Employee Benefits

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:

1. Correction of overpayment – if an error occurred within the past three months.
2. Indemnity payments owed by the employee to the employer.
3. Recovery of wage advances.
4. Deductions required by law, such as EPF, SOCSO, and PCB contributions.
5. 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.

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.

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.
• 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, essential community work, or urgent repairs.

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.

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. 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 their employer within 48 hours of its commencement.

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

Complaints

The Director-General of Labour holds the authority to investigate and resolve disputes between employees and employers concerning wages or other monetary payments.

Scope of Authority:

• Monetary Claims: Addressing disputes related to wages and other cash payments.
• Discrimination Complaints: Investigating matters pertaining to employment discrimination.

Jurisdictional Threshold:

The Director-General now has the power to inquire into disputes involving employees earning up to RM4,000 per month.

Retirement Fund, Social Security And Insurance

Under the Employment Act 1955 and related regulations, employers are required to provide key statutory benefits:

Mandatory Contributions:

1. Employees Provident Fund (EPF): A retirement savings scheme governed by the EPF Act 1991. Both employers and employees contribute.
2. Social Security Organisation (SOCSO): Provides protection for work-related injuries, disabilities, and death under the Employees’ Social Security Act 1969.
3. Employment Insurance System (EIS): Provides financial assistance and job search support for retrenched employees under the EIS Act 2017.
4. Medical Insurance (For Foreign Employees): Employers must purchase the Foreign Workers Hospitalisation and Surgical Insurance Scheme (SKHPPA).

Additional Benefits:

• Employers may offer group medical insurance or other incentives, though these are not mandatory.
• Any additional benefits should be clearly outlined in the employment contract.