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The New Employment Law applies to EVERYONE!

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.

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