Labour Laws of Malaysia

Amendments To Labour Laws

 The following amendments came into effect in March 2012.  Please note that the contents of this page has yet to include these change 

  1.    Definition of employees – changed to up to RM2000 
  2. .       Definition of Part time employee – now becomes:  “part-time employee” means a person included in the First Schedule whose average hou of work per week as agreed between him and his employer are more than thirty per centum but do not exceed seventy per centum of the normal hours of work per week of a full-time employee employed in a similar capacity in the same enterprise”
  3.   Maternity leave – 28 weeks reduced to22 weeks
  4. Wage period – payment of wages not later than 7 days changed to not later than the next wage period
  5.  Employment of Foreign workers and domestic servants – On their employment or termination, the employer must inform Director General within 30 days

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There are over 300 questions and answers here on various labor law issues.  These questions and answers used to be on my Sow & Harvest Consulting Services website at the late Geocities site, until it passed away some years ago, and deleted my website and contents without notice.  Blessedly, I just found my backup copy this morning.

I reckon this page will be useful for employers, employees and also up and coming HR executives.
I used to provide immediate email response to inquiries as a service. I guess I could still do it now. Please direct your email to : 
( Copy this address over to email manually please )
 [ My apologies that the address for some reason had not receiving incoming mails ]

But I wonder how this kind of thing works on a blog page.  So here goes:

1.      What is the Employment Act, 1955?

It is the Labor Law in Malaysia - that's what!!! Actually it is just one of the many sets of "labor laws" found in this country. Do you know that an average Human Resource Practitioner in this country may need to know about more than 10 sets of laws which affect workers one way or other?

Well then - the Employment Act 1955 is that one set of labor laws which govern many aspects of the contract of service between an employer and an employee. This piece of legislation, among other things:-

·        defines a contract of service, and manner of termination,
·        sets the minimum terms and conditions of employment,
·        prescribes when an employer may take action against an employee or when the employee may take action against the employer,
·        regulates payment of wages and deductions
·        sets out the mechanisms for enforcement of the provisions

2.      Which Employees are covered by the Employment Act, 1955 and how are they covered?

There are different categories and extent of protection, such as :-

2.1.   Full Protection is given to:

·       Any employee (whatever his job title or position, whether a citizen, permanent resident or foreign worker, with the exception of domestic servant) whose wages does not exceed RM1500 per month is fully covered by the Employment Act, or
·        Any employee who is engaged in manual labour continues to be fully covered by the Act even if his wages exceed RM1500;
·         Any employee who is engaged in operating (driver or attendant of ) any mechanically propelled vehicle operated for transport of passengers or goods (lorries, buses, taxi) for reward or for commercial purpose is also fuly covered irrespective of the amount of wages earned;
·        the direct supervisor of any manual labour also enjoys full protect regardles of the amount of wages earned;
·        any employee who is employed in any vessel (ship and boat ) registered  in Malaysia as long as he is not a duly certified officer is also given full protection regardless of amount of wages earned

   (See First Schedule of the Employment Act)

2.2.   Partial Protection

·         Domestic Servant, regardless of amount of wages earned are NOT covered by -
o       Section 12 - entitlement to minimum notice for termination of service
o       Section 14 - domestic inquiry and disciplinary action
o       Section 16 - entitlement to minimum days of work if employed in an industrial undertaking
o       Section 64 - of being counted within the prescribed minimum of 5 person persons
o       Part IX - entitlement to maternity benefits
o       Part XII - entitlement to minimum benefits and payments such as annual leave, working hours, rest day, overtime, public holiday, sick leave, medical treatment, etc., etc.
o   Part XIIA - entitlement to Termination and Lay-off Benefits

(See First Schedule of the Employment Act)

·        Any employee who earns more than RM1500 but who is not included for continuing protection is not entitled to any benefits provided by the Employment Act, 1955 ((See First Schedule of the Employment Act) but by virtue of Section 69B, he is entitled to seek the intervention of the Labour Office to enforce the terms and conditions of employment in accordance to the Contract of Service he negotiated with his employer.

3.      Who is Not Covered Under This Act??

As said above a general rule, most employees who earn more than RM1500 and above are not covered by the provisions for minimum benefits, payments and so on.  For those who are paid not more than RM5000, the law has been amended to provide them with assistance by the Labour Office to enforce their contract of service.

Those who are not protected at all would be those earning more than RM5000.

4.      What Does Protection Offer To an Employee?

The Employment Act provides many forms of protection.  Among the most significant would be :

·        Automatic entitlement to minimum benefits provided by the Act or existing benefits, whichever is more favorable
·        Minimum notice period for termination or wages in lieu of notice
·        Minimum days of work for certain industry
·        Maternity benefits
·        Leave, holiday, rest day and payments
·        Termination and lay-off benefits
·        Right to seek intervention of the Labour Office for failure of employer to uphold agreed terms of employment .

5.      What About Those Employees Who Are Not Covered By The Act?

Innnnteresting question but not so difficult to answer.

a.       When it comes to determining the terms and conditions of employment, there are no statutory minimum for any benefit to speak of.  It is for the employee to negotiate for his own terms and conditions of employment subject to his bargaining position and the existing practices of the prospective employer.

b.      Once the terms and conditions are agreed upon, they become a part of the Contract of Service, which is enforceable like any other contract.

c.       If there is a breach of contract of service by the employer, then an employee who is not protected will have to seek remedy through civil court proceedings, whereas those who are protect can easily obtain the assistance of labour officer which is free of charge and much speedier

6.       Is there any other recourse if an unprotected employee does not want to seek recourse through civil court proceedings?

It depends on the issue.  Certain things there may be other recourse, for others there may be none.  Let's look at some examples -

Example 1
Say an employer agrees to pay (or has been paying) a person a fixed allowance of RM500.  Then cost cutting reasons, he decides to remove this allowance against the objection of the employee who is not covered by the Act.  In this case, the employee can take up a case of "constructive dismissal" against the employer if the employer remains stubborn and insist on unilaterally changing the terms of employment.

Example 2
An unprotected employee resigns from his job by proper means and giving his employer proper notice.  Despite that, the employer unreasonably refuses to pay the employee the final balance of his salary when the termination takes place.  In this case, the employee has no other recourse but to sue for his money.

7.      Are Part-Time Workers Protected By This Act?
Yes, they are and always have been.  Even before the present amendments were made, the definition of "employee" was such that part-timers were never specifically excluded and so were protected like every other employee.  The amendment now merely makes it very clear that they come within the ambit of the Employment Act, 1955 and subject to the conditions set in the First Schedule of the Act.

The amendment also  provides for the Minister of HR to make regulations to govern the terms and conditions of employment of service of a part-time employee (something which he has yet to do).

The general assumption however, seems to be that since they have been defined as employees whose average work hours do not exceed 70% of that performed by regular employees, therefore the benefits should be apportioned to that ratio of work hours against that of regular employees - something which I may not totally agree with at this point.  It is too simplistic an assumption.  Anyone proposing to adopt this approach is advised to think it thrice over, especially in view that the Minister has not made any regulations yet.  By the time the Minister makes his regulations, you may find what you have given does not measure up to the levels set by the Minister - which of course is a minor matter which you can rectify from then on.  On the other hand you may find yourself having given more than what is set, and of course you cannot then reduce what you have already given, can you?  Then again, it does not that it matter if you can afford that little bit extra, does it?


1.  What is a Contract Of Service (COS)?

The Contract of Service is also known as the Contract of Employment.

When one person A agrees to work for another person B, and B similarly agrees to accept A as his employee, a contract of employment is considered to have been formed.

Such an agreement could have been made orally, in writing or even impliedly. Specifically the Employment Act includes an apprenticeship contract as a COS.

So one must always be careful of the provision that contracts made orally or impliedly - because there always exist the possibilities of:

·contracts made unwittingly
·terms being offered and forgotten, or
·terms being ambiguous

That can spell lots of trouble and headaches when arguments arise. To avoid unnecessary headaches, put all contracts of service in writing, and put the terms in writing as well. In that connection, a letter of appointment constitutes a contract of employment.

{ Where to Look : Section 2 "contract of service }

2.   Are there any situations where the COS must be in writing?

Sure. If you employ a person to carry out a specific job which is likely to take more than a month to complete, or for a fixed period of time (example temporary or seasonal workers), then the law specifies that the contract must be in writing. However, that does not mean that for these types of employees the contract could not have arisen orally, or impliedly.

{ Where to Look : Section 10(1) }

3.   What if an employee starts work without signing the letter of offer? 

The contract is still there. The minute the employee starts work, he has accepted the contract (except that the terms of the contract are not expressly stipulated.  Now that creates room for some nitty gritty bickering if either side gets bitchy.  Fortunately such negative behavior does not always happen, or does it?)   Signing it is a matter of formality.

4.   Is a Collective Agreement a contract of service?

A collective agreement is a contract on the terms and conditions of employment signed between the employer and the trade union.  The terms are applicable to members of the union working in the company.

 It is not a Contract of Service per se between employer and an employee, but rather serves as the terms of employment relating to that employee's contract of service.

5.   What happens when certain terms are left silent in the COS?

Well, that does happen and when it does, there are certain recourse such as:-

·to  revert to the appropriate provisions of the Employment Act.
·to  look for customary practices and implied conditions
·to try proving or disproving claims of oral promises.

Messy, messy.

6.   How does the law ensure that the minimum provision on the benefits prescribed?

The law specifically states that any term of employment which is less favorable to the employee that those provided by the law "shall be void and of no effect" and the provisions of the Act or the provisions made under subsidiary legislation "shall be substituted therefor".

Of the law also specifically provide that it does not prevent the employer and the employee from agreeing to terms which are more favorable to the employee than what it has been provided for.

{ Where to Look : Section 7 & 7A }

7.   Under the law, what is the minimum notice period for termination of service?

First of all, the Employment Act allows for the employer and employee to agree on the notice period between themselves and stipulates that :-

·any notice period agreed upon shall be the same for employer and the employee
·any provision for such notice shall be made in writing.

Then it goes on to say that if there is no such provision in writing, then the notice period SHALL NOT BE LESS THAN:-

·4 weeks' notice if the employee has been employed for less than 2 years
·6 weeks' notice if the employee has served for 2 years and up to less than 5 years
·8 weeks if the employee has served 5 years or more.

This answers the common question why is it that the law provides for one set of notice of period and yet the one in the appointment letter provides for a different set. It also answers the question as to what happens if the notice period is not stated.

{ Where to Look : Section 12(2) }

8.   Under what circumstance does the minimum notice period by law become compulsory?

In normal situations, we tend to see the notice period coming into play when an employee resigns from his job. That being so, the notice period in the appointment letter is observed.

However, an employer may also terminate the services of an employee for several reasons. The requirement for notice period may differ according to the grounds for the termination. Where the grounds for termination is related to retrenchment whether it is due to closure of business, shrinkage of operations, restructuring or reorganization, change of ownership or that the employee refuses to accept a transfer to a different location because he is not contractually obliged to accept such an order, then the law requires that the notice period is not less than it has provided for.

This means that once retrenchment is being used as a ground for termination by the employer, the employer had better do some comparison of the requirement for notice period , employee by employee. If in any specific case, the notice in the COS is more beneficial to the employee, then that notice period is to be observed. If in the case of any employee it is found that the notice period in the COS is less beneficial to the employee, then the provision of the Labour Laws is to be observed.

{ Where to Look : Section 12(2) }

9.   What happens when a person fails to provide any notice for terminations?

Then the one that fails to provide the notice period has to pay to the other indemnity in lieu of notice. The rate of indemnity is equal to one day's wage for each day of notice short of the required period.

Incidentally, many organizations are using the formula of one month's wages divided by 26 days for computing a day's wages for the purpose of determining the indemnity to be paid. I got another surprise for them. The denominator to be used is the actual number of days in the month in which the notice is served!
 The laws specifically provide for the 26 days denominator to be used only in respect of Parts IX and XII!

10. Is there any situation where the notice period need not be given?

Sure there are. Notice need not be given in the following circumstances: -

·  if the party that is supposed to receive the notice agrees to waive it. For example, an employee is required to give 1 month's notice before resigning but he needs to go off earlier. So he applies to the employer to waive the notice period and the employer agrees to it. See - Simple, isn't it?

{ Where to Look : Section 12(2) }

·   in the case of the employer dismissing the employee for misconduct

{ Where to Look : Section 14(1)(a) }

·   in situations where the termination is caused by willful breach of contract of service by either party, such as :

·    the employer terminating the employee for being absent from work for more than 48 hours without prior permission and without good reasons, or without attempting to inform the employer of the reasons { Section 15(2) }; or

·   the employee terminating the contract of service because the employer fails to pay wages in accordance to the requirements of the law (e.g. not paying within 7 days of the closing of the pay period) {Section 15 (1)}; or

·  the employee terminating the contract of service because of immediate threat to his or his family's safety (violence or disease) which arise out the employer compelling him to face situations which he is contracted to face {Section 14(3)}.

In case you have not noticed, the catchword here of course, is WILFUL. You find out whatever that means in realize.

{ Where to Look : Section 14(2)(a) }

11. What is the effect of notice for termination which is given orally?

Ahaa! Never allow the practice of serving or receiving notice of termination by word of mouth. The Labour Laws specifically states that "such notice SHALL be written….."

Besides, it is bad management practice anyway.

Bear in mind too that when it comes to the crunch, since the law specifically provided for notice to be written form, it means that the oral notice becomes invalid and is treated as not having been given in the first place.

{ Where to Look : Section 14(2)(a) }

12. How can an employer terminate an employee?

Terminate is really a big word. When we say a contract is terminated, it is so general that we disregard the manner in, and the grounds under which the terminated is effected. In actual practice, the grounds for termination and the manner of termination becomes more important. o, it will do well to do some work on your own in understanding the following common grounds for termination exercised by the employer:-

i)         dismissal due to misconduct, non-performance, inefficiency, incompetence

ii)       retrenchment, where employee is terminated because of reasons connected to the health of the organization or restructuring of its operations, etc. and not because the employee has done anything wrong
iii)      termination simpliciter - or contractual termination, meaning the termination occurred    naturally upon the completion of a specific task for which an employee is employed to perform, or completion of a specified period of service
iv)      retirement - where the employee leaves service upon attaining a specified age
v)        breach of contract - where the contract is terminated because an employee fails to honor the terms of his employment
vi)      frustration of contract - where the employee is unable or is prevented to honoring his contract of service due to specific situations which may be beyond the employee's control.

Actually in respect of items (iii), (iv) and (iv) the contract expires, not that the employer actually terminates it.

{ Where to Look : Attend Training Programs on the subject, read up Industrial Court Reports, Make mistakes and learn the hard way }

13. What can an employer do to the employee who is absent for more than 2 consecutive days?

Employees are considered to be contractually obligated to attend at work as scheduled by the employer. Of course there will be times when the employee is unable to attend at work. But it is for the employee to apply for leave due to him and obtain approval before he goes off. He has no right to take off as and when he likes. That's the law.

On the other hand, he may have good reasons for not being able to obtain permission in advance. The law is reasonable and accepts this fact. And therefore the law provides some leeway in Section 15(2) that if he is to be absent for more than 48 hours without prior permission, he better have a "reasonable excuse" for it. And not only that, he better make sure that he has attempted to inform his employer of those "reasonable excuse" "prior to or at the earliest opportunity during such absence".

If he fails to do so, he "shall be deemed to have broken his contract of service with the employer".

However, employers must never take the reasoning that just because an employee has been absent for 48 hours he has therefore automatically terminated himself. For that matter, the employer should also not automatically terminate him either.

a)       if the employee continues to be absent into the 3 day and beyond, the employer has an option of immediately writing to him to demand he return and show cause and then, a) if he returns and wants to continue working, check out his reasons, make a decision whether it is reasonable or not reasonable. If the excuse is not reasonable, then exercise the right to consider that he has breached the contract of service and is therefore terminated. Do check his attendance and track record before terminating him though.

b)       if he does not return, write another letter to him informing him that in view he has failed to respond, you consider he has absconded from work. The company therefore considers he has terminated his service without giving prior notice of termination, and will proceed to take action against him to recover indemnity in lieu of notice through the Labour Office under Section 69 of the Employment Act. And the employer should proceed to do so.

Don't ever believe those people who tell you that the employer has an automatic right to consider the employee terminated upon the magic 48 hours time limit being breached.

14. How can an employee terminate the COS?

As many as there are for the employer to do the same. Resignation is always the main cause of employee initialed termination. Employees can also terminate the COS on grounds of breach of contract by the employer.

Employees do abscond in which case they commit the breach of contract. It is then left to the employer to either take action to terminate the contract, or to handle it in such a way to reflect the true situation, that is, the employee resigned without notice and therefore becomes liable to pay indemnity to the employer.

How about being dead? Actually I would group being dead as coming under frustration of contract. It is not like the employee does not want to come back, right? He just can't. So the contract just lapses.

{ Where to Look : Attend Training Programs on the subject, read up Industrial Court Reports}

15. Is the employer's right to terminate unfettered?

Malaysian laws recognize the right of the employer to dismiss an employee, or to terminate for other cause. But what is not acceptable is the abuse of that right where the employer carries out dismissal in an unjust and unfair manner or for camouflaged reasons.

To provide check and balance, aggrieved employees have several channels to obtain remedy such as through the Labour Office or through the Industrial Court machinery, or even through the Civil Courts.

Therefore, employers must always be prepared to defend their actions in most cases where their decisions are challenged, although in specific instances the employees who raise the challenge carry the onus to prove the charges.

{ Where to Look : Attend Training Programs on the subject, read up Industrial Court Reports}

16. What is the law governing probationers?

Laws on Probation?! What laws? There are no such laws. But just treat them as any other employees except that they are under the employer's observation on their suitability to be regular employees.

And forget that notion about probationers not being entitled to sick leave and stuff like that without properly checking out the facts first. Never forget that probationers are not differentiated under the law. They continue to be entitled to the minimum benefits stipulated by the Employment Act, 1955. If you want to do any differentiating, do it on those parts of the benefits which you have provided beyond the minimum provisions of the Employment Act, 1955.

{ Where to Look : Read between the lines of the Employment Act, 1955 }

17. How long can probation periods be?

The probation period can be as long as the employer thinks he can get away with, really. Come to think of it, we have heard of one year probation in the government service, haven't we? But that's another issue.

In the private sector which is governed by the Employment Act, 1955 certain standard practices have developed over the years. So, probation period of 3 months have become more or less the norm for non-executive positions while 6 months probation is common for executive and managerial positions.

But as is said earlier, there is no law governing it. If you want to be different you can waive notice period or set it as 10 years if anyone wants to join you. You are not breaking any laws.

{ Where to Look : Read between the lines of the Employment Act, 1955 }

18.How many times can an employer extend the probation period of an employee?

Again, as many times as he wants as long as he feels he is dissatisfied with employee's performance, but do not want to terminate the contract; and that employee continues to like working for him under probation for the rest of his life. But of course in this matter, the employer must first ensure that he has not unwittingly signed away that right to extend probation in any way by the way he has described probation and extension of probation in the letter of appointment.

{ Where to Look : Read between the lines of the Employment Act, 1955 }

19. Can probationers be terminated without notice or reasons being given?

Part One first. It depends on the terms in the COS with that employee. If the COS provides for a person under probation to be terminated without notice, then it can be done. But most letters of appointment would state that the notice period while under probation is 24 hours, both ways. But there is increasing incidence of the notice period now being set at 2 weeks - thanks to the tight labour market situation.

As for Part Two of the question. Without reasons??? An employer must be very old-fashioned and out-of-date if he continues to put in the condition that probationers can be "terminated without any reasons being provided" in the letter of appointment.

The practice of Industrial Relations in the country has long set the standards that an employer is only allowed to terminate a probationer on grounds related to his performance of the job or his conduct which adversely affects the job and or the interests of the company. That means that employers are required to provide evidence to support their decision to terminate the services of a probationer when challenged.

For this reason, it is always advisable that the employer takes the trouble to maintain written records of non-performance by any probationer during the period of probation and the communications with him about the matter. By doing so the poor fellow cannot be surprised at the end of the period with the shock that the employer has actually not been happy with him all along. If he continues to be shocked despite those communications, then at least the employer won't be shocked by his inability to find supporting evidence.

{ Where to Look : Read between the lines of the Employment Act, 1955 }

20. What should an employer do in the following situation?

"A new employee starts work without signing the COS, which specifies a notice period of 2 weeks if he wishes terminate the COS while under probation. After the 4th day he absents himself.  On the 10th day, he comes back saying he is no longer interested in continuing with the job and demands that he be paid for the 4 days of work done."

Nothing like a case study here to understand applications better, right?

Big deal if he comes demanding. Work out his pay slip for him for the 4 days of work, compute in there the deductions for SOCSO and EPF, and top the deductions with a claim against him for indemnity in lieu of notice of termination. The balance should show a negative figure. Otherwise something is wrong with your calculations.

So he ends up paying the employer instead. If he doesn't want to pay, then a case can be taken up against him under Section 69 of the Employment Act, 1955 at the Labour Office.

The reason it can still be done is that the minute he starts work on the appointed day, he has accepted the terms of employment. Signing the COS is a mere formality which makes things neat and tidy. Of course that means that if it is not signed, the employer has only to prove that he has received the letter with the terms in it or that he knows about it when he started work.

                                    WAGES AND WAGE PERIODS                               

1. What is the permissible wage period?
Wage period shall not exceed 1 month.  In the case where no wage period is stated, the law deems it to be 1 month.

{ Where to Look : Section 18) }

2. What is the latest time for wages to be paid?
If you are referring to the regular wagers due to an employee who is still in service, then they are to be paid not later than the 7th day after the closing of the pay period. If for any reason an employer wishes to pay later than the 7th day, then he has to obtain special approval by the Director-General of Labour first.

But if you are referring to Wages due to an employee whose services has terminated, then check out the next question below.

{ Where to Look : Section 19) }

3. What if the employer habitually pay wages later than stipulated above?
If an employer fails to pay within the 7 day period once in a long while for reasons beyond his control, I would think that people would understand and therefore won't make too much noise about it.

But if it is habitual, then the employer opens himself to prosecution in court by the Labour Office if employees were to lodge a complaint against him. If found guilty then he will be fined.

He may also open himself to accusations by his employees that he has breached the contract of service as provided by Section 15(1). In which case, the employees can terminate the contract without notice accordingly and proceed to claim for termination and lay-off benefits.

4.   An employee resigns by giving the required and proper notice, and serves out the notice period.  On his last day of work, his employer finds it inconvenient to pay him, and asks him to return at the end of the month to collect the balance of  his wages.  Is that in order?
No! No! and No!. That is definitely not in order. The law is very specific that if an employee resigns with proper notice, or if he chooses to indemnify the employer for the any shortfall in the notice period, then he is to be paid the balance of his wages by his last day of service.

In fact, the same provision applies for following situations where the contract of service is terminated,

·        due to the contractual expiry of the contract (such as a fixed period contract of service)
·        the employee completes a specific job or task for which he has been employed,
·        due to retrenchment or termination due to changes in the organisation ownership, restructuring,
·        the employee is dismissed without notice after having been found guilty of a serious misconduct,
·        the employee is terminated due to a breach of contract of service, and if
·        the employee resigns without notice or sufficient notice by paying indemnity in lieu of notice to the employer.

Forget about giving excuses like there is not enough time to prepare the last salary, documentation is not complete and so on. They don't hold water.
{ Where to Look : Sections 20 & 21(1) }

5. When should an employee be paid if he resigns without giving notice and without paying indemnity in lieu of notice?

In this case, the employer can tell him to come back within the next 3 days to collect his final wages.

This 3 day grace period also applies if an employee terminates the contract of service on the grounds that the employer has committed wilful breach of his contract of service, or has put him or his family in undue danger

{ Where to Look : Section 21(2) }

6.   When paying the final wages to an employee who has terminated his services, what about the monies that he may owe the company?
The employer is allowed to make such deductions as are lawful and provided for by laws such as EPF, Income Tax, SOCSO, indemnity in lieu of notice, and even overpayment of wages up to the last 3 months. But the employer cannot deduct any other amounts in respect of payments for such things as cost of uniform and company equipment not yet returned, bus fare, etc.

{ Where to Look : Section 20 & 21 }

7. How much money can an employer make to an employee as an advance of his wages?
Advances of wages is limited generally limited to not more than the amount the employee has earned in the preceding month, or the amount he is likely to earn in a month of work.

{ Where to Look : Section 22 }

8.   Is the employer allowed to provide a greater amount under any other circumstance?
The employer can provide more than 1 month's advance if it is for any of these purposes :

·        buy, build or renovate a house
·        buy land
·        buy livestock
·        buy car, motorcycle or bicycle.
·        to buy shares in the employer's business, where it is offered by the employer (August 1998 amendment)

For the purposes stated above, the employer does not need to apply for any permission from the Director-General of Labour.

If the employer intends to provide a greater amount of advance for other purposes, then he has to apply to the Director-General Of Labour for approval.

 { Where to Look : Section 22) }

9. What are lawful deductions which can taken directly off the the wages paid to an employee?
The employer is only allowed to make the following deductions from the wages to be paid to an employee without having to apply for any approval from the DG of Labour : -
·        subscription, entrance fees, loan installments, interest and other dues payable to registered trade union, co-operative thrift and loan society. There must be a request in writing by the employee before such deductions can be made
·        overpayment by employer in respect of mistake in the 3 months immediately preceding.
·        Indemnity in lieu of notice of termination (except where the employer terminates an employee due to absence from work for more than 2 consecutive days provided for under Section 15(2) and Section 13(2) )
·        recovery of advances made under Section 22 provided that such advances do not carry interest,
·        advances authorized by other written law (e.g. EPF, SOCSO, Income Tax)
·        recovery of advance made for the purpose of buying shares in the business of the employer

The employer is also allowed to make other deductions from the wages to be paid to an employee after having received prior approval approval from the DG of Labour. There is also a condition here that the DG can only grant an approval if the application is made at the written request of the employee.

If the employer alone makes an application, the DG has no power to grant an approval. These other deductions are: -

  • Payment into superannuation scheme, provident fund, welfare scheme, thrift, insurance schemes
  • Payments to a third party on behalf of employee
  • Repayment of advances made under Section 22 where interest is charged, as well as the interests payments
  • Payment for goods/shares of the business sold by the employer to the employee
  • Rental of accommodation (e.g. hostel), cost of services, food and meals provided by the employer at the request of the employee, or under the contract of service
  • Deductions made at the written request of the employee to pay to a registered co-operative society in respect of goods, foodstuff and provisions taken on credit. The deduction and repayment must also have the agreement of the co-operative shop.

{ Where to Look : Section 24 }

10. Is there a limit to the monthly deductions that an employer can make?

Under normal circumstances, deductions shall not exceed 50% of the employee's wages earned during the month.

However, under special circumstances, the 50% limit can be exceeded, such as:-

·        recovery of indemnity in lieu of notice
·        recovery of any monies owing to the employer by the employee from the final payment of wages upon the termination of contract of service

With approval of the DG of Labour for up to a further 25% in respect of repayment of housing loan.

{ Where to Look : Section 24(4) }

11. Is the employer allowed to pay wages by cheque?

The basic provision is that employees covered by the Employment Act, 1955 wages must be paid in legal tender. Any wage paid in non-legal tender form is considered illegal, null and void. Employees after receiving such payment can continue to take action to recover the wages.

However, it can be allowed when the employee agrees to it in writing.  An employee is not allowed however, to unreasonably without such agreement. 

If the employee decides to withdraw his consent, he can do so by giving the employer 4 week's notice and the employer cannot force him to accept the payment in cheque to his order.  Such consent, once given, also cannot unreasonably be withdrawn by the employee.

{ Where to Look : Section 25(1) & (2) }

12. How is it then that payment into bank accounts are so wide-spread?
As stated above, it can be done so long the employee provides his consent in writing. But of course, there are employers who take for granted that it is not necessary to obtain such written consent from the employee.

In fact the payment can also be made into the account of the employee in a registered finance company.

The account can be in the name of the employee or it may be a joint account between the employee and another person.

Remember that if the employee chooses to withdraw his consent, he can do so by giving 4 weeks notice. After that, the employer is compelled to pay him in legal tender.  The amendments of August 1998 however, has made it clear that an employee may not unreasonably withhold his consent for payment through such means, and similarly may not  withdraw his consent once it is given.

{ Where to Look : Section 25A(1) & (2)}

13. If an employee is unreasonable and demands to be paid by cash when everybody else is being paid by their bank accounts, isn't that very inconvenient for the employer?
Well, the law's the law. Remember that the laws were formulated at such a time when paying by bank and cheque wasn't so fashionable or acceptable. There weren't so many banks with their branches either in those days. However, it does look like the Employment Act, 1955 has not been keeping itself up to date, huh?

14.  Can interest be charged on advances made?
An employer may charge interest on advances only where the quantum of the loan exceeds one month's wages. This means that interest is likely to be chargeable on advances for purchase of house, car, livestock and so on, but not for festival advances which do not normally by practice exceed even 2 weeks.

Remember also that if the advance which is greater than one month's wage is intended for any other purpose than for buying house, car, livestock, etc., it can only be given after obtaining the approval from the DG of Labour.

{ Where to Look : Section 27 }

15. Can the employer reduce the salary of an employee?
No.  Not unless, the employee agrees to it, as in the case of business downturn where the employer is badly affected.  It is for the employer to convince the employer of his circumstances and hope that the employee understands that helping to contribute towards cost reduction, jobs can be preserved, or it is in the form of disciplinary action where the employee has been found guilty of a misconduct after a domestic enquiry.  It is a rarely exercised punishment as it can lead to other counter actions by the employee, unless such a punishment has been made known to the employee explicitly in his terms and conditions of employment.  As a punishment, it is an option best avoided unless the employer exercises it clearly to avoid otherwise having to dismiss the employee.

                             Restrictions on Employment of Women                             

1.   What are the restrictions placed on the employment of women?

 Sections 34 and 36 set the following restrictions:-
·        female workers in industrial undertaking (mainly manufacturing, construction, passenger and goods transportation), and
·        agricultural undertaking are not allowed to work between the hours of 10:00 p.m. until 5:00 a.m.
·        There is an added requirement that female workers must have at least 11 consecutive hours of rest ("free from such work") before starting work for the day.
(The above do not apply to other business undertakings such as commercial, educational, entertainment, etc.)
The law also does not allow female workers to be employed in any underground working.

2.   How then can factories operate 3 shifts with female workers?
That's because these factories are most likely to have applied for exemption through the Director General of Labour subject to certain conditions. You would likely find these among them : -
·         free transport is to be provided to and from the home to the work place
·         a certain amount to be paid as shift allowance
·         hours of work in each shift,
·         break hours,
·         rest hours
·         period of work before each shift change
These are pretty standard conditions, subject also to operating conditions as submitted by the employer during the application.

3.   Why are there female workers working in the underground restaurants at the Dataran Merdeka?
"Underground Working" is defined under Section 2. It is only meant to cover mining and excavating and extraction work underground, not commercial work.

                                            Rest Days                                                 

1.   What are rest days?
A week has 7 days - everybody knows this, of course. The labour laws require that an employer must allow an employee to have one whole day of rest in every week. That, is the rest day as termed by the law.

In the August 1998 amendments, power is now transferred from the Minister to the DG to approve an application by an employer to have his employees enjoy their monthly rest days once a month in a stretch of days.

Where to Look: Section 59(1)

2.   Must Sunday be reserved as the rest day?
Any day of the week can be declared as the rest day. It just so happens that most countries in the world have adopted Sunday as the rest day. Therefore these business houses close on Sunday and they must as well let employees have the same day off as their rest day.

Where to Look: Section 59(1) - Read Between The Lines

3. Do employees have a say on when the rest day should be?

No. By right the employee has no say at all. It is the employer who will decide which day it is for the employee to take off as his rest day. It would be a compromising employer who allows his employees to choose their own rest days - this is definitely a good employee relations approach, provided that business is not adversely affected.

Where to Look: Section 59(1) - Read Between The Lines

4. Must the rest day be on the same day in every week?

Let's put it this way. The law requires that the employer set the rest days and informs the employee accordingly before the commencement of the month. The days need not be the same day of every week. So it can be on Sunday this week, but Tuesday next week and so on.

But once the rest day is set for the month, the employer is not allowed to change the rest day for the employee. This is to prevent the employer from taking advantage of the employee by shifting his rest day around in order to prevent paying him rest day rates if he is required to work on his rest day.

Where to Look: Section 59(1) - Read Between The Lines

5. What is the method used for informing the employee of his rest day?
If the rest day is a common day, such as Sunday where the entire company closes for the day, a single permanent notice on the notice board will suffice.

If employees are given their rest days on different days of the week ( usually happens where business goes on throughout all 7 days of the week, e.g. hotels), employees are notified through the roster (or their work time-tables) for the next month, or when they are issued their clock-in cards for the next month.

Failure to inform the employee of his rest day is an offence against the law. Note also that the Roster mentioned need to be maintained for inspection for a period of up to 6 years.

Where to Look: Section 59(2)

6.   An employer is not allowed to change the employee's rest day.  What if the employee applies to have his rest day changed?

Same answer - No. The rest day is taboo. No changing means no changing, unless you are prepared to take the stand (risk) that as long as the employee initiated it, he would complain to the Labour Office. Or you may even want to take the chance that if the Labour Officer finds out, he will happen to be the nice fellow who says " Oh what the heck, the employee agreed - so we won't be so technical about enforcing the law". The choice is yours.

 Where to Look : Section 59(1) - Read Between the Lines

7.   Many businesses are on a 5-Day week schedule.  Which is the rest day if there are 2 days off in a week?
The law says "the last of such rest days shall be the rest day for the purposes of the Act".
There are, in fact, companies which operate on systems with more than 2 rest days.  If there are two days, then the 2nd day is recognized as the official rest day, and if there are 3 rest days, then it is the 3rd day and so on (Any employer giving 4 rest days????)

The non-rest days are commonly referred to as "off-days" to differentiate from the rest day, and to indicate that these are not governed by the law for matters relating to work on rest day, overtime sense.

Where to Look : Section 59(1)

8. Can an employee have his rest day replaced if he has sick leave on his rest day?

An employee on rest day is not entitled to sick. So there is no question of replacing the rest day.

Where to Look : Section 59(1)

9. Are there other situations where rest day does apply?
Yes. Rest days are not provided for during any period where an employee is on maternity leave, disablement leave under SOCSO or Workmen's Compensation.

Where to Look : Section 59(1)

10. The rest day means a period of 24 hours beginning at midnight for an non-shift worker. How about for a shift worker?
As a shift worker's time of starting (or ending work) changes according to the shift that he is in, the midnight starting point does not apply any more. In addition, the rest day is defined as a "continuous period of not less than 30 hours" which is free from work.

Where to Look : Section 59(1A)

11. Can an employer require that an employee must return for work on his rest day?
A Shift Worker can be compelled to Work on his rest day.

A non-shift worker cannot be compelled to work on his rest day except under the following circumstances:

In case of accident, whether actual or threatened, which affects his place of work
In work which is essential to the life of the community (e.g. public transport)

Work essential for the defence or security of Malaysia (probably industries involved in arms production?)
Urgent work to be done on machinery or plant

An interruption of work which it was impossible to foresee (power shutdown?)
Work in any industrial undertaking essential to the economy of Malaysia or an essential service as defined under the Industrial Relations Act, 1967 (e.g. banking, electricity services, fire services, dock and harbour, postal, prison, production of fuel and lubricants, public health, radio & TV, telecommunications, transport, water etc.)

Where to Look : Section 60(1)

12. How should an employee be paid If he works on a rest day?
The Rates are different for Monthly Rated Employees as compared to employees who are daily or hourly rated.

For Monthly-rated employees, any period of work which is less than half a day (usually up to 4 hours for example) shall be paid half his ordinary rate of pay for that day.

That's right, folks. Paying "double-rate" for monthly-rated employees is actually paying more than the required minimum of the law. But then, it has more like become the standard market rate by now. It doesn't look like it is easy to get anyone to come back for rest day work if the rate is less.

For a daily-rated or hourly-rated employee, he is entitled to 1 day's pay for any period of work on a rest day which is less than half his normal hours. For work which is more than half a day but less than the normal hours of work for the day, he is entitled to 2 days wages.

Where to Look : Section 60(3)

13. What if an employee works beyond the normal hours of work on a rest day?
For that, whether it is for a monthly, daily or hourly-rated employee, each hour over the normal hours is to be paid at 2 times the hourly rate of pay.

Where to Look : Section 60(3) 

                                             PUBLIC HOLIDAYS                                       

1.     What is the public holiday entitlement for employees?

The Employment Act 1955 (EA 1955) provides that an employee should enjoy at least 10 paid public holidays in a year. Four of these 10 days are specified as "COMPULSORY". The other 6 being left to the discretion of the employer to choose from the list of Gazetted public holidays, or for that matter to pick any other day it wishes as a paid holiday, e.g. the Anniversary of the Company founding.
To be competitive in employee benefits, or due to the nature of its operations, many, if not most companies, offer more than the 10 days set by the EA 1955. So the actual days do vary from organization to organization within the range of 10 to 18 days.

{ Where to Look : Section 60D(1) }

2.   Which are the 4 days and what does being "compulsory" imply in respect of these 4 days?

The 4 days are:

i)         The Agung's Birthday
ii)       The Labour Day
iii)      The State Sultan's Birthday (or the Federal Territories Day in the case of the Federal Territories)
iv)      The National Day

Being compulsory means that The employer is not allowed to substitute these holidays with another day. Employees either get the day off as a paid holiday, or if they are required to work then they must be paid the prescribed holiday rates.

  { Where to Look : Section 60D(1) }

3. How does substitution of public holiday work?
Certain businesses operate on all 365 or 366 days in the year - hotels, public transport and hospitals being among the most conspicuous. To cater to these operations, these employers are allowed to have arrangements with employees to substitute certain holidays with any other day. This allows some employees to be off on the actual day itself, while leaving adequate numbers to man operations as if it is a normal working day for them. The substitute day becomes the public holiday for this latter group of employees and if they are required to work on the substitute day, then they are to be paid at the required public holiday rate.
Employers should not, (or rather - must not) exploit the employee either by not fixing the substituted day well in advance for the employee, or substituting the substituted holiday again. Some employers may do this to avoid paying holiday pay.
 { Where to Look : Section 60D(1) and (1A) }

4. What is the meaning of gazetted public holidays?

This is the list of official holidays which Federal Government announced and gazetted accordingly in respect of national and state holidays for the whole country. For each state, there should be 18 such holidays.

The government offices are always closed on these days accordingly. So too the financial institutions. But private businesses are in no way forced to close for business on these days, nor are they forced to adopt these as their company holidays, except of course for the 4 compulsory holidays.

5.  How do employees get to know which public holidays they will be enjoying?
The employer is required, before the beginning of the year to post onto the notice board a list of the paid holidays that will be observed.
For these days that are to be substituted, it is left to be mutually agreed upon between the employer and the employee(s) concerned.
 { Where to Look : Section 60(1A) }

6.  What happens if the federal or state government declares an additional holiday?
That depends.
Under normal circumstances, it is expected that as long as the employer has provided at least the minimum 10 days, then the employer is not compelled to observe any other additional day as a paid public holiday for the employee.
But there are situations where the employer may have contractually (wittingly or otherwise) tied himself to observed all holidays declared by the government. So check the wordings on the contract of service.

 { Where to Look : Section 60D - Read between the Lines }

7.  What if an employer is compelled to close operations for a day as a mark of respect in the event of the passing away of a dignitary?
Closing operations and having to pay employees for that day may be two different issues. The employer may not need to pay the employee on that day as a paid public holiday. Again, check the contract of service.

 { Where to Look : Section 60D - Read between the Lines }

8.   What happens if an employee falls sick on his public holiday and obtains a valid sick leave for it?
Treat that day as his sick leave and take it off his sick leave entitlement. But he has to report for work as soon as the sick leave is over and then the employer can decide on the day to grant as his substitute holiday.
The employee has no right to continue through the sick leave to the next day as his substitute public holiday.

 { Where to Look : Section 60D (1B )}

9.     What are the rates for public holiday work?
Irrespective whether the employee is monthly-rated, daily-rated, hourly-rated or piece-rated - the employee shall be paid 2 days wages ( in addition to the holiday pay he is already entitled to) for any number of hours of work which does not exceed his normal hours of work.
In simpler language, for example - if an employee normally works 8 hours a day, then even if he works an hour or less on a public holiday, he is to be paid 16 hours' wages. So you might as well make sure the employee is put to in full 8 hours of work on a public holiday or not at all if you are squeamish about paying so much for hours not worked.
 { Where to Look : Section 60D(3)(a)}

10. What are the rates for public holiday work which exceeds the normal hours?
Let's say we are sticking to the 8-hour period as normal hours. If an employee works beyond the 8 hours, every hour is to be paid at 3 times the hourly rate of pay.
 { Where to Look : Section 60D(3)(aa)}

11. An employee works part of the day on a compulsory public holiday, falls ill and obtains sick leave for the rest of the day. What happens to the holiday pay?

Ouch! I need help on this one for myself. Help..Anyone?

There seems to be 2 ways of looking at this and I have not come across any specific test case that decides this. Maybe someone out there can put in some views.

Angle 1: Favoring the Employer
Even compulsory holidays are substitutable in the event of sickness or temporary disablement under SOCSO or Workman's Compensation. Therefore treat the public holiday as sick leave and substitute the next working day as the public holiday in substitution.

Angle 2: Favoring The Employee

But the way it is read, the law on the payment for work on public holiday does start off with the words "Notwithstanding subsections (1),(1A) and (1B)". The employee can argue that with this provision, if he has already reported for work before falling sick, then this overrides the issue of substitution and he is entitled to be paid the additional 2 days pay for having reported for work.
Any ideas out there?

 { Where to Look : Section 60D(1) to 60D(3)}

12.  What can be done if an employee absents himself on the working day immediately before a public holiday?

Yeah - this happens pretty often when the "balik kampung" fever strikes during the Chinese New Year or Hari Raya Holidays.

Unless he has a reasonable excuse for it, the employee will forfeit the holiday pay. If it happens to be a stretch of 2 or more days of public holiday - too bad - he loses the holiday pay for the days concerned.

The same applies if the employee absents himself on the day immediately after 1 or more public holidays, including the substituted holidays.

 { Where to Look : Section 60D(2)}

13.     What is a reasonable excuse for being absent?

A million-bucks question. Best left to the employee to explain and prove it is genuine, unpreventable and serious enough to warrant his absence. Of course the usual well-worn reasons (that I have had the pleasure and privilege to receive) which are generally not found acceptable are:
·         My baby sitter did not come to work
·         mother (or any available relative) fell sick,
·         bus came late, could not get a return ticket back,
·         stuck with parents who decided to extend their holidays,
·         sick and produces sick certificate from a clinic which is not within the company's appointed, panel of doctors,
·         dog ate my shoes,
·         drug addict stole my shoes, and
·         lots more ingenious or less than genius ones, if I dig into my memory bank.
 { Where to Look : Industrial Court Reports }


14.     Can an employee refuse an order to work on a public holiday?
The Law says "any employee may be required by his employer to work on any public holiday to which he is entitled" . So it looks like the employee cannot refuse to work on a public holiday if the employer insists that he return to work.
When it comes to public holidays, the employer can require the employee to work.

15.     A public holiday falls on a Saturday, which happens to be a half-day.  Is the employee's holiday pay treated as 1/2 day's pay.
The laws specifically states that in such a case, the half day shall be paid as if it is a full working day.

 { Where to Look : Section 60(4) }

16.     A paid public holiday coincides with an employee's rest day. Does he automatically get the next day off?

Sure. Both the employer and employee know well in advance when a public holiday falls, and so too with the employee's rest day. If it happens to be a Sunday which is the also the Rest Day for the many companies, then Monday is obviously the rest day automatically.
Where the company does not close for any day in the week, and employees are scheduled to have their rest day by turns throughout the week, then the working day immediately following the rest day becomes the employee's rest day.

 { Where to Look : Section 60(D)(1) }

17. An employee's rest day coincides with a public holiday, let’s say it happens to be a Sunday. On that Sunday itself, the employee is called back to work. Is it to be paid as work a rest day or work on a public holiday?

As the law provides that if a public holiday coincides with a rest day, the next day is to be considered as a public holiday in substitution, it obviously places priority on the rest day. In this case, the work on Sunday is to be paid a Work on A rest day. If the Employee works on Monday in this case, then he is to be paid the holiday rates for it.

 { Where to Look : Read Between The Lines }

18.  If an employee's rest day on Sunday coincides with a paid public holiday and on Sunday he falls sick and obtains sick leave from the company doctor, then what?
The rest day takes precedence over the public holiday. So Sunday is treated as a rest day While Monday is his paid public holiday.
In this case, the sick certificate is to be disregarded as an employee is not entitled to sick leave while on his rest day.

 { Where to Look : Section 59(1) }

19.  A paid public holiday falls on a day during which a female employee is on maternity leave. Does the employee get a public holiday in substitution?

Employees on Maternity Leave are not entitled to any public holidays.

20.  A part-time employee has a contract in which he works only 3 days a week, and that too he works only for 4 hours on each of those days. What is his public holiday entitlement?

Remember the definition of who is an employee covered by the EA 1955 who is to be entitled to the minimum provisions of the law?
Looks like he is entitled to the minimum 10 days at the normal 4 hours at his ordinary rate of pay for the day. Unless of course, the employer has mistakenly given him a letter that says he is entitled to all the holidays that other employees are entitled to - then it will hurt a wee bit more than the 10 days.

 { Where to Look : Read Between The Lines - Section(2) - Definition }

                                    Annual Leave and Misc Leave                                 

1.   What is an employee's entitlement to annual leave?

The Employment Act 1955 (EA 1955) sets the minimum entitlement (which means employers are free to give more, but not less than these provisions) in stating that -

·        "An employee shall be entitled to paid annual leave of -

(a)     eight days for every twelve months of continuous service with the same employer if he has been employed by that employer for a period of less than 2 years;

(b)     eight days for every twelve months of continuous service with the same employer if he has been employed by that employer for a period of 2 years or more but less than five years; and

(c)     sixteen days for every twelve months of continuous service with the same employer if he has been employed by that employer for a period of 5 years or more.

Simply put :-

The employee is entitled to at least 8 days a year for the first and second year. For years 3,4 and 5, the employee should be entitled to 12 days for each year, and thereafter the employee is to be given at least 16 days for each year of service.

  { Where to Look : Section 60E(1) }

2. When can an employee start taking annual leave?

If you read #1 above carefully enough, you will notice the phase "for every twelve months of continuous service" which I have emboldened just like this. So it means the employee has first to serve out the 12 months before he can enjoy the leave to which he is entitled.

Again, simply put, the employee accrues the leave in the first year and enjoys it during the second year and so on. That's right, to be enjoy the minimum 16 days, the employee would be doing his 6th year in service.

The concept is sort of like the salary paid to an employee. He earns it during the month and gets paid at the end of the period. Then he spends it after that.


  { Where to Look : Section 60E(1) }

3.  What happens if an employee urgently needs leave, but has not served the qualifying period yet?

If your company policy is to follow the provisions of the law, then the employee cannot be given annual leave. Grant him Unpaid Leave then, if it is urgent enough and he agrees to it.

4. Can an employee be given advance annual leave?

Look at it this way. Items 1,2 and 3 assumes that the company is providing the bare minimum of annual leave, i.e. 8 days, 12 days or 16 days respectively. That being the case, if you give the new employee one day advance leave, it means the next year when he starts taking his leave he is entitled only to 7 days, which is less than the minimum provision - so you break the law technically.

But if your annual leave provision goes above the minimum, then you may use the extra provision as advance leave with the agreement of the employee.

5. Why do some companies allow employees to enjoy annual leave from the first year on?

Why? They are generous! Or maybe it is traditional in that industry! Maybe because of competition!

If you want to be competitive, you may also have to start thinking about being a little bit generous, if you are not already doing it. But if you do choose to stick to the minimum level of benefits - then by all means, it is your right to tell employees "Look - serve one year first. That's what the law say!"

6. Can annual leave be carried forward to the next year?

As with the issue of providing advance leave - I would say "no" if you are providing the bare minimum according to the law. However, if you may carry forward the days which are over the minimum, provided the employee agrees.

 { Where to Look : Section 60E - Read between the Lines }

7. What is the right of employee to demand for annual leave?

An employee who wants leave must apply for it and obtain approval. He cannot demand to be given leave. Annual Leave is granted at the discretion of the Employer. But the employer must exercise that discretion fairly.

If the employee applies for leave, and the employer continues rejecting the leave in such a way that eventually the employee has no chance to enjoy the leave due to him within the period of eligibility, then the employer subjects himself to the risk of both being prosecuted for breaking the law as well as being in breach of contract of service with the employee.

 { Where to Look : Section 60E (2)- Read between the Lines }

8.  What happens if an employee fails to apply for and consume his leave?

An employee is required to consume the annual leave due to him during the period eligibility. Where any such balance can be carried forward (see #6 above) then it should be done in accordance to mutual consent or by the established policy.

In the rare event that an employee persistently refuses (or fails) to consume his leave and did not arrange to carry forward the leave, then the employer has the right to forfeit the balance not consumed.

I would normally advise employers to ensure that the employee has officially been reminded, and be given the sufficient opportunity to apply for the leave before taking any action to forfeit what is not consumed.
{ Where to Look : Section 60E(2) }

9. How about paying off for the annual leave not consumed?

      Taking this course is of course better than forfeiting the leave not consumed. Some employers are pretty happy to pay off annual leave if employees agree, but others may not be so happy to do so for reasons best known to them.

It is to be remembered again here - No employer may force any employee to accept payment in lieu of annual leave, just as no employee can demand to be paid in lieu of annual leave. It has to be by mutual consent In most instances, it is not a difficult consensus to reach anyway, except in the case of hard heads and bad relations between superior and subordinate. Right?
Take note also that the employee's agreement not to take any or all of his annual leave entitlement must be given IN WRITING

 { Where to Look : Section 60E(2)}

10. What if an employee goes on annual which has not been approved?

Charge him for being absent without prior approval as a misconduct.

11.When can an employer forfeit the annual leave of an employee?

One instance in where the employee fails to consume his annual leave during the period of eligibility (see #8 above)

Another situation i in the case of an employee who has been dismissed for misconduct after due inquiry and he happens to have annual leave not yet taken {refer to Section 60(E)(3A)}. This option appears to be quite well-used.

A third situation is See Section 60E(1) Last Para} where an employee "absents himself from work with the permission of his employer and without reasonable excuse for more than ten percentum of the working days during the twelve months of continuous service in respect of which his entitle to such leave accrues....". Hey..... have any of you guys ever been so tolerant of an employee who has been absent for more than 10% of the working days????

12. Can the employer schedule an employee's annual leave?

Sure you can, as long as you got employees tame enough not to complain to the Labour Office.

13. What happens if an employee falls sick a period that he is on annual leave?

Sick Leave is given priority over Annual leave and therefore the corresponding annual leave is considered as not taken and to be credited back to the employee's account.

But if you have unkind thoughts about the employee really being sick, then you can make life a little difficult for him by asking him to explain to you why the leave should be acceptable, e.g. the leave was granted by your own company doctor for instance

14. What happens when a female employee becomes entitled to maternity leave during a period that she is on annual leave?

As with Sick Leave, the maternity leave comes first and the annual leave is considered not taken. Of course I don't think you need to ask the employee to prove she really gave birth, eh?

15. Can the employer offset the days that an employee has been absent against his annual leave balance?

I would say no. For one, you cannot do it without the employee's consent. If the employee agrees, then who is there to stop you? Will it be a wise decision to have such a practice? If you are thinking only of not losing working days, you might think that's the brightest idea you ever have had. On the other hand, you may be also signalling to your employees that it really isn't important to apply for leave and wait for permission. Just do it first, the boss will take it off the annual leave anyway.

16. If an employee agrees to receive payment in lieu of annual leave, how is the value of the leave derived?

In the case of a monthly rated employee, the rate is obtained by dividing the monthly rate of pay by 26 days. Of course you remember that this 26 day denominator is used for computing the benefits stipulated by Part XII of the Employment Act as well as in respect of maternity benefits.

In the case of weekly rated employees, it is weekly rate of pay divided by 6 days, although I have yet to know of any company in Malaysia which uses weekly rate for employees. Have you?

And, for daily rated or piece-rate employees, it is the total wages earned by such employee during the the preceding wage period divided by the actual number of days worked (but excluding rest days and public holidays)

 { Where to Look : Section 60(I) }

17. What happens to the annual leave balance when an employee resigns?

 When an employee resigns, he is entitled to take such leave before the termination takes place (which really means he can use the annual leave to offset the Notice Period requirement).

If you want him to work through the notice period, then he has to agree.

As for the computation of the leave balance, he is entitled to the balance outstanding from the previous 12 months service, plus the pro-rated leave in respect of the current period immediately preceding the resignation.

             Medical Treatment, Sick Leave and Hospitalization Leave         

1.   What is the entitlement of an employee to sick leave?

These represent the minimum set by the law where no hospitalization is required -

i)     If the employee has served less than 2 years, he is entitled to 14 days in each year of service.
ii)   If the employee has served 2 years or more but less than 5 years, he is entitled to 18 days in each of these years
iii)  If the employee has served 5 years or more, then he is entitled to 22 days in each of these years

2.   How about hospitalization leave?

If the employee is hospitalized, then the employee is entitled to 60 days of sick leave, which is inclusive of the 14, 18 or 22 days mentioned in #1 above.

Here is an example of how it works -

This is Ah Chong's 2nd year of service with ABC Sdn Bhd.  In January, he was down with flu and was given 2 days sick leave.  In August, he met an accident and ended up with whopper injuries which required hospitalization.  Under the law, he is entitled to 14 days sick leave or up to 60 days in the case of hospitalization.  In this case, since he has taken 2 days sick leave in January, he is stilled entitled to 58 days of hospitalization leave.


3. Can the employer set a qualifying period before an employee becomes entitled to sick leave or hospitalization leave?

NO.  As soon as an employee joins the company, he becomes entitled to the Sick Leave or Hospitalization Leave benefits - that is as long as he can get the commpany doctor to certify that he is sick and require the leave to recuperate.

4.Can the sick leave or hospitalization leave be pro-rated for the year if an employee joins the company at some point in the middle of the year?

NO.  Unlike annual leave, sick leave provisions are stipulated as being given in accordance to Calendar Years - i.e. it is always given from January till December.  Any time an employee joins the organization, he becomes entitled to the full minimum benefits.  So this has some interesting implications.

Say - If an employee happens to join the company on December 1, 1996 and after 2 weeks he shares the same experience of Ah Chong in the above example with the same whopper injuries....  His hospitalization entitlement would of course be limited to the remaining 2 weeks of December, 1996 - but 1997 is a new year and he therefore can continue "enjoying" hospitalization leave for another 60 days in respect of the new year.

5.   Can any unconsumed sick leave or hospitalization leave be carried forward to the next year?

NO.  The employer cannot pro-rate the leave, and neither can the employee expect that any balance of leave unconsumed to be carried forward.  For that matter, employer are also generally advised against compensating employees (paying cash) in lieu unconsumed leave.  Why so? Because there is no reason for any employee to want to be sick, and if he is sick enough to be resting, you don't want him around waiting for an accident to happen because of it.  Besides, he is unlikely to be productive when he is sick - right?

6. Must employees be given free medical treatment?

Yes, all employees who are covered by the Act are to be given free medical.  Actually the words used in the Act are "examination at the expense of the employer".  In its strictest sense, it would actually mean that the employer is obliged to pay only for the doctor's expertise in diagnosing and prescribing medication - and not for the cost of the medication itself.  This is why it is possible for employers not to pay for surgical cost and hospitalization cost.

However, traditional practice in Malaysia always had the clinic doctor not only examining the patient and prescribing medication, but also dispensing the medicines too.  And all that goes into one single bill with no itemization.  So employers also had the tradition of paying without questions asked.

But if an employer is stingy and wants to go against tradition, he can still insist to his panel of doctors to itemize the cost so that he can identify and pay only for the cost of examination, while the employee foots the bill for the medicine.  However, there will be interesting consequences - call me if you want to know what can happen.

7. So "Free Medical" does not include hospitalization costs?

That's right.  The employer has the right not to bear the cost for surgery and hospitalization. But do note hospitalization bills are itemized and where you find an item which represents the cost of doctor's visit (or examination) the employer has to pay for this.

In line with the explanation given above, the employer do not have to pay for cost of bed space, food, surgery, anesthetics, etc.

Nevertheless, in practice, the vast majority of employers that I have come across do provide free hospitalization and surgical benefits.

8. Is the employer obliged to accept all sick certificates given by any doctor?

There are a few points to note here :-

i)      "Doctor" refers to those professionals who are registered with the MMA or medical officers, meaning duly qualified doctors in government clinics and hospitals.  ( Sinseh, dukuns and bomohs are naturally excluded)
ii)       It also includes duly qualified and registered dental surgeons
iii)     If the company has an appointed panel of doctors, it generally means that the employee is only entitled to free medical examination from these appointed doctors only.
iv)     The employee is not entitled to free medical examination or sick leave from any other doctor not in the company's appointed panel of doctors, and that would include government clinics, unless there was such urgency for treatment at that time and the company appointed doctors are not available due to distance or time.
v)      But in situations where the company do not have an appointed panel of doctors, then the employer must accept any bill or sick certificate which is issued by any qualified doctor
vi)     In the case of hospitalization leave, then there is no question that the company is bound to accept the sick certificate issued, while the cost is subject to internal policies.

9. In Malaysia, there are  some  situations where an illness /condition is better treated by traditional healers, and the management knows about it.  Shouldn't there be exceptions in such situations?

Yeah sure.  There remain certain beliefs that Traditional Healers are still better at healing certain conditions - such as broken bones, or those mysterrious recurring and chronic  aches and pains that modern medicine often do not seem to have an effect on.  But hey, we are talking of the law here.  And the law has very clearly stated its definition of who is qualified to certify the sick leave.  So sick certificates from bomohs and sinsehs are not acceptable.

But then, if the employer wants to accept it, he is not committing any offense, mind you.  He can still make the exceptions as if it is sick leave, and I use the words "as if".

10. If employee becomes sick during his rest day, can he get a replacement for the rest day?

An Employee on sick leave is not entitled to the weekly rest day.

11. Are there anymore situations where an employee is not entitled to paid sick leave?

Yes.  There are, such as:

i)        when the employee is on maternity leave and receiving maternity allowance.

ii)       when the employee is receiving compensation for disablement benefit under Workman's compensation, or
iii)     when the employee is receiving periodical payments from SOCSO for temporary disablement.

This is where I normally like to draw the attention of HR executives to the fact that the non-entitlement for paid sick leave in respect of item (a) here is when the employee is receiving maternity allowance - not just when the employee is on maternity leave!  Savvy?

12. Is there any time limit by which an employee must notify his employer that he is on paid sick leave?

When an employee goes on sick leave, he is required to inform his employer of the fact within 48 hours of the commencement of the leave.  If he fails to do so within the required time period, he is "deemed to absent himself from work without the permission of his employer and without reasonable excuse".

13. Are part time workers entitled to sick leave and benefits?

I would rather put it back to you this way - Where in the EA 1955 does it say thatt Part-time workers are not entitled to sick leave, or for that matter any of the other benefits named under the Act?

As the law is written now, it would look like the employer is committing an offence by not providing part-time workers with these benefits.( In fact, a famous fast food chain has already been charged in court for overtime offense on part-time workers.)

But then with all the funny and irregular work schedule arrangements, it has been pretty difficult for anybody to come up with a formula for allocating the benefits in such a way it does not upset the regular employees.

But keep your fingers crossed.  The Parliament is coming up with amendments to clarify this situation soon - hopefully.  And I will keep you posted.

                                        HOURS OF WORK                                 

1.   What are the working hours stipulated by the laws? What are the working hours stipulated by the laws?

In general, the following conditions must be adhered to in any contract of service with an employee:-

i)         Working hours per day shall not exceed 8 hours in a day
ii)       Working hours shall not exceed 48 hours in a week
iii)      In any one day, no employee shall work for more than 5 consecutive hours without a period of rest of at least 30 minutes (by the Aug 1998 amendments, any break less than 30 minutes is not counted as a break at all)
iv)      The employee shall not work in excess of a spread over period of ten hours in any one day

But in respect of the meal break hours, there is an exception recognizing that there are certain jobs which do not permit employees to leave their work unattended for long periods.  For such employees, defined as those whose work "must be carried out continuously and which requires his continual attendance"  work may be carried on for eight continuous hours without that single 30 minutes period of rest.  However, in return they may be allowed a number of short breaks which must add up to 45 minutes in total, and one of such breaks must be long enough for them to have their meals.

2. Can an employee be asked to work for longer hours than eight hours in a day without paying overtime, but instead be given time off to replace the longer hours worked?

The law only allows an hour's extension daily, i.e. up to 9 hours in any one day.  The extra hour worked can be given as time off on other day(s) of the week so that the total of 48 hours is maintained.  In fact, this is the principle on which 5-day week and 5-1/2 day week is based.  Except that the employee ends up working less than 48 hours weekly in the case of 5 day week as the maximum of 9 hours a day on five days add up to only 45 hours.


3.   Can there be exceptions to those limits stipulated in item #1 above?

Yuup!  The prescribe hours may be exceeded in the case of : -

i)         an actual accident, or an anticipated one in the place of work
ii)       performance of work which is essential to the life of the community
iii)      performance of work essential for the defence or security of Malaysia
iv)      interruption of work which was unforeseeable
v)        urgent work to be done to the plant or machinery
vi)      work in any industrial undertaking essential to the economy of Malaysia or any essential service as defined under the Industrial Relations Act, 1967


4. What is that "spread over period" thing mentioned above?

The definition of this is found in Section 2 of the Act stated as follows: -

"spread over period of ten hours" means a period of ten consecutive hours to be reckoned from the time the employee commences work for the day, inclusive of any period of periods of leisure, rest or break within such period of ten consecutive hours;"

So what does it mean?  Just this - the employer has the benefit in any single day of ensuring that a worker finishes his eight hours of normal work within a consecutive 10 hour period.  In the past, certain types of jobs may start very early in the day, say 8:00 a.m.  The employee works a few hours, then goes off work, to return again to do another period, and off again.  The actual work may end late in the evening, but if you had added up the actual hours worked, the employee would still have actually worked 8 hours during all those short stints in the day.

Example of such work are cinema ticket sellers, restaurant workers and so on.

With the "spread over period" law, the employer cannot stretch 8 hours of work over a 10 hour period anymore.  If he does so, he still has to pay overtime rates for hours which are past the 1st 10 hours even though the employee is not working until the time the employee actually stops work for the day.

5. What are the overtime rates?

That's 1.5 times the normal hourly rate of pay for overtime which is performed on a normal work day.

For overtime work performed on a rest day (i.e. any work performed on a rest day which is in excess of the normal hours of work in a day) the rate of 2 times the hourly rate of pay.  In respect of overtime work on public holiday in the rate is 3 times the hourly rate of pay.

6.   What is the maximum no. of hours a employee may work in a day including overtime?

It would look like under normal circumstances, an employee is only allowed to work the normal maximum of 8 hours and 4 hours of overtime, i.e. a total of 12 hours in a day.  If it is a monthly rated employee, it is usually assumed that the break hours are not paid for and not included within this 12 hour daily limit.  For shift workers who are usually paid for their break hours, then it is inclusive of the break hours - unless your contract of service stipulates otherwise.

7. Are there any other limitations on overtime work?

It is obvious that the maximum daily overtime hour is limited to 4 hours a day at best.  The monthly limit in aggregate for any employee must also not exceed 104 hours.

If any employer feels that 104 hours of overtime work per employee per month is still not sufficient for his operational needs, then he has to apply to the Director General Of Labour for exemption.  Must be a very lucky employer who has workers who love to work so much overtime in a month - either that or they must be foreign workers - ehh?

8.   Does the treatment of shift workers differ in any way?

Shift  workers may work for more than 8 hours on any one day for more than 48 hours in a week, provided that when you take the average of the total hours over any 3-week period, the average still does not exceed 48 hours.

As with other workers, shift workers are not allowed to exceed 12 hours of work in any one day, except under the circumstances as stipulated in item #3 above.

                                       PROLONGED ILLNESS                                      

1.   What Is Prolonged Illness Leave?

This is a special type of leave given to employees to help them recover from certain specific ailments. These ailments are usually the very serious ones which require prolonged treatment and rest.  It is what is known as a "contingency" benefit - i.e. a benefit provided and enjoyed only when specific conditions are present.

2.   Why Is It That Not All Employers  Are Providing This Benefit?
That's mainly because the labor laws do not require it to be given.  As far as the labor laws are concerned, the provisions for sick leave are deemed as sufficient for the majority of all cases without burdening the employer with too much cost.  Anything more that the employer wants to give, it must choose according to his ability to afford.

Therefore, for those employers who choose to provide this benefit, it is because they have chosen to provide for  it.

On the other hand, you will find that this benefit is often provided for in Collective Agreements, meaning that the trade unions usually make it a point to ask for this benefit from the employer.  Bear in mind though, even when a trade union asks for it, it does not mean that the employer is compelled to give - there is still the element of willingness, or agreement to do so for whatever reasons.

Note also some employers do not find it comfortable to declare such leave as form of standard benefit.  But they do consider extending the leave period to employees who need it on a case to case basis.

3.   What Kinds of Illness Would Entitle A Person To Such Leave?

There is no hard and fast rule, but employers commonly determine a list of illnesses which an employee may suffer from in order to be entitled to it.  The most common illnesses listed are usually cancer, leukemia, hepatitis, polio, stroke, or even AIDS (because AIDS is no longer considered the result of promiscuity or drug abuse alone).  Being a benefit given voluntarily, the employer has the right to decide, but again, in the case of Collective Agreement, the list would have been decided after mutual consultations and agreement.

4.    How Does This Leave Work In Relation To Sick Leave and Hospitalization Leave?

 We would normally expect that an employee who is sick to first use up the normal sick leave and hospitalization leave provided by the employer.  When it is comes to a point that such leave is exhausted, the employee can then apply for the Prolonged Illness Leave to take on and continue from where the normal sick and hospitalization leave ends.

At this point, the employer must first be satisfied that the illness falls within those classified for entitlement.  If the sickness does not fall within those classified, then the primary condition for entitlement is not met and the employer does not have to grant it.

As an example, an employee meets with a serious accident as a result of which he is unable to report to work for 4 months.  After 60 days, all his sick and hospitalization leave would have been exhausted.  But as an accident does not normally come under the entitlement for Prolonged Illness Leave, the employer is unlikely to grant it.

 5.  What Other Conditions Should Be Met In Order To Provide This Leave?
It is up to the employer really, to decide on this or what has been agreed with the union.  Again, the most common condition would be that the employee should at least be confirmed employee, or that the employee must have served a minimum period of time with the company.

6.   What Is Quantum /Value of Such Leave?

The practice varies widely.  To illustrate this point see the following table :-

Company A May Do This:-
  • Less than 1 year service  - 4 months unpaid
  • 1 year service or more:-
    • First 3 months at full pay
    • Second 3 months at 1/2 pay
    • Third 3 months without pay
  While Company B Does Something Different
  • For confirmed employees with less than 1 year service
    • First 1 month at full pay
    • Second 1 months at 1/2 pay
    • Third 1 months without pay
For confirmed employees with 1 year service or more :
    • First 3 months at full pay
    • Second 3 months at 1/2 pay
    • Third 3 months without pay

There can be more imaginative variations than those shown above.

7.         Isn't Providing For This Benefit A Very Expensive Affair?

If you are looking at it from the angle that 500 employees in the company every year is going to suffer from leukemia or come down with a stroke or some other illness like those listed - Sure, it is going to be extremely expensive.

But that is not going to happen, is it?  Do you really think employees are going to enjoy getting to enjoy the Prolonged Illness Leave and the pay and time off that comes with it?  I would think they would rather pay you money if you can take over the illness from them if they had been unfortunate enough to be a victim.

Being a contingency benefit, the chances of actually having to grant this benefit would really be minimal ( unless working conditions in the company contribute to high incidences of stroke, hepatitis, AIDS and what have you) and so it is not going to be costly at all.  But to a victim of these illnesses, such leave provide a lot of comfort, mental and financial, both to the employee as well as family members. So it is a worthwhile benefit to provide after all.

                          TERMINATION AND LAYOFF BENEFITS                          

1.  What are the Termination And Lay-Off Benefits Regulations all about?

Termination And Lay-Off Benefits are provided under the "EMPLOYMENT (TERMINATION AND LAY-OFF BENEFITS) REGULATIONS 1980," which is a part of Employment Act, 1955.  This set of regulations, among other things, is intended to : -

i)         set the rate of compensation to be paid to employees who lose their jobs (generally where it is due to no fault of theirs)
ii)       define those who are not entitled and those who are not.
iii)      define the circumstances under which those who are entitled may lose that entitlement
iv)      set out the responsibility of employers to pay.

The regulations, being a part of the Employment Act, 1955 apply only to those employees who come within the definition of employee and the First Schedule of the Act.

2. When does an employer become liable to pay these benefits?

An employer becomes liable to pay these benefits when he terminates the services of any employee, or he lays-off any employee who has served him continuously for not less than 12 months.

One point to highlight here is that there is a specific provision that the 12 months service mention may include two or more periods of employment, if the period of break between each period of service does not exceed 12 months.
What does this mean?  Simply this - if you employ say, a part-time worker, and he works from 1 January until end of March.
When he rejoins you again in the middle of April, whether to continue as a part-time worker or as a regular employee and works until 31st January the next year.  For the purpose of defining liability to pay termination benefit, this employee would qualify because the intervening period between the two service contract has been less than 30 days.

3.   Does this mean that when an employee is dismissed after serving more than a year,  he must be paid Termination Benefits?

No! No No!  Not for dismissals.  Termination benefit is only meant generally for those employees who lost their jobs through no fault of theirs in serving their employers.  An employee who is dismissed means that he has done something wrong.  Anyway, just to make it clear under (#2) above, it is explained when an employer becomes liable.  But Regulation 4 has four parts which sets out the employees who are excluded from receiving termination and lay-off benefits
·         Regulation 4(1) excludes the following types of employees...

i)         those who are terminated by the employer on grounds of retirement upon attaining the retirement age, provided that this retirement age is stipulated in the contract of service.
ii)       Those who are terminated "by the employer on grounds of misconduct inconsistent with the fulfillment of the express or implied conditions of his service, after due inquiry (remember Section 14(1) ??)
iii)      Those who have terminated their services voluntarily (i.e. those who resigned of their own accord).  It does not however include those employees who terminated their own services due to a breach of condition of service by their employer, or those who do so because they are made to face violence or danger which is outside of their contract to face.

·         Regulation 4(2) makes this exclusion....
§               An employee who is terminated but the contract is renewed, or he is re-engaged by the same employer under a new contract of service where the terms and conditions of employment are not less favourable than before, provided that the renewal or re-engagement takes effect as soon as the previous contract ends.

·         Regulation 4(3) sets the following conditions

i)         An employee is not entitled to receive the payment if he unreasonably refuses to accept an offer to re-employ him or to renew his contract of service, provided that the offer is made more than 7 days before the effective date set for the termination.
ii)       The new terms of employment, the capacity of his position, the place of employment are not less favourable than that of the previous contract.
iii)      The re-employment or renewal takes effect on or before the date of termination.

·        Regulation 4(4) bars the following employee from receiving the payment –

i)         Any employee who leaves the job before the expiry of the notice period given by the employer in accordance to the notice period set under Section 12 of the Employment Act, if –
a.       he has not obtained the prior consent of the employer.
b.       He leaves without paying wages in lieu of notice.

3a.  What is a Lay-Off?

In a general sense, it means any period where work is not provided when the employer is obliged to do so, and the employee is not paid during such idle period.  For the purpose of determining the eligibility to receive the payment of termination benefit, it means:-
A total of 12 normal working days without work; in any consecutive period of 4 weeks, and during which the employee is not paid.

So once an employer exceeds the prescribed limit, then he becomes liable to pay termination benefits to the affected employees.

4. What is the rate of Termination Benefits set by the Regulations? 
The Rate of compensation is to be found Under Regulation 6, which says that the amount should not be less than:-

i)         10 days wages for each year of service which is not less than 2 years.
ii)       15 days wages for each of service which is 2 years or more, but less
than 5 years.
iii)      20 days wages for each year of service which is 5 years or more.

In addition, take note also that -
The daily rate is based "wages" as defined in Section 2(1) computed against the the earnings of the preceding 12 months.

Computation is to be pro-rated for incomplete year and calculated to the nearest month.  The benefit prescribed above is in addition to wages in lieu of notice period, if any, annual leave balance, etc which may be due to the employee.

5.        What happens if ownership of the business changes hands?

Please note that a change in ownership of the business may or may not mean a change of employer to the employee.  As far as an employee is concerned, his contract of service is with the company, and not necessarily with a particular person(s); or owner(s).

i)         Let's look at it this way. Joe works for Suregain Bhd, which is in turn controlled by Datuk Dahkaya personally and a few of his companies.  As far as Joe is concerned, his employer is Suregain Bhd., not the Datuk.  So if the Datuk sells all his shares in Suregain to Tan Sri Adawang, the ownership may have changed, but Suregain Bhd as a company continues to exist and as an employer, remains unchanged.
ii)       However, let say the Tan Sri takes over the company and merges it his own company Profit Banyak Sdn Bhd to form a new company called SureProfitBanyak.  He then deregisters the name of SureGain, but keep all the employees of Suregain under the new company SureProfitBanyak.  This means that not only has the ownership changed, but Joes employer has also changed.

It is my view that 1st situation #5.i, the Tan Sri and his management need not make any re-offer of employment.  Things continue as usual for all employees unless as individuals, they are being moved to new companies under the Tan Sri.

In 2nd situation under #5.ii, the provisions are as follows –

i)         if within 7 days of the change of ownership, the new owners offer continued employment without less favourable terms, and the employee refuses, then the employee is not entitled to termination benefit payment.
ii)       if the new owner does not offer continued employment, then both the old owners and the new owners of the business are jointly and severally liable to pay the termination benefits to the affected employees.
iii)      continued employment under the new employer also means that the past service of the employee is to be absorbed by the new employer, and there is no break in the continuity of his employment.

6.   If a company is affected by recession and needs to reduce the work force, can the company ask the newer employees to resign?  

Sure you can, if your employees are nice enough to obey you.  My advice is - don't do it.  If you need to retrench - then retrench and follow the rules to do it.  Asking employees to resign opens the employer to charges of unfair labour practice and unlawful dismissal and the consequences can be pretty bad for the employer.

Try also not to hide a retrenchment action under the guise of terminating a probationer under the probationary clause. Termination of a probationer should only be done on the grounds that the probationer is not suitable for the job.

7.  Is it true that probationers are not entitled to termination benefits?
As far as the law is concerned, it does not distinguish between probationers and confirmed staff.  As long as the employee has served at least 12 months, the employer becomes liable to pay if the employee does not fall into any of the exclusion provisions.
Does notice period for retrenchment refer to the notice period in the contract of service?

Take the notice period in your contract of service and compare it with the notice period provided under Section 12.  If what you find in your contract of service is not less than what is set by the law, you have to apply accordingly; but if your provision is less than that of Section 12, throw yours out and follow Section 12.

 To give an illustration, say Ahmad is under 6 months probation and this is his 5th month in service.  He is being retrenched.  Under your terms and conditions, the notice period for termination under probation is 24 hours.  However, since he is being retrenched  (and not being terminated for being incompatible with the job), you have to provide him with a minimum of 4 weeks notice instead, or pay him 4 weeks' wages in lieu.

9.   What are the rules to follow in a retrenchment?

There are not many, but all are important -
(a)   The first rule is "Use retrenchment as the last option".  Try out cost saving methods.  Talk to employees and seek their cooperation and consent if you are thinking of work day reduction, pay-cut.  Retrain and transfer excess employees to more productive jobs.
(b)  If there is no other option, under the new orders from the Minister of HR, you have to provide 1 month notice to the Labour Office.
(c)   Ever heard of "outplacement?"  Help employees find alternative jobs, if possible even before they are retrenched, if they are willing, else, after they are retrenched.
(d)   Always give employees sufficient forewarning - so that they can prepare themselves mentally to face the trauma.  Many managers do not seem able to feel the sense of trauma and despair that a retrenchee goes through.  By giving sufficient notice, some may be able to use the opportunity to get alternative employment.
(e) The normal rule to adopt in selection of retrenchee is "LIFO - Last In First Out" - by job categories, usually.  But there can be exceptions to this, provided you have good grounds to support.