5 Key Facts in Malaysian Labour Law Every Graduate Should Know

Knowing your legal rights as a graduate hire is important so you can confidently navigate your career journey!
Jevitha Muthusamy
Editorial Writer
5 Key Facts in Malaysian Labour Law Every Graduate Should Know

As you embark on your graduate career and evaluate job offers and working conditions, it's crucial to understand what your rights and entitlements are as an employee. This will help you make more informed choices so you can avoid sketchy or unethical employers looking to take advantage of you. 

In Malaysia, employee rights are mostly governed by the Employment Act (EA) 1955. The EA has gone through several amendments over the years to stay updated with the current employment climate. Let’s delve into the key legal essentials every graduate should be aware of.

Working Hours and Overtime

The EA sets a maximum limit of 45 working hours per week, excluding mealtimes. Employers must also ensure their staff have at least one rest day per week. Any work beyond this is considered overtime. 

Notably, a recent amendment to the EA in January 2023 now ensures that full-time employees earning salaries of up to RM4,000 per month are entitled to overtime pay. Overtime rates vary according to a few possible scenarios, as outlined by the EA below:

  • Normal working days:

- Work exceeding normal working hours: 150% the hourly rate of pay.

  • Rest days:

- Work not exceeding the normal working hours: 100% the hourly rate of pay

- Work exceeding normal working hours: 200% the hourly rate of pay

  • Public Holidays:

- Work not exceeding normal working hours: 200% the hourly rate of pay

- Work exceeding normal working hours: 300% the hourly rate of pay

If your job involves extended hours, then make sure you negotiate with your employer about their overtime policies beforehand. Check your employment contract to determine what your employer has identified as “standard working hours”, “working days”, and “rest days”. Make sure their overtime rates comply with EA requirements as well.  

Paid Annual Leave and Medical Leave

Under the EA, employees are entitled to 10 mandatory public holidays a year. Though if you are asked to work on a public holiday, then overtime pay provisions take effect – as stated in the previous section. 

Paid annual leave is prescribed based on tenure. For the first two years in a job, you are entitled to a minimum of 8 days of paid leave annually, increasing to 12 days in your third to fifth years, and 16 days after your fifth year. 

Medical leave (also known as “sick days” or “MCs”) follows a similar pattern, with a minimum of 14 days per year for your first two years in a job, 18 days in your third to fifth years, and 22 days from the sixth year onwards.

Probationary Periods

When you first join an employer, they may require you to undergo a probation period. This is a “trial” period typically lasting three to six months, during which you may not be offered the full range of employee entitlements until you prove that you can do the job well enough to be confirmed as a permanent employee.

A probation period and its duration must be specified in your employment contract. During this period, employers can legally withhold entitlements such as paid annual and medical leave, or benefits like company insurance coverage or other staff incentives. There may also be more lenient allowances for staff resignations, such as notice periods of just 2 weeks as opposed to 1 or 2 months. However, the employer must still fulfil all salary obligations, including overtime pay allowances and EPF/SOCSO contributions.  

It’s important to note that probationary periods are not mandated by law, but are done at the discretion of the employer. They are, however, considered standard industry practice. Make sure to clarify the company’s probationary policies and carefully review the terms in your employment contract before signing it. 

Staff Bonuses

While annual and performance bonuses are a significant perk for staff, the EA does not have any specific provisions regarding them. Companies may choose to provide bonuses, but this is not guaranteed by law. 

During the interview process or while reviewing job offers, ensure you inquire about the company’s policies towards staff bonuses, whether you qualify for them, how they are determined, and when they are disbursed. You’ll have to use your best judgment here about what’s right for you. 

Retrenchments and layoffs

It’s worth noting that under Malaysian labour law, companies can only retrench or lay off staff if they can first prove to the government that they have employee redundancies. In simpler terms, they must first show evidence that they have too many staff performing similar or overlapping functions before they can undertake any kind of retrenchment exercise.

However, as a graduate or entry-level employee, you will realistically have little to no say in this entire process. If you have been selected for layoffs as part of a company retrenchment exercise, the best you can do is to ensure that you do get the necessary retrenchment benefits on your way out.

In short, Malaysian labour law currently stipulates that employees who are retrenched are entitled to receive one months’ worth of their latest salary for every year that they have worked at the company. However, an amendment to the EA in January 2023 added another clause that employees earning more than RM4,000 in salary per month are not covered by this entitlement.

Regardless, this still serves as a good benchmark for you to negotiate retrenchment benefits with an employer if you are being let go. Do you best not to settle for less on the way out!