Latest Malaysian Employment Act 1955: Key Provisions Every Employer Must Know

The Employment Act 1955 has been a guideline of employment law in Malaysia. It provides workers’ rights and sets standards for employers to follow. 

Following the industry and working style nowadays, the government has given recent updates on the act to make it even more relevant by addressing modern challenges.

For example, now Malaysians add labor laws regarding flexible work and improving protections for all types of employees in Malaysia.

In this article, we will share the Employment Act 1955, including the new coverage that you need to understand. Read the explanation below.

What is the Employment Act 1955?

The Employment Act 1955 is a governmental law to set minimum standards for wages, working hours, leave, and workplace safety.

It applies to both local and foreign employees to give protection against unfair practices and promote employee welfare.

Over time, the Act has evolved to address new challenges, such as flexible work and the need for better employee protections of gig workers.

Key Provisions of the Employment Act 1955

The Employment Act 1955 outlines clear provisions to protect employees and guide employers in creating fair workplace practices.

These key provisions address various aspects of employment to give transparency and promote workers' rights.

1. Coverage

Previously, the Act only applied to employees earning RM2,000 or less per month.

Now, it covers all employees regardless of their salary, though some rules, such as overtime pay, may not apply to those earning above RM4,000. 

Domestic workers and certain managerial roles are still not included under the Act and follow separate agreements.

This change helps fair treatment for more employees, especially those in different sectors and earning minimum wage.

2. Working Hours and Overtime

One of the most significant updates is the reduction of maximum working hours from 48 to 45 hours per week.

This change aims to reduce burnout and align with international labor standards.

For employees earning below RM4,000, overtime rates outside working hours is compensated at 1.5 times their hourly rate for regular extra hours and higher rates for work on rest days or public holidays.

3. Rest Days and Public Holidays

Employees are entitled to one rest day per week and 11 public holidays annually.

Public holidays include key national celebrations like Malaysia Day and Labor Day.

If employees work on these days, they are entitled to double or even triple pay, depending on the circumstances.

4. Leave Entitlements

The Act ensures employees have access to various types of leave:

• Annual leave: Ranges from 8 to 16 days based on years of service.

  • 1-2 years of service: 8 days

  • 2-5 years of service: 12 days

  • More than 5 years of service: 16 days

• Sick leave: Between 14 and 22 days annually, plus an additional 60 days for hospitalization.

  • 1-2 years of service: 14 days

  • 2-5 years of service: 18 days

  • More than 5 years of service: 22 days

• Maternity leave for female employees: Increased from 60 to 98 days, reflecting a stronger focus on family welfare.

• Paternity leave: New fathers are entitled to 7 days of paid leave, subject to conditions like length of service and marriage verification.

5. Termination and Dismissal

Termination is a sensitive process, and the Act outlines clear rules to avoid disputes.

Employers must provide valid reasons, such as redundancy, poor performance, or misconduct.

Notice periods range from 4 to 12 weeks depending on the employee’s tenure, and final wages must be paid immediately to avoid legal repercussions.

6. Wages and Payment

From February 2025, the minimum wage will increase to RM1,700 to give better financial support to low-income workers.

Small businesses with fewer than five employees have until August 2025 to adjust to this change. Employers must pay wages on time, as delays can lead to legal penalties.

Employers can make wage deductions for specific reasons, like employees provident fund EPF, SOCSO, or loan repayments agreed upon by the employee.

Bonuses and incentives, while not required by law, are often offered to keep employees motivated and happy at work.

7. Sexual Harassment Complaints

Under Section 81H, employers must display notices about sexual harassment to promote awareness and encourage a safer workplace for both male and female employees.

This is a small but significant step toward fostering respect and dignity at work.

8. Flexible Work Arrangements

The Act now supports flexible working arrangements as responds to the changing dynamics of post-pandemic workplaces.

Employees can request adjustments to their working hours or location in writing, and employers must respond within 60 days by explaining their decision if they decline.

Recent Amendments and Updates

The recent updates to the Employment Act 1955 signal a significant step toward creating fairer and more inclusive workplace practices in Malaysia, including:

Flexible Working Arrangements

Employees can now request options like remote work or adjusted hours to better balance their personal and professional responsibilities.

Employers are required to respond in writing within 60 days by providing valid reasons if the request is denied.

Shorter Working Hours

The maximum weekly working hours have been reduced from 48 to 45 hours.

This change, aligned with global labor standards, aims to reduce burnout and support better work-life balance for employees.

Increased Employee Coverage

The Act now applies to all employees, regardless of their salary.

However, certain provisions, such as overtime pay, do not apply to those earning above RM4,000 per month.

Enhanced Social Protections

New provisions include compulsory EPF contributions for foreign workers and increased salary ceilings for SOCSO and EIS contributions.

These changes aim to provide greater financial security to a wider range of employees.

Then, how is the impact both to the employee and employers?

These updates bring positive changes for both employees and employers.

Workers, especially in gig and informal roles, now have stronger protections against unfair dismissal and unsafe conditions.

Flexible work options and shorter working hours help employees manage their personal lives better, while the higher minimum wage and mandatory EPF contributions improve financial security.

For employers, these changes mean updating policies, adjusting payroll for the new minimum wage, and managing flexible work requests.

Although these updates may increase costs, they also lead to happier, more loyal employees and a more productive workplace. In the long run, both employees and employers stand to benefit.

Common FAQs about the Employment Act 1955

What happens if an employer does not follow the Employment Act?

If an employer does not follow the Employment Act 1955, they can face legal action, including fines or penalties.

This can also damage the company’s reputation and cause problems with employees, like disputes or mistrust.

How can employees seek redress if their rights are not protected under the Act?

Employees can make a complaint to the Department of Labour or the Industrial Relations Department.

These agencies will help resolve the issue through discussions or may take the case to the Industrial Court. Employees can also ask for advice from a lawyer if needed.

How to stay informed about updates to the Employment Act 1955?

Employers and employees can check the Ministry of Human Resources website or follow announcements from the Department of Labour.

Attending workshops, subscribing to HR news, or consulting with legal experts are other good ways to keep up with any changes.

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