Labor Law / Labor Column Part 2: Employment Contract / Employment Rules

Labor Law / Labor Column Part 2: Employment Contract / Employment Rules


1. Employment of Employee

  As in Japan, when a company employs employees in Malaysia, it is necessary to sign an employment contract with an employee. Various laws and regulations have been set in Malaysia from the viewpoint of protection of workers, and it is necessary for the company to keep in mind the knowledge of related laws and ordinances and precedents in employment. Therefore, in this article, we will describe mainly about employment contracts and employment rules that stipulate agreement / discipline with employees.

2. Employment Contract

1Employment Act

  The Employment Act (Employment Act 1955) provision is reference for employment contracts. The Employment Law is a law that mainly to provide minimum terms & conditions (Mostly of monetary value) to certain category of workers such as workers whose monthly wages is less than RM2,000 per month and person who employed in a specific occupation such as a manual workers (Employment Act (Hereinafter referred to as "Article 2 (1), Attached Table 1). Other workers are not subject to the employment law except for some provisions such as provisions on sexual harassment etc. However, please take note because there are matters which can’t be agreed below the terms and conditions stated in the employment law, mainly in court precedents etc. In addition, it is difficult to secure employee with the conditions that are lower than competitors, so it is more likely to grant more conditions than those stipulated in the Employment Act to workers who are not subject to the employment law.

2Various Security

  The Employment Law stipulates and guarantees the minimum level of labor conditions. Terms & conditions below the standards stipulated by the Employment Act or regulations / statement will be invalid (Article 7). Please refer to the table below for the main contents of the Security.

Overview Contents of the Security
Working hours
(Article 60A)
Maximum 8 hours per day, within 48 hours per week [1]
Overtime Up to 104 hours per month (Employment (Limitation of overtime work) Regulation 1980) [2]
Overtime Allowance (Hourly/Daily/Monthly)
(Article 59, 60A, C)
Exceed normal working day/time: 1.5 times the hourly rate of pay
On Holiday/Time (Half day or less): 1 Day rate of pay
On Holiday/Time (Over Half day & within a day): 2 Days rate of pay
Rest Day: 2 times the hourly rate of pay
On Public Holiday/Time: 2 Days (Outside time is 3 times the hourly rate of pay)
Public Holiday 
(Article 60D)
At least 11 gazetted public holidays (Inclusive of 5 compulsory public holidays) in one calender year and on any day declared as a public holiday under section 8 of the Holidays Act 1951
Annual Leave 
(Article 60E)
Less than 2 years of service:                           8 days
2 or more but less than 5 years of service:     12 days
Over 5 years of service:                                16 days
Medical Leave
(Article 60F)
Less than 2 years of service:                          8 days
2 or more but less than 5 years of service:    12 days
Over 5 years of service:                               16 days
Where hospitalisation is necessary:             Up to 60days (inclusive of the paid
                                                               sick leave entitlement stated above)
Maternity Leave
(Article 37)
60 consecutive days (Can start earlier than the period of 30days immediately preceding confinement, but subject to few conditions)

[1] Flextime system / Exceptions in young people (Article 60C, Young people/Child and youth employment law)
For women, restrictions such as working at night (10:00 pm - 5:00 am) (Article 34 (1)).

3. Employment Rules

There is no requirement to prepare the employment rules under law, and there are no definitions and regulations on employment rules. However, by clarifying the standards of working conditions and benefit, many companies have created employment rules and other internal rules of working conditions and regulations in order to prevent complaints of employees and conflict between labor and management in advance. Moreover, it seems that it is being used as an action guideline of an employee by setting company vision.

  However, it is not practical to put all the provision comprehensively throughout the details in the employment rules, because it may lead to confusion among workers. Therefore, in the employment rules, there are many companies that set only basic items and for individual rules is in separately set rules.

Please refer to the table below for the main items of the employment rules.         

Items Details
Overview ・Vision, Mission Statement, Company History, Organization Chart
・Introduction of main products & services
Employment Conditions ・Working hours
・Salary, Incentives/Bonus, Increment (Base on evaluation)
・Various allowances (Overtime, working on public holiday, etc)
・Various insurance (Medical Insurance, Pension where contributed by the company)
・Public Holidays
・Confidential Provision
・Probation period (including dismissal)
・Provide notice period for dismissal
・Severance pay
・Medical checkup
Company Vision ・Training
・Dress code
・Exchange gift with customers & business partners
・Working environment (Sexual harassment, smoking, safety, etc)
Various Procedure ・Disciplinary Punishment
・Promotion, Performance evaluation, Award
・Report on Absence/Late arrival
・Acquire Holidays
・Transfer request
・Report of accident/notification
・Emergency evacuation method
・Comment/Suggestion to the company (Suggestion box)

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All data and commentary included in this material was edited and written by Legal firm "One Asia" based on published information at the time of this material creation, but it does not guarantee its accuracy and completeness. In addition, we are not responsible for any damage caused by using the information in this material.                                                                
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"One Asia Lawyers" is the first ASEAN legal specialization in Japan, which was established in order to offer advice on legislation in Japan and ASEAN countries, including Malaysia. For inquiries regarding this article, please send in email to

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