law of employment act in malaysia

Topics: Wage, Employment, Malaysia Pages: 26 (5531 words) Published: December 4, 2013
Salary and Wages
in Malaysia
Rohayu Abd. Ghani
Rasidah Arshad
Fazli Idris
Rozhan Othman
Noreha Halid
June M.L. Poon
Ayu Trisna
University Kebangsaaan Malaysia, Bangi, Selangor

This paper discusses the compensation practices in Malaysia against the backdrop of the legal framework for wage and salary deterinatio n. It also exa mines the Malay sian labo ur mark et situation a nd trends in salary and wage administration together with the role of unions in compensation determination.

Malaysia is a country of more than 20 million located at the southernmost tip of mainland Asia. Besides being a leading exporter of commodities such as natural rubber, tin, palm oil, timber, petroleum, and natural gas, Malaysia is also one of the world’s leading exporters of electronic semicond uctors, roo m air-cond itioners, and a udiovisual e quipmen t. Prior to July 199 7, Asia was seen as a region exemplifying success in economic growth and development. Between 1991 to 1996, the Malaysian econom y grew at an ave rage rate of m ore than 8% . Howev er, Mala ysia could no t shield itself from being negatively impacted by the 1997 Asian Financial Crisis where the nation suffered a 7.5% c ontraction in its Gross D omestic P roduct (G DP) in 1 998.

In 2000, M alaysia had a workforce (defined as persons between 15-64 years old) of slightly above 9 million. About 60% of the workforce were below 35 years of age. Union members accounted for about 8.15% of the labour force. Unemployment was reported at 3% of the labor force, and foreign workers accounted for one out of every seven jobs (Malaysia 1996-1998, 1996 ).

This scenario shapes the Malaysian labour market condition. Until 1997, the salary and wage rate in the country had experienc ed a significant g rowth. Th is was a result of the rapid econom ic growth and near p erfect emp loyment. T his paper will discuss the salary and wage practice in Malaysia. It will begin by describing the legal framework for wage and salary determination. It will then describe the Malaysian labour market and trends in salary and wage administration in the country. An examination of the role of unions is also included.

The legal framework for salary and wa ge payme nt in Malaysia is governed by the Employment Act 1955. The Act defines wages as basic pay and all other cash payments made to employees for their contract of service. The following payments, however, are no t included as part of wages:

The value of any house accomm odation, the supply of any fo od, fuel, light or water, and medical attendance.



Contributions paid by employers on their own account to any fund or scheme established for employee s’ benefit

or welfare including pension fund, provident fund, superannuation scheme, retrenchment scheme, termination scheme, layoff scheme, retirement scheme, and thrift scheme.
Traveling allowance or the value of any traveling concession. !


Any sum payab le to emplo yees to defray s pecial exp enses entailed on them by th e nature of the ir employm ent.

Under the Act, payment of wages must be mad e no later than the 7th day after the last day of a wag e period. A wage period mu st not exceed one mon th, and unless this period is specified in a contract of service, it is deemed to be one month. That is, employees are paid at least once a month. Employers, however, may pay wages at shorter intervals, say once a w eek or on ce every two weeks.

The Act specifies that when an emplo yer terminates an employee without notice, the wages owing to the employee must be paid no later than the day the service is terminated. If it is the employee who terminates the service without notice, payment must be made within 3 days from the day of such termination. If termination is with notice by either the employer or employee, wages must be paid by the end of the notice period. The Employment Act does not govern every aspect...

References: Ayadurai, D . (1985) . The Employer, the Employee and the Law in Malaysia. Singapore: Butterworth.
Chen, M. Y. (2001). Malaysia’s ‘Super Corrido r’ fails to attract financia l attention. The Wall Street Journal. 28 March.
Fernz, H . (1997) . Malaysia a m ajor impo rter of migran t workers in A sia. The New S traits Times, March 24.
Yeow, J. (1997). FMM denies claim of cheap foreign labor. The New Straits Times, August 2.
MDC (19 55). Emplo yment A ct, MDC, Kuala Lumpur, 1991.
Labor Force Survey Report 1995. Department of Statistics, Kuala Lumpur, 1996.
Business Monitor International (1996). Malays ia 1996-199 8: Annual report on go vernment, econom y, the business
environm ent, capital ma rkets and ind ustry, with forecas ts through end -1998
Malaysian Employer Federation Compensation and Salary Survey 1996. Malaysian Employer Federa tion, Kuala
Lumpur, 1997.
New Straits Times (1997). “Number of Expatriate Posts to Rise By 20 percent”. New Straits Times, March 7.
National Productivity Corporation (1997). Productivity Report 1996. National Productivity Corporation, Kuala Lumpur.
The Star Publicatio n (1998 ). 90% o f those laid-off finds job easily. The Star, April 21.
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