By Richard Wee, Janessa Kok & Bryan Boo

Photo Credit: “Employer” by Nick Youngson (AlphaStockImages) is licensed under CC BY-SA 3.0


Is it true that every individual who has a 9am to 5pm job is well protected under the Employment Law? What are your rights as an Employee in the event of an unfair dismissal, non-payment of wages, or if you are unfairly deprived of your annual or medical leave? We answer 5 of the commonly asked questions about the Malaysian Employment Law below.

#1        Are you an “Employee” or merely a “Contractor”?

If you are an employee who is currently considering your legal position, it is essential to first identify whether or not you satisfy the statutory definition of “Employee”. For the most part, pursuant to the Employment Act 1955, an individual who has entered into a Contract of Service would be deemed an “Employee”.

On the other hand, a “Contractor” is usually an individual or company who is hired or appointed under the Contract for Service solely to work on for a specific project or task for purposes of the principal’s trade or business.

#2       What is a “Contract for Service” and a “Contract of Service”? Which category do you fall under and what are the pros and cons?

Although the difference is just one word, the effect of both vastly differs. Take a look at the table of comparison below:

 Contract for Service Contract of Service
 The Employer should have no control over you   e.g. in terms of working hours, annual leave,   office rules etc. Provided it is in compliance with the law, the   Employer would have the absolute discretion   in determining your working hours, the number  days for annual and medical leave and so on.
 Payment for services rendered may, in some   occasion, come in the form of a Tax Invoice,   Payment and Official Receipt manner. There is   no mandatory progressive paymentunless the   purposes of hiring the Contractor so require. It is mandatory to progressively pay the   Employee’s monthly wages for services   provided. Failure to do so would expose to the   Employer to a potential Labour Court action.
 The services rendered by a Contractor need   not be personal.For instance, in most cases, a   Contractor is free to hire a Sub-Contractor to   carry out the duties owed to the Employer   under the Contract for Service. A Contractor is   also free to take on as many job offers at once. The services provided by an Employee must   exclusive and personal.
 A Contractor is solely in charge of the profit   margin of the Contractor’s business. For   instance, under a Contract for Services, the   Contractor would make profit out of his   undertaking.

 An Employee should not and would not be   burdened by the Company’s business   expenses and financial losses, if any.

 A Contractor works independently and is only   bound to comply with the terms and conditions   of the Contract for Service. An Employee is bound to work under the   direction and instruction of the Employer   alongside complying with the terms and   conditions of the Contract of Service.
 A Contractor is not protected under the   Employment Act 1955 An Employee is protected under the   Employment Act 1955


#3        What is the position of a Probationer? Are you given equal protection?

While there is no statutory definition for what a Probationer is, case law has distinguished between a Probationer as well as an Employee.

Is it mandatory for all new Employees to undergo a probationary period? The answer is no. However, more often than not, an Employment Contract/Contract of Service would specifically provide for a probationary period. For example; “You will undergo a probationary period of three (3) months starting from the date of this Employment Agreement. During the probationary period, you shall not be entitled to any annual leave.”

Would a Probationer then be protected just like confirmed Employees? Similar to a confirmed Employee, in the event of an unfair dismissal, the Probationer is also entitled to make a representation to the Director-General for Industrial Relations.

What then distinguishes the position of a Probationer and a confirmed Employee? Should the Court be satisfied that the Probationer has been unfairly dismissed, the Probationer shall be entitled to any back wages, which shall not exceed twelve months’ back wages from the date of dismissal as per the salary given. On the other hand, when a confirmed Employee is unfairly dismissed, the entitlement to any back wages would be based on the number of years they have served the Company. In other words, the amount claimable by a Probationer would very likely be lower than a confirmed Employee.

Would an extension of a probationary period amount to an unfair and unjust treatment? Most Employers would opt to extend the Probationer’s probationary period instead of terminating him immediately. In other words, an extension of a probationary period may, in some instances be considered a second chance instead of an unfair or unjust treatment.

#4        What are the statutory benefits given to Employees?

An Employer is bound to make contributions to the Employees Provident Fund (EPF) for any individual under the Contract of Service. Additionally SOCSO (Social Security Organisation), also known as PERKESO (Pertubuhan Keselamatan Sosial) contribution is a mandatory requirement imposed on all Employees irrespective of the Employee’s monthly wages. However, in the event the Employee’s monthly income exceeds RM4,000, the contribution required would only be based on RM4,000 per month.

A new piece of legislation which provides an additional statutory benefit to employees is the Employment Insurance System Act 2017 (EIS), which was passed by the Dewan Rakyat on 26 October 2017. The Human Resources Minister, Datuk Seri Richard Riot, stated that the Government is committed to implementing the Act in January 2018.

The EIS will be administered by SOCSO and it seeks to help employees who have lost their jobs get back on their feet by providing certain benefits. These benefits include job training as well as monetary payouts for a certain amount of time during the period of unemployment. However, it must be noted that this will not apply if the employee voluntarily resigned, retired, or the Contract of Service expired or was terminated by way of mutual consent or due to misconduct.

It must be noted that the EIS applies to all industries having one or more employees, except for certain groups of people specifically mentioned in the Act, for example domestic workers and members of the public service. Sections 14 to 16 of the Act makes it mandatory for both employers and employees to be registered under the Act and to contribute to the Employment Insurance Fund.

(A further article on this area will be coming up soon)

#5        What is the difference between a Labour Court and an Industrial Court?


Labour Court


Industrial Court
Deals with disputes in relation to wages, sick-leave, annual leave and so on.Mainly deals with issues of unfair dismissal, trade union complaints and trade disputes.
Who hears and decides the cases?
Hearing is before a Labour Officer of the Labour DepartmentFor dismissal cases, the case is heard by the President or Chairman sitting alone.
For trade disputes, the case is heard by a panel comprising of the President / Chairman, an employer’s representative, and an employee’s representative.
What if I am not happy with the decision?
Decisions made by the Labour Court is appealable to the High CourtDecisions made by the Industrial Court is final. However, parties may apply for Judicial Review.

Court Process

(i)   For wages not exceeding RM5,000.00

The Director General of Labour shall have the power to inquire into the dispute with regards to wages as well as any other payments in cash due to the Employee

Director General of Labour will then decide on the dispute

(ii)   For wages exceeding RM5,000.00

The Industrial Relations Department will step in to settle the dispute.

However, if the matter still is not resolved, the Department will report to the Director General of Industrial Relations.

(See the flow chart for the Industrial Court Process)

Lodge a complaint to the Director General of Industrial Relations

Conciliation process conducted by the Director General of Industrial Relations

Report of the conciliation process to be given to the Ministry of Human Resources

Minister of Human Resources has discretion to take whatever actions necessary to conciliate.

In the event the conciliation process fails, the Ministry of Human Resources will then decide whether or not to refer the dispute to the Industrial Court.

The Industrial Court will only have the power to hear if the matter is referred to the Industrial Court.

Richard Wee is a fellow Partner for Dispute Resolution as well as the Head of both the Sports Law Practice Group and the Real Estate Practice Group at Messrs MahWengKwai & Associates. Richard’s legal practice encompasses a wide range of areas, including Company & Contracts Law, Trust & Equity Laws, Tort Liabilities, Criminal Defence & Civil Liberties. In fact, Richard Wee is among the few lawyers in Malaysia well versed in Sports Law.

Janessa Kok is an Associate at Messrs MahWengKwai & Associates. She was recently called to the Bar in December 2017. Passionate in matters relating to Employment and Family disputes. This is Janessa Kok’s maiden attempt to share her thoughts on the pertinent areas of Malaysian Employment Law.

Bryan Boo is a paralegal at Messrs MahWengKwai & Associates who had completed his law degree at Northumbria University in 2016. Law is in fact his second degree after obtaining his Bachelor of Theology in 2010. Bryan Boo is comfortable in Esports Law, a new area of service recently launched by Messrs MahWengKwai & Associates on 1 December 2017.

15 Jan 2018


Note: This article does not constitute legal advice to any specific case. The facts and circumstances of each and every case will differ and therefore will require specific legal advice. Feel free to contact us for complimentary legal consultation.