Malaysian Employment (Amendment) Bill 2021

On 25 October 2021, the Employment (Amendment) Bill 2021 (“Bill”) was tabled before the Malaysian Parliament for the First Reading. The Bill has been long expected and was announced by the Ministry of Human Resources in 2018. However, the now tabled version of the Bill differs from the initially circulated version and might have been influenced by recent pandemic-related changes in work culture, and by scandals around forced labour allegations in certain industries. We have summarized some of the key changes suggested in the Bill as follows:

1. Clarification of calculation of incomplete month’s work

The Bill suggests a clarification of the calculation of wages for incomplete month’s work by introducing the following formula:

Monthly wages

------------------------------ X Number of days eligible

Number of days of in the wage period

particular wage period

The wage period is based on 26 days, as set out in Section 60I of the Employment Act 1955 (“Act”).

2. Extension of maternity leave and protection of pregnant women

As already previously addressed by the Ministry of Human Resources, the Bill proposes to extend the current maternity leave from 60 days to 90 days. It is also suggested to make it an offence to terminate pregnant employees or employees suffering from an illness arising out of her pregnancy, except for terminations on the grounds of wilful breach of employment agreement, misconduct and closure of employer´s business. The burden of proof that the termination is not on the ground of the pregnancy is with the employer.

3. Introduction of paternity leave

Under a new Section 60FA, the Bill introduces paternity leave, where married male employees are entitled to three days of paid paternity leave up to a maximum of five confinements, irrespectively of the number of spouses, if they have been employed by the same employer for at least 12 months before the confinement and have notified the employer of the pregnancy at least 30 days before the expected confinement.

4. Approval required for the employment of foreign employees

The Bill suggests that the Director General of Labour needs to approve the employment of foreign employees. Currently, it is only required to notify the nearest office of the Director General of Labour. The approval of the Director General of Labour will depend on the HR compliance of the respective employer, for example not having any outstanding matter or case relating to any conviction for any offence under the Act, or has not been convicted of any offence in relation to anti-trafficking in persons and forced labour.

5. Introduction of flexible working arrangements

The Bill suggests the introduction of a new Part XIIc into the Act which stipulates the rules on flexible working arrangements. The employee may apply in writing to the employer for flexible working arrangements with regard to hours of work, days of work and place of work. The employer then has 60 days to either accept or reject such application in writing, and will need to give reasons for the refusal.

6. New rules on discrimination in employment

In a new Section 69F, the Bill gives the Director General of Labour the power to inquire into and decide any dispute between employees and employers relating to discrimination, and to make orders accordingly. The Bill does not provide any definition of “discrimination”, nor does it specify the scope and content of such orders. The wording of the new Section suggests that the power of the Director General of Labour relates to existing employment relationships and does not apply to pre-employment scenarios, for example potential discrimination in the candidate selection process.

7. Stiffer penalties in cases of forced labour

The Bill introduces a new Section 90B on forced labour. Employers who threaten, deceive or force an employee to work or who prevent an employee from leaving the place of work, can be sentenced to a fine not exceeding one hundred thousand Ringgit, or to imprisonment for a term not exceeding two years, or to both. With this new section, the Bill seems to address the recent allegation against several Malaysian companies which were apparently practicing forced labour.

8. Conclusion

To what extent this Bill will find its way into the Act remains to be seen. It is important to note that the Act does not apply to all employees, but only to those who’s monthly wage does not exceed MYR 1,500. The fact that the Act does not apply to all employees constitutes potential legal uncertainties to employers as to what standards should apply for employees with a higher monthly wage, and whether such contractual terms can actually be enforced in court. The Bill does not propose any change with regard to the general scope of the applicability of the Act.

The introduced approval for the employment offoreign employees might constitute a burden for foreign investors intending to bring in management personnel or technical specialists. It might also burden labour intensive employers with further inflexibility to recruit sufficient manpower, considering that the unemployment rate of Malaysia is currently at around 4.8 percent.

The introduction of flexible working arrangements might lead to more disputes in workplaces and more burdensome justification for employers. Considering the low unemployment rate it might be better to leave it to employers to offer such flexible arrangements in the attempt to attract the right talents.

Finally, the stiffer penalties in case of forced labour can only be welcomed. The recent cases of forced labour allegation against companies in Malaysia covered in international media demonstrate that enforcement of a ban of forced labour and compliance with the existing set of rules requires a tougher approach.