay employees their ordinary rate of pay for each day of entitled sick leave. For monthly-paid employees, receiving their regular monthly wages is deemed as having been paid for the sick leave taken.
Exceptions:
- Employees are not entitled to paid sick leave during periods they are receiving maternity allowance or compensation for disablement under relevant laws.
Employers and employees should familiarize themselves with these provisions to ensure compliance and proper application of sick leave entitlements as stipulated in Malaysian employment law.
Annual Leave
Under the Employment Act 1955 of Malaysia, employees are entitled to paid annual leave based on their length of continuous service with the same employer:
- Less than 2 years: 8 days per year
- 2 to 5 years: 12 days per year
- More than 5 years: 16 days per year
For employees who have not completed 12 months of continuous service in a year, their annual leave entitlement is prorated based on the number of completed months. Any fraction of a day less than half is disregarded, while fractions of half a day or more are rounded up to a full day.
If an employee falls ill or is entitled to maternity leave during their annual leave, the relevant sick or maternity leave is granted, and the annual leave is considered not taken.
Employers may request employees to forgo their annual leave, but this requires the employee’s written consent, and the employee must be compensated with payment in lieu of the leave.
It’s important to note that if an employee is absent without permission or reasonable excuse for more than 10% of the working year, their annual leave entitlement for that year may be forfeited.
Additionally, employees are required to utilize their annual leave within 12 months after the end of each 12-month continuous service period; otherwise, the entitlement may be forfeited.
Employers and employees should refer to the Employment Act 1955 and their employment contracts to ensure compliance with all provisions related to annual leave entitlements.
Complaints
the Director-General of Labour holds the authority to investigate and resolve disputes between employees and employers concerning wages or other monetary payments due under the terms of employment contracts or the provisions of the Act.
Scope of Authority:
- Monetary Claims: The Director-General can address disputes related to wages and other cash payments.
- Discrimination Complaints: Recent amendments empower the Director-General to investigate and decide on matters pertaining to employment discrimination. Employers found in violation may face fines upon conviction. mondaq.com
Limitations:
The Director-General is restricted from intervening in disputes that:
- Are currently under investigation or proceedings as per the Industrial Relations Act 1967.
- Have been resolved by the Minister under Section 20(3) of the same Act.
- Have been referred to or are awaiting proceedings before the Industrial Court.
Jurisdictional Threshold:
While the Director-General’s authority traditionally covers employees earning up to RM2,000 monthly, amendments have extended this jurisdiction. The Director-General now has the power to inquire into disputes involving employees earning up to RM4,000 per month.
Employers and employees should be aware of these provisions to understand the avenues available for dispute resolution under Malaysian employment law.
Retirement Fund, Social Security And Insurance
Under the Employment Act 1955 and related regulations in Malaysia, employers are required to provide key statutory benefits to employees. These benefits involve mandatory contributions deducted from employees’ salaries and employer contributions, ensuring financial security and social protection.
Mandatory Contributions:
- Employees Provident Fund (EPF)
- Governed by the Employees Provident Fund Act 1991, EPF is a retirement savings scheme.
- Both employers and employees must contribute based on the employee’s wages, with rates set by the EPF Act.
- The contribution rates may vary depending on the employee’s age and nationality.
- Social Security Organisation (SOCSO)
- Administered under the Employees’ Social Security Act 1969, SOCSO provides protection for employees in cases of work-related injuries, disabilities, and death.
- Employers must contribute to SOCSO for all eligible employees earning wages, including under the Employment Injury Scheme and the Invalidity Scheme.
- Employment Insurance System (EIS)
- Introduced under the Employment Insurance System Act 2017, EIS provides financial assistance and job search support for retrenched employees.
- Employers and employees both contribute to this fund.
- Medical Insurance (For Foreign Employees)
- Employers are required to purchase the Foreign Workers Hospitalisation and Surgical Insurance Scheme (SKHPPA) for foreign workers under the Workmen’s Compensation Act 1952.
Additional Benefits:
- Employers may offer group medical insurance or other incentives as part of an employee benefits package, though these are not mandatory under Malaysian labor law.
- Any additional benefits, such as performance bonuses, allowances, or sales incentives, are at the employer’s discretion and should be clearly outlined in the employment contract or appointment letter.
Employers must ensure that all statutory contributions are clearly stated in employment contracts and payroll records to maintain compliance with Malaysian labor laws.
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