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In brief

Recently, we have observed that the labour authorities in Peninsular Malaysia have increased efforts to monitor employers’ compliance with the local laws and practice. With the expansion of the scope of the Malaysian Employment Act (EA) effective 1 January 2023 to cover all employees in Peninsular Malaysia (and Labuan), employers are reminded of their statutory obligations, especially those under the EA.


Inspections and inquiries

Under the EA, officers of the Labour Department are empowered to enter the premises of employment to inspect and make inquiries which the officers consider necessary on any matter relating to the provisions of the EA.

While the EA provides that the officers should, where practicable, notify the employer of any inspections, the EA also empowers them to make such visits to workplaces without prior notice.

Reminder on employers’ EA obligations

Given that any inspections or inquiries by the Labour Department can be done without prior notice or with short notice, it is pertinent that employers ensure continuous compliance with their obligations under law. 

Particularly, employers are reminded of their EA-prescribed obligations as follows:

  • Restrictions on payroll deductions: Employers are not allowed to effect payroll deductions (even if the employees have given their consent) except for limited purposes set out in the EA. Some examples of payroll deductions which require the prior approval of the Director General of Labour are deductions relating to contributions for employee stock purchase plans offered by a parent/related company of the employer, global retirement plans, payment for insurance premium, payment for season parking.
  • Limitations on working hours and overtime
  • Observation of public holidays
  • Providing employment benefits (such as annual leave, sick leave, rest day) at rates not lower than the minimum prescribed under the EA
  • Proper record keeping, particularly of the employee register and maternity allowance register at the workplace for inspection
  • Various notification requirements, which are triggered by instances such as the employer’s name or location change, taking over of business, termination of certain categories of employees, etc.

In addition, if there are any employment-related permits, approvals or certificates which have been obtained by the employer, such permits, approvals or certificates should be kept by the employer at the workplace, to be made available for inspection as and when necessary.  

Failure to comply with the provisions of the EA is generally an offense, and on conviction, can attract a general penalty of up to RM 50,000 (approx. USD 10,000) (with some other non-compliances carrying higher penalties). Additionally, if any offense under the EA is committed by a body corporate, the directors, managers, or other similar officers of the body corporate may be charged jointly or severally.

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Author

Trishelea is a partner in the Employment Practice Group of Wong & Partners. Her practice focuses on employment and industrial relations, and maritime and shipping law.

Author

Grace Chai is an Associate in Wong & Partners, Kuala Lumpur office.

Author

Han Yang Quek is a Legal Assistant in Wong & Partners, Kuala Lumpur office.

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