Employment Rights in Malaysia: What Every Worker Should Know

Employment law in Malaysia is primarily governed by the Employment Act 1955 (EA), the Industrial Relations Act 1967 (IRA) and the Federal Constitution. These laws establish minimum standards for wages, working hours, leave entitlements and termination procedures, and provide mechanisms for workers to seek redress when their rights are violated. Whether you are a factory worker in Johor Bahru, a professional in Kuala Lumpur or a foreign employee on a work permit, understanding your employment rights is essential. This guide, prepared by the employment law team at Messrs S K Song, provides a practical overview of the key protections available to workers in Malaysia.

The Employment Act 1955: Scope and Coverage

The Employment Act 1955 is the principal statute governing employment standards in Peninsular Malaysia and the Federal Territories. Following significant amendments, including those introduced in 2022, the EA now applies to all employees regardless of salary, though certain provisions relating to overtime, rest days and termination benefits continue to apply specifically to employees earning below RM4,000 per month. The EA sets out minimum entitlements that cannot be contracted out of — any term in an employment contract that provides less favourable conditions than the EA is void and unenforceable.

Working Hours, Overtime and Rest Days

Under the EA, the normal hours of work shall not exceed 45 hours per week. For employees earning below RM4,000 per month, the maximum daily working hours are eight hours per day, exclusive of rest periods and meal breaks. Overtime work must be compensated at a rate of at least 1.5 times the ordinary rate of pay for work on normal working days, 2 times the ordinary rate for rest days and 3 times the ordinary rate for public holidays. Employers are required to provide at least one rest day per week, typically Sunday, though this may vary by industry. Employees are also entitled to 11 paid public holidays per year, five of which are specified by the government.

Annual Leave and Sick Leave

Annual leave entitlement under the EA is graduated based on length of service. Employees with less than two years of service are entitled to a minimum of 8 days of paid annual leave per year. This increases to 12 days for those with between two and five years of service, and 16 days for those with five or more years of service. Sick leave entitlement is similarly graduated: 14 days per year for employees with less than two years of service, 18 days for two to five years and 22 days for five or more years, provided the employee is certified ill by a registered medical practitioner. Hospitalisation leave of up to 60 days per year is also provided.

Termination of Employment

Termination of employment in Malaysia may occur by resignation, dismissal, retrenchment, expiry of a fixed-term contract or mutual agreement. The law imposes obligations on employers in each scenario. For dismissals, the employer must have just cause and excuse, and must follow the principles of natural justice — namely, the employee must be informed of the charges or grounds for dismissal and given a fair opportunity to be heard. Failure to follow due process, even where the misconduct is genuine, can render a dismissal unlawful.

Notice Period and Termination Benefits

Either party may terminate the employment contract by giving the required notice. The minimum notice period under the EA is four weeks for employees with less than two years of service, six weeks for two to five years and eight weeks for five or more years, unless the contract provides for a longer period. Payment in lieu of notice is permissible. Employees who are terminated without just cause or who are retrenched are entitled to termination benefits or retrenchment benefits under the EA, calculated based on length of service and last drawn salary.

Unfair Dismissal and the Industrial Court

Malaysian law provides robust protections against unfair dismissal. Under the Industrial Relations Act 1967, an employee who has been dismissed without just cause or excuse may file a representation to the Director General of Industrial Relations within 60 days of the dismissal. The DGIR will attempt conciliation between the parties. If conciliation fails, the Minister of Human Resources may refer the matter to the Industrial Court for adjudication.

The Industrial Court is a specialist tribunal that hears unfair dismissal claims. It applies the principle established in the landmark case of Milos v. Perusahaan Sadur Timah Malaysia (PERSTIM) Bhd, which holds that the court must satisfy itself that the employer had just cause or excuse for the dismissal. The burden of proof lies on the employer to demonstrate that the dismissal was justified. Remedies available from the Industrial Court include reinstatement to the employee's former position and back wages, or compensation in lieu of reinstatement of up to 24 months' salary.

Retrenchment and Redundancy

Retrenchment — the termination of employees due to redundancy — is permissible under Malaysian law, but employers must follow specific procedures. The Code of Conduct for Industrial Harmony and the Employment (Termination and Lay-Off Benefits) Regulations set out the expected standards. Employers are expected to adopt a "last in, first out" (LIFO) principle when selecting employees for retrenchment, though deviations are permissible with justification. Retrenched employees are entitled to lay-off benefits calculated at 10 days' wages for each year of service for the first four years, 15 days' wages for each year of service from the fifth to the ninth year and 20 days' wages for each year of service from the tenth year onwards.

Foreign Workers' Rights

Foreign workers employed in Malaysia are entitled to the same minimum protections under the EA as local employees, including minimum wage, rest days, annual leave and sick leave. Employers are responsible for obtaining the necessary work permits and ensuring that employment conditions comply with Malaysian law. Foreign workers who are unfairly dismissed may also file representations under the IRA, although practical challenges such as the expiry of work permits during proceedings can complicate matters. Our team at Messrs S K Song advises both local and foreign employees on their rights and can assist with Industrial Court representations.

Sexual Harassment Protections

The Employment (Amendment) Act 2022 introduced enhanced provisions on sexual harassment in the workplace. Employers are now required to inquire into any complaint of sexual harassment and take appropriate action. The law defines sexual harassment broadly to include any unwanted conduct of a sexual nature, whether verbal, non-verbal, visual, gestural or physical. Victims may also seek redress through the Industrial Court. Employers who fail to handle complaints properly may face legal liability.

How Messrs S K Song Can Help

Employment disputes can have serious financial and professional consequences. The employment law team at Messrs S K Song advises employees and employers across Johor Bahru on all aspects of employment law, from contract review to Industrial Court litigation. We handle unfair dismissal claims, retrenchment matters, breach of contract disputes and workplace harassment complaints. Our approach prioritises practical, cost-effective solutions while being fully prepared to advocate for your rights in the Industrial Court when necessary.