Employment Contract in Malaysia

What are the key elements included in an employment contract?

An employment contract in Malaysia typically encompasses various critical aspects, such as job roles, responsibilities, salary structure, provisions for leave entitlements, and the procedural framework for employment termination. 

Moreover, employers should ensure registration with the Employees Provident Fund (EPF) and Social Security Organisation (SOCSO), reinforcing the importance of comprehensive and compliant employment contracts.

Check out our templates for employment contracts in Malaysia here, or engage our corporate law firm to prepare them for you.

What is the minimum salary stipulated in the Malaysia 2023 Labour Law?

The recent adjustment in the minimum wage, from RM1,200 to RM1,500 per month starting on July 1, 2023, has resulted in uniform minimum wage standards across Malaysia. All employers with fewer than five employees, excluding those engaged in professional activities, are classified under the Malaysia Standard Classification of Occupations (MASCO)  by the Ministry of Human Resources.

What is the new work policy in Malaysia?

Starting on January 1 January 2023, there is a reduction in the maximum weekly working hours to 45 for all employees covered by the Employment Act 1955, regardless of whether they work on non-shift or shift schedules. 

The minimum working hours in Malaysia are eight hours a day. In the event that an employee is mandated to work beyond regular hours on a typical working day, they are entitled to receive compensation at a rate of 1.5 times their hourly wage.

Can an employment contract be modified or updated?

Yes, employment contracts can be modified or updated to reflect changes in employment terms, provided both parties agree and follow legal procedures.

Does the Employment Contract have to be in writing?

An oral agreement between an employer and an employee holds legal recognition and enforceability between the involved parties. 

Nevertheless, it is recommended that an employment arrangement be documented in writing and duly signed by both parties. This indicates acknowledging and accepting the employment relationship’s terms and conditions.

What happens if there is a dispute related to the employment contract?

In case of disputes, our legal team can provide guidance and support in resolution, ensuring that your rights are protected.

How long does it take to draft a customised employment contract?

The timeframe for drafting an employment contract can vary depending on the complexity and specific requirements of the contract. We aim for efficiency while ensuring legal accuracy.

What is the difference between an employment contract and an employment agreement?

The difference between an employment contract and an employment agreement lies in their legal enforceability. 

An agreement refers to a mutual understanding between parties, while a contract is a legally binding agreement enforceable under the law. Specifically, a contract involves an offer, acceptance, consideration, legality, and capacity. The key distinction is that a contract is legally binding, with clear penalties for violation, whereas an agreement may not be binding.

The terms “employment contract” and “employment agreement” are commonly used and understood in the employment context. However, if you want to emphasis the legally binding nature of the arrangement, “employment contract” may be more precise.

Using “employment agreement” might convey a slightly broader sense, including non-legally binding understandings. In legal and formal contexts, the term “employment contract” is often preferred for clarity and specificity.