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During peak seasons or in service-based sectors, working overtime becomes an inevitable necessity. Consequently, the issue of overtime payment frequently arises in such circumstances. According to the Employment Act 1955 (“EA”), overtime is defined as the additional hours worked by employees beyond their normal hours of work per day. Normal hours of work are the working hours agreed upon between the employer and the employee in the employment contracts. When employees worked beyond the agreed-upon hours of work, it becomes the employers’ obligation to provide overtime payment. It is important to note that not all employees are entitled to overtime payment. Employees earning a monthly salary above RM 4,000 are not entitled to overtime payment as mandated by the law. This means that any overtime payment is subject to the employers’ discretion. The EA provides specific rates of overtime payment that employers must follow. Employers have the flexibility to offer higher rates, but they are not allowed to offer lower rates. The rate of overtime payment varies depending on whether it is a normal working day, a rest day, or a public holiday. The table below illustrates the rates of overtime payment for various occasions. Day Prescribed Overtime Rate Normal Working Day HRP x 1.5   Rest Day HRP x 2 Public Holiday HRP x 3 ORP (ordinary rate of pay) = monthly rate of pay/26   HRP (hourly rate of pay) = ORP/normal hours of work The mandatory overtime payment can significantly increase the employers’ expenses, particularly during peak seasons or when a significant number of employees fall within the salary range of RM 4,000 and below. As such, some employers are exploring alternatives to preserve cash flow while still meeting the legal requirement. One commonly considered alternative is granting replacement leave to employees at a later date. However, the question is whether this approach is legally acceptable. It is important to note that the EA does not explicitly prohibit the use of alternative arrangements to replace overtime payment. Furthermore, there is a provision in the EA allowing employers and employees to agree on more favourable terms than the provisions outlined in the EA. It is subject to discussion as to whether a replacement leave is a better alternative and is more favourable to the employees. It is undeniable that some employees prefer monetary compensation over a day off. The safest approach for employers is to comply with the EA by providing overtime payment to eligible employees. If employers decide to pursue an alternative arrangement, they should clearly communicate the alternative to their employees, explain the rationale behind such a decision, and obtain the employees’ written consent for such arrangement. These will ensure transparency and fairness when dealing with the issue of overtime. To further assist employers in navigating the issue of overtime, the employers may consider the following: Requesting employees to work overtime only when necessary. Conducting performance reviews to identify the root causes of performance deficiencies if overtime is required due to performance issues. Hire more freelancers during peak seasons if the cost is lower than the cost of overtime payment. Establishing well-defined procedures and guidelines that clearly state when overtime is permissible, how it should be requested, and how it will be compensated. Establishing a system for recording overtime work, calculations, and payments. While it is important to comply with the law regarding overtime payment, it is equally important to address internal governance issues that may be causing excessive overtime. By reviewing and improving internal systems and procedures, employers can create a more productive work environment and reduce the need for excessive overtime. By striking a balance between hard work, fair compensation, and a healthy work environment, employers can create a foundation for employees’ satisfaction. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Consultancy services have become increasingly popular among individuals and businesses. Consultants offer a wide range of services such as digital marketing, branding, and others. They bring industry experiences and fresh perspectives to the table, assisting clients to address specific issues, improve performance and drive revenue growth. However, one of the common concerns shared by consultants is the potential risk of not receiving timely and full payment for their services, even if they have diligently fulfilled their obligations. On the other hand, clients are concerned about the lack of significant improvements in their business or consultancy fees that are disproportionate to the results achieved. To address these valid concerns and foster a win-win situation, a well-structured consultancy agreement with customised clauses plays an important role to protect the interest of both parties. Protecting the Consultants: A consultancy agreement outlines the scope of work, deliverables, and expected outcomes provided by the consultants. These clauses establish a clear understanding between the consultants and the clients. To address the issue of non-payment or delayed payment, consultants may include clauses such as late payment charges or suspension of services until full payment is received. These clauses ensure protection and compensation for consultants in the events of payment-related issues. Besides that, the consultants may include an outcome disclaimer clause in the consultancy agreement, specifying that certain results or outcomes cannot be guaranteed. For example, a successful franchise application or a top 3 Google ranking. This clause is especially important when the consultancy services involved third parties or are subject to external circumstances. By managing clients’ expectations and clarifying the limitations of the services provided, this clause protects consultants from unrealistic demands. Protecting the Clients:  To address concerns of performance not up to the standards, clients can specify milestones or performance targets within the consultancy agreement. This ensures that consultants must meet these targets before clients are obligated to make payments. Such an arrangement safeguards clients’ interests by ensuring that satisfactory results are delivered before any financial commitments are made. Additionally, clients can explore alternative payment mechanisms, such as offering free shares, as a means to motivate consultants and enhance their performance. For clients who pay a substantial consultancy fee, it is reasonable for them to expect exclusive services for a specified duration. To formalise this expectation, an exclusive service clause can be included in the consultancy agreement, stipulating that the consultants will solely provide services to the clients during the specified period. This clause ensures undivided attention from the consultants to the clients’ business and helps prevent conflicts of interest. Protecting Both Parties:  To safeguard the interests of both consultants and clients, the consultancy agreement can include clauses relating to intellectual property rights, confidentiality, and dispute resolution. These clauses protect the parties’ proprietary information and confidential information as well as help the parties to find a mutually agreeable solution to solve disputes. In conclusion, a customised consultancy agreement ensures that the consultants and the clients are aligned towards achieving their goals. Most importantly, it establishes a solid foundation of understanding and sets realistic expectations for both parties. This clarity not only helps consultants to focus their efforts on addressing specific issues, but also allows clients to have a clear understanding of what they can expect from the consultancy engagement. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Whether engaging in joint venture arrangements, strategic partnerships, or any other form of collaborative relationship, maintaining, protecting, and preserving confidential information are important for businesses. In a business collaboration, parties often share critical and proprietary information. This may include financial data, marketing strategies, ideas, customer list, and other forms of confidential information. Without a non-disclosure agreement (“NDA”), the disclosing party exposes itself to substantial risks as the receiving party could exploit the information for its own benefit or even share it with the disclosing party’s competitors. An NDA is a contract that protects confidential information exchanged between the parties. The primary purpose of an NDA is to establish the manners and restrictions in using the confidential information. In an NDA, the receiving party is often required to get prior written consent from the disclosing party before using or disclosing the confidential information beyond the agreed-upon purposes. Failure to obtain the written consent amounts to unauthorised use of confidential information. The NDA imposes an obligation on the receiving party to maintain the confidentiality of the information for a specified duration, thereby preserving the confidentiality of information even if the collaboration ends. An NDA ensures that the receiving party understands its obligations and the potential legal consequences of breaching its obligations. Besides that, it allows the disclosing party to seek legal remedies such as monetary damages or injunctive relief to protect its interest in the event of a breach. Additionally, an NDA sends a strong signal that the disclosing party prioritises the protection of confidentiality and expects the receiving party to do the same. This establishes a foundation of trust, encourages open communication and mutual respect between the parties involved, thereby facilitating the business collaboration. In conclusion, an NDA is an essential tool for safeguarding confidential information in a business collaboration. By signing an NDA, parties can establish clear expectations, minimise unauthorised disclosure, and have legal remedies in case there is an incident of an unauthorised disclosure that breaches the NDA. ***** About the author: This article was written by Wong Shen Ming, Corporate Associate – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

Creating an effective Terms of Use (ToU) for your mobile application or website is a crucial step in safeguarding your digital business. A well-crafted ToU not only protects your rights but also outlines the obligations and responsibilities of your users, setting the stage for a transparent and secure online environment. Below, we offer expert tips for drafting a robust ToU, complemented by cautionary tales of companies that faced legal challenges due to inadequate terms. Key Tips for Crafting a Strong Terms of Use Lessons from Historical Missteps Conclusion Drafting a comprehensive and enforceable Terms of Use is not just about legal compliance; it’s about building a trustworthy and secure platform for your users. By clearly defining the terms of engagement, protecting privacy, and setting forth rights and responsibilities, you can foster a positive user experience while safeguarding your business against potential legal pitfalls. Learning from the mistakes of others can guide you in avoiding similar missteps, ensuring your ToU stands as a testament to your commitment to fairness, transparency, and legal integrity. About the author: This article was written by Edwin Lee, Corporate Partner – law firm in Kuala Lumpur, Malaysia. The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.

On 15 August 2022, the Ministry of Human Resources issued and gazetted the Employment (Amendment of First Schedule) Order 2022 (“Order”) which will come into effect on 1st September 2022. Please note that this Order is only applicable to the Peninsular Malaysia. This Order removes the salary cap of those who are entitled to the benefits and protections under the current Employment Act 1955 (the “EA”). For more details regarding the series of amendments made to the EA, you may refer to our previous articles here:  The New Employment Law Amendments: Empowering Employees The New Employment Law Amendments: What Have Been Missed Out? [Part 1] The New Employment Law Amendments: What Have Been Missed Out? [Part 2] Previously, the common rights and benefits provided in the EA such as the overtime payment, extra payment for working on public holidays, minimum notice period of termination, annual leave, sick leave, hospitalization leave, maternity and paternity leave, public holiday, etc only applied to employees earning a monthly salary of RM 2,000.00 and below. For employees earning more than RM 2,000.00 per month, their rights and benefits will be governed by their employment contracts. If the rights and benefits stipulated under the employment contracts are less favourable than the EA, the employees would still be bound by the terms of the employment contract. With the removal of the salary cap of RM 2,000.00 from Schedule 1 of the EA, the EA will now apply to ALL EMPLOYEES. This means that employees will now be entitled to the same rights, protections and benefits under the EA regardless of their monthly salaries, industries and nature of work. In other words, if the employment contract has provisions that are less favourable than the EA, the EA will prevail over the employment contract. Having said the above, certain exceptions apply. The Order states that employees earning RM 4,000.00 and above are not entitled to the following rights and benefits (the “Inapplicable Provisions”): Section 60(3) Payment for work done on a rest day Section 60A(3) Overtime payment Section 60C(2A) Allowance during shift work Section 60D(3), (4) Payment for work done during public holiday Section 60J Termination, lay-off and retirement benefits For illustration, an employee earning RM 3,000 per month will now be entitled to overtime payment calculated in accordance with the EA if the employee is required to work beyond 45 hours per week. On the other hand, an employee who is required to work beyond 45 hours per week but is earning RM 5,000 per month will not be entitled to overtime payment since Section 60A(3) is inapplicable to him. Both employees, however, will have the right to apply to the employers for a flexible working arrangement under Section 60P since it falls out of the Inapplicable Provisions.  With the introduction of this Order and less than a month from its effective date, we believe it is a critical moment for employers to relook and modify their employment contracts to ensure the contracts are in conformity with the latest employment law. If your business may be impacted by the above changes, we highly encourage you to conduct a review of the terms of employment for ALL your employees as soon as possible to ensure that the terms are consistent with the provisions of the EA. ADDITIONAL NOTES: Section Description Quantum s. 60A(3) Overtime payment on a normal day 1.5x HRP for overtime after 8 hours of work s. 60(3) Payment and Overtime payment on a rest day [for employee being employed on a monthly or weekly rate of pay] 0.5x ORP for the first 4 hours of work 1.0x ORP for the subsequent 4 hours of work 2.0x HRP for overtime after 8 hours of work s. 60D(3) and (4) Payment and Overtime payment on a public holiday 2.0x ORP for normal 8 hours of work 3.0x HRP for overtime after 8 hours of work s. 60C(2A) Entitlement of allowance during shift day To be decided by employer based on regulations made by the Minister s. 60J Termination, lay-off and retirement benefits   10, 15 or 20 days for each year of completed service based on the employee’s year of service Note: ORP (ordinary rate of pay) = wages/26 days HRP (hourly rate of pay) = ORP/normal working hour *The above is inapplicable to employees earning more than RM 4,000.00 per month   For calculation of overtime for employees being employed on a monthly rate of pay Ordinary Rate of Pay – Monthly Rate of Pay Ordinary Rate of Pay                Monthly Rate of Pay Per Day                            =      __________________                                                               26 For calculation of overtime for employees being employed on a weekly rate of pay Ordinary Rate of Pay – Weekly Rate of Pay Ordinary Rate of Pay               Weekly Rate of Pay Per Day                           =   __________________                                                              6   ***** About the author: This article was written by Edwin Lee Yong Cieh, Partner, Neoh Jia Shern, Corporate Associate and Wong Shen Ming, Trainee Lawyer – law firm in Kuala Lumpur, Malaysia.   The view expressed in this article is intended to provide a general guide to the subject matter and does not constitute professional legal advice. You are advised to seek proper legal advice for your specific situation.