A Simple Guide for Employers Under the Employment Act 1955
Understanding and complying with the Employment Act 1955 is critical for all employers operating in Malaysia. Whether you are managing a large corporation or a small business, failure to comply with Employment Act 1955 may result in legal consequences, financial penalties and reputational damage. The Employment Act 1955 outlines the key statutory obligations employers must observe to ensure lawful and fair employment practices.
1. Introduction to the Employment Act 1955
The Employment Act 1955 is Malaysia’s primary labour law that governs employment relationships. It outlines minimum standards employers must observe in terms of wages, working conditions, leave entitlements, termination procedures, and more.
Who is covered?
Effective 1 January 2023, the scope of the Act was significantly broadened:
- All employees regardless of salary are entitled to the fundamental protections.
- However, certain provisions do not apply to employees earning more than RM4,000.00 per month, particularly in areas like overtime and termination benefits.
2. New Minimum Wages Effective 2025
From 1 August 2025, the minimum wages of RM1,700.00 will apply regardless of the number of employees.
3. Working Hours and Overtime
Section 60A(1) of the Act clearly limits the employees’ normal working time to:
- 8 hours per day, and
- Maximum 45 hours per week.
and, employees are also entitled to at least one rest day per week.
If an employee works less than 8 hours on one or more days of the week, the employer may distribute the remaining hours across the other working days.
However:
The daily working hours must not exceed 9 hours.
Total weekly hours must still not exceed 45 hours.
What if the employee work overtime?
The employee shall be entitle to overtime pay as per the rate stated below:
| EA 1955 | Overtime | Rate |
|---|---|---|
| 60A(3)(a) | Work done on Normal Working Day in excess of normal working hours | Hourly Rate of Pay x 1.5 |
| 60(3)(a)(i) | Work done on Rest Day – less than half day within normal working hours | Ordinary Rate of Pay x 0.5 |
| 60(3)(a)(ii) | Work done on Rest Day – more than half day but does not exceed normal working hours | Ordinary Rate of Pay x 1.0 |
| 60(3)(c) | Work done on Rest Day in excess of normal working hours | Hourly Rate of Pay x 2.0 |
| 60D(3)(a)(i) | Work done during Public Holiday within normal working hours | Ordinary Rate of Pay x 2.0 |
| 60D(3)(aa) | Work done during Public Holiday in excess of normal working hours | Hourly Rate of Pay x 3.0 |
Important Exception: This right to overtime pay does not apply to employees earning more than RM4,000.00/month.
4. Annual Leave Entitlement
Section 60E of the Act – All employees are entitled to paid annual leave, based on the duration of their service:
| Years of Service | Number of Days |
|---|---|
| Less than 2 years | 8 days |
| 2 to 5 years | 12 days |
| More than 5 years | 16 days |
If the employee has not completed twelve months of continuous service with you, then his entitlement of paid annual leave shall be in direct proportional to the number of completed months of service. In other words, it is on earned leave basis.
5. Sick Leave Entitlement
Section 60F of the Act – Employees are entitled to paid sick leave, provided it is certified by a registered medical practitioner or medical officer. The entitlement depends on the length of continuous service with the same employer:
| Years of Service | Sick Leave (per year) |
|---|---|
| Less than 2 years | 14 days |
| 2 to 5 years | 18 days |
| More than 5 years | 22 days |
In addition, employees may be entitled to hospitalisation leave, up to 60 days per year.
6. Maternity Leave
Effective from 1 January 2023, the maternity leave has been increased from 60 consecutive days to 98 consecutive days through the Employment (Amendment) Act 2022.
A female employee may commence her maternity leave:
not earlier than 30 days before confinement, or
not later than the day immediately following her confinement.
Pursuant to Section 37(2)(a) of the Employment Act 1955, a female employee is entitled to receive maternity allowance if:
she has been employed by the employer for a period of, or periods amounting in the aggregate to, not less than 90 days during the 9 months immediately before her confinement; and
she has been employed by the employer at any time in the four months immediately before her confinement.
Always remember! It is illegal to terminate a pregnant female employee unless she committed wilful breach of a condition of the contract of service, misconduct or business closure. It is also an offence to terminate a female employee who is on maternity leave unless the termination is due to business closure.
7. Paternity Leave
Pursuant to Section 60FA of the Employment Act 1955, married male employees are entitled to a paid paternity leave for 7 consecutive days provided that:
he has been employed by the same employer at least 12 months immediately before the commencement of such paternity leave
he has notified his employer of the pregnancy of his spouse at least thirty days from the expect confinement or as early as possible after birth.
Note: The paternity leave is restricted to 5 confinements irrespective of the number of spouses.
8. Non-Compliance is an Offence
Section 100 of the Act provides that employers who fail to comply with the provisions in relation to:
- Rest days
- Overtime pay
- Public holidays
- Annual leave
- Sick leave
…are committing an offence under the Employment Act 1955 and a fine may be imposed.
8. How does an employee make an unfair dismissal claim against the employer?
The employee has to file the claim/complaint with the Industrial Relations Department within 60 days from the date of dismissal.
Conclusion: Stay Informed, Stay Compliant
The Employment Act 1955 is not merely a set of guidelines—it is enforceable law. Employers must adopt proactive HR practices, keep updated with legislative changes, and ensure internal policies reflect statutory requirements.
Although having an employment handbook is not a statutory requirement for operating a company, it is good practice to have one that clearly outlines the company’s policies and compliance with the employment requirements in Malaysia.
Compliance not only mitigates legal risk but also builds a trustworthy and sustainable workplace culture that attracts and retains talent.
Need Help?
If you are unsure whether your current practices comply with the latest employment laws, we are here to help.
Email us at: admin@bcc.my
Call us at: 03-6416 0102
Written by: Legal Associate, Jessie Kwong
Disclaimer: This article is provided for general informational purposes only and does not constitute legal advice. For legal assistance tailored to your specific situation, please contact us.