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Update on Employment Matters in Malaysia

The change in Malaysian political landscape has brought together the aggressive efforts made by the newly elected government in implementing new employment policies to this country. Some of the highlights are as follows:-


Pension Scheme for Housewives

The government has recently launched a three phase voluntary contribution scheme under Suri Incentive Programme with the aim to enable housewives to gain access to quality social security and enhanced income security.

The first phase of the pension scheme has officially begun on August 15 with the target group of housewives, single mothers, widows and married men (for their wives) listed in the e-Kasih database, a national database supporting the poverty programmes for those in the bottom 40% (B40) of the society. The eligible recipients are required to save a minimum of RM5 monthly into their Employees Provident Fund (EPF) account, upon which the government will contribute RM40 monthly.

Through further legislative changes, the second phase which is expected to be launched early next year will see an additional RM10 contribution by the government to go to the Social Security Organisation (SOCSO), while the third and final phase which is expected to only begin in early 2020 will be the implementation of the initial suggestion of the government that 2% out of 11% of the EPF contribution of husbands is to be transferred to their housewife spouses and the government will top up with a RM50 monthly contribution.


SOCSO Protection to the Spouses of Business Owners

Prior to this, wives or husbands who work for their respective spouses were not eligible to register or contribute to SOCSO as an ‘employee’ but starting from July 1, 2018, spouses who are hired by their partners are now eligible to register and contribute to the employment fund.

With the extension of the eligibility of SOCSO benefactors under the Employees’ Social Security Act 1969 (Act 4) and the Employment Insurance System Act 2017 (Act 800), the spouses will receive benefits for temporary and permanent disablement, invalidity pension and funeral, among others under Act 4 and benefits such as job search allowance, early re-employment allowance and reduced income allowance under Act 800.


Standardized Minimum Wage

Since 2016, the minimum wage in Peninsular Malaysia is RM1,000 whereas in Sabah, Sarawak and Labuan is RM920. In line with the government’s GE14 manifesto to standardize a minimum salary of RM1,500 nationwide, a new minimum wage will be implemented in stages.

The National Wages Consultative Technical Committee has completed its review of the minimum wage as stipulated under the National Wages Consultative Act 2011 and it is currently pending approval from the cabinet. If there is no hindrance, the new minimum wage order will be gazetted in the next one or two months.


Daycare Facilities at Government Agencies

The government has announced that all government offices will be equipped with child daycare centres by January 1, 2019. To date, there are only 205 government offices and 25 private offices that are equipped with childcare centres although the government has issued a circular on 1989 calling on public services to provide daycare facilities.

It is hoped that the private sector will follow suit as the government is determined to provide 10-year tax exemption as an incentive to the private offices to cover their expenditure in the renovation, maintenance and ownership of a daycare centre.


Court Cases

In relation to court cases, we are aware that the Industrial Court has no extra territorial jurisdiction to any other foreign country. However, as there are now more increasingly complicated employment relationships in which employees are being employed by an employer entity in one jurisdiction but are carrying out work in another jurisdiction through assignments, secondments or some other similar arrangements, it raises an important issue on the jurisdiction of the Industrial Court.

Two recent Industrial Court cases of Lars Kruse Thomsen v Hot-Can Sdn Bhd (Award No. 1629 of 2017) and John Brian Chesson v Baker Hughes (Malaysia) Sdn Bhd (Award No. 119 of 2018) have considered this issue by first determining who the actual employer entity is, and accordingly, which jurisdiction the employer is in. The Industrial Court gave effect to the plain meaning of words used in the contract of employment and the subsequent supplemental agreement between the employer and the employee which are considered to reflect the intention of the parties. In both cases, the Industrial Court held that the employees’ employers were foreign companies based on their contracts and therefore, the Industrial Court had no jurisdiction to hear the employees’ claims.


Written by:

Melinda Marie D’Angelus (Partner)

Dg. Roziekah Ussin (Senior Associate)