What Happens if You Don’t Pay Your Employees on Time?

The Employment Act 1955 may not cover all employees, but non-EA employees' employment contract terms can protect them. 

In Malaysia, employees' rights include the following: 

• Annual leave

• Maternity leave

• Overtime

• Probation period

• Public holidays

• Sick leave

• Termination

• Wages or salary

• Working hours

 

When should you make salary payments to your employees?

According to Section 19 of the Employment Act 1955, as an employer, you must pay every employee within seven days after the last day of the salary payment period. 

For instance, you must pay an employee's October 2022 salary by 7th December 2022.

 

What happens if you pay your employees late?

If you don't pay your employees on time, you have violated Section 19 of the Employment Act 1955. 

There is still time to discuss with your employees to come to a mutual understanding. But, if there's still a disagreement, the employee can take legal action and lodge a complaint for your failure to pay their salary.

 

What happens if an employee lodges a complaint?

If the employee lodges a complaint to the Labour Office, the Labour Office will conduct an investigation. They may contact you, the employer, concerning the employee's claim.

If you accept your employee's claims and pay up, the Labour Office will consider the matter settled, and the employee will withdraw the claim against you. 

If you dispute the employee's complaint, the Labour Office will set an appointment in the Labour Court to hear the case.

As an employer, you are required to attend the hearing (as well as the employee). The court would issue a summons to you as the defendant. 

As the defendant, you can represent yourself or through your lawyer.

At the hearing's end, the Presiding Officer would make an order in oral or writing. 

 

Can you appeal if you are unsatisfied with the Labour Court's decision?

Yes. If you are unsatisfied with the Presiding Officer's decision, you can appeal to the High Court within 14 days from the decision's date.

If you do not appeal to the High Court and do not want to obey it, the Labour Office will enforce its order in the Sessions Court to recover the employee's salary. 

 

When should you pay your resigning employee?

Based on Section 20 of the Employment Act 1955, you must pay the resigning employee's salary on the day they are officially terminated.

Do not wait months to pay the resigning employee's salary, as they can go to the Labour Office and file their claim under Section 69 of the Employment Act.

 

Should you still pay an employee's salary if they quit without notice?

No, and based on Section 21 of the Employment Act, the employee is required to pay you instead.

 

"21. Payment on termination of the contract in special circumstances and on breach of contract

(1) Where an employer terminates the contract of service of an employee without notice in accordance with section 13 (1) or (2) and section 14(1) --

(a) the wages, less any deductions which the employer is entitled to make under section 24, earned by the such employee up to and including the day immediately preceding the day on which the termination of the contract of service takes effect; and

(b) in addition, where the employer terminates the contract of services under section 13 (1), the indemnity payable to the employee under that subsection, 

shall be paid by the employer to the employee no later than the day such contract of service is so terminated."

 

For instance, the employee will need to pay two months' salary as compensation to you, the employer, as indemnity in place of a two months notice period.

However, if you terminate an employee without notice, they can file their claim under Section 69 of the Employment Act at the Labour Office.

 

Can an employee file a complaint at the Labour Office even if their salary is over RM5,000?

They can still lodge a complaint as they are covered under the employment law as they are an employee or a "workman" as described in Section 2 of the Industrial Relations Act 1967:

"…any person, including an apprentice, employed by an employer under a contract of employment to work for hire or reward and for the purposes of any proceedings in relation to a trade dispute includes any such person who has been dismissed, discharged or retrenched in connection with or as a consequence of that dispute or whose dismissal, discharge or retrenchment has led to that dispute."

If you and the employee cannot settle the dispute, the Industrial Relations Department will step in and get involved instead of the Labour Office.

 

What happens if an employee lodges a complaint to the Industrial Court?

The Industrial Relations Department will receive the complaint and report it to the Director General of Industrial Relations (DGIR). The DGIR will then try to resolve the issue via conciliation between you and the employee. 

If the conciliation fails, the DGIR will refer the matter to the Minister, who will try to solve the issue. 

If that also fails, the Minister can refer the issue to the Industrial Court for a decision or an award.

 

Can you appeal against the Industrial Court's decision?

Yes. If unsatisfied with the Industrial Court's award, you can appeal to the High Court within 14 days from the award's reception date.

 

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