Update: Employment Act Will Cover All Employees Effective 1 January 2023 (With Some Exceptions)

The amendments to the First Schedule of the Employment Act 1955 (“EA”) were gazetted on 15 August 2022, which widens the scope of employees covered by the EA. Initially, this was to be implemented effective 1 September 2022. However, the Minister of Human Resources announced on 26 August 2022 that the implementation of the amendments will be deferred to 1 January 2023 (subject to the changes being gazetted).

Effective 1 January 2023, the EA will apply to all employees. However, employees whose wages exceed RM4,000 a month will not be entitled to overtime and/or termination benefits. Previously, overtime and termination benefits were payable for employees who earn RM2,000 and below and/or who are involved in manual labour.

Click here to read our earlier article about how the EA amendments may affect you.

 

Which parts of the EA do not apply to employees earning above RM4,000 a month?

These provisions will not apply to employees earning above RM4,000 per month:

  • Work and overtime payments on rest days
  • Overtime payments for work in excess of normal hours of work
  • Shift work allowance
  • Work, allowance and overtime payments on public holidays
  • Termination, lay-off and retirement benefits

 

What should employers do to comply?

Employers should first relook at their workforce arrangements to see if they comply with the EA. A crucial point is if you have any employees earning between RM2,000 to RM4,000. Previously these employees would not have been entitled to overtime, but now they would be. Companies would therefore have to ensure they have a proper overtime procedure/policy in place to cover these employees.

Now that the EA will apply to all employees, an audit of your employment contracts, policies and procedures should be done to ensure compliance. This includes benefits like public holidays, annual leave, sick leave, hospitalisation leave and notice periods. It also includes looking at procedural aspects of employment such as timing of wage payments, and deductions from salary.

 

My biggest concern is overtime; my organisation may not be ready to implement overtime for a large number of new employees by January 2023. What can we do?

Start by assessing your manpower and production needs from January 2023. As overtime is only done at the direction of the employer, you can put a hold on all overtime work until your organisation has the correct systems in place to address this change in the law.

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This article was written by Donovan Cheah (Partner) and  Adelyn Fang (Associate). Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific for 2017-2022, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Donovan & Ho is a law firm in Malaysia, and our employment practice group has built a reputation for providing strategic employment advice to local and global organisations.  Our team of employment lawyers provide advice on employment law and industrial relations including review of employment contracts, policies and handbooks, advising on workforce reductions, and managing dismissals of employees for poor performance or misconduct. We also represent clients in unfair dismissal claims and employment-related litigation. Have a question? Please contact us.

 

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