Don’t confuse about Employment Act Amendment 2022

Introduction

The Employment (Amendment) Act 2022, also known as Act 265, obtained Royal Assent on 26 April 2022 and was issued in the Federal Government Gazette on 10 May, following its passing in both Houses of Parliament. The revision to the First Schedule is to be enforced from 1 September 2022 onwards (Update on 26/8/2022: Enforcement date has been moved to 1 January 2023) .

Employment (Amendment) Act 2022

 

1. EA salary threshold increased from RM2,000 to RM4,000

Following the First Schedule Amendment Order which will come into force on 1 January 2023, the way the Employment Act (EA) scope is defined has been reversed.
Before 1 Jan 2023, the Act applied only to employees earning up to RM2,000/month, with some specified sections applying to all employees.
From 1 Jan 2023 onwards, it will apply to all employees, irrespective of wages, with some specifiied sections not applying to employees earning more than RM4,000/month as refer summary table below

EA Provision Applicable for Employee with Monthly Salary RM4,000 and Monthly Salary above RM4,000

All employers will need to review their existing employment contracts and policies in order to ensure full compliance with EA. It should be noted that Section 7 of EA states that any terms or conditions which are less favourable to an employee than those provided under the EA will be void and of no effect. This is also applicable to contracts entered into before 1 January 2023.

2. Maternity leave extended from 60 to 98 days

Before 1 Jan 2023, pregnant employees are entitled to a maternity leave of up to 60 days only.
From 1 Jan 2023 onwards, pregnant employees are entitled to a maternity leave of up to 98 days.
Where a female employee is entitled to maternity leave whether or not she is entitled to receive maternity allowance from her employer for the eligible period under Part IX Maternity Protection paragraph (c), or whether or not she has fulfilled the conditions set out in paragraph (2)(a), she may, with the consent of her employer, commence work at any time during the eligible period if she has been certified fit to resume work by a registered medical practitioner.
According to Institute of Strategic and International Studies (ISIS) Malaysia analyst Lee Min Hui, this long waited change will improve the state of gender equality and introduce family-friendly policies in the workplace. But now comes the harder question: What will these policies look like when implemented? How Companies Can Ensure Maternity Leave Doesn’t Hurt Women’s Careers? These are the questions that employers are seeking answers to, given concerns over ensuring that they will have the capacity to attract more high-quality workers, diversify the workforce and keep women in leadership roles — potentially enhancing firm profitability.

3. 7 days paid paternity leave introduced

Before 1 Jan 2023, there is no mention of paternity leaves in the Employment Act.
From 1 Jan 2023 onwards, Seven (7) consecutive days of paternity leave introduced in respect of each confinement and restricted to five confinements irrespective of the number of spouses.
A married male employee shall be entitled to paternity leave from his employer if: he has been employed by the same employer at least twelve months immediately before the commencement of such paternity leave; and that he has notified his employer of the pregnancy of his spouse at least thirty days from the expected confinement or as early as possible after the birth.
This will help male employees in their role as father to play their part during the first days following childbirth, and help change norms towards men playing more equal roles at home.

4. Employees can apply for flexible working arrangement

Before 1 Jan 2023: employees must work in office on working days as per the shifts agreed in the contract.
From 1 Jan 2023 onwards: employees may apply “for a flexible working arrangement to vary the hours of work, days of work or place of work”, and the applications shall be subject to their employers’ approval.
Considerations for employers: whether you approve or refuse an application, you must respond to it in writing within 60 days after receiving it. For every application refused, you should provide valid reasons for the refusal. It is advisable that you prepare a guideline or policy of flexible working arrangement beforehand for your company in order to ensure that you are not caught off guard on 1 January, and also to lay the foundations for the anticipated changes in the next couple of years.
Considerations for employees: You make your request for the desired working arrangement to your employer in writing with proper justification.

5. Reduce maximum weekly working hours from 48 to 45 for non-shift and shift employees

Before 1 Jan 2023, the maximum working hours per week for non-shift and shift employees is 48 hours.
From 1 Jan 2023 onwards, hours will be reduced reduces the maximum working hours per week to 45 hours, for all employees under the scope of EA 1955, irrespective of whether they are non-shift employees or shift employees. Apart from reducing the maximum working hours per week to 45 hours, the other existing provisions in the EA 1955 that governs working hours and shift work remain unchanged.
There are 4 scenarios shared by Malaysian Employers Federation, 3 of which are for non-shift employees, and 1 for shift employees. With the understanding that businesses may have different working hours arrangements, the scenarios below are examples relevant to an average businesses: –

Scenario 1: Non-Shift Employees Working on an 8 hours per day (Excluding Break), 5 days per week.

  • This is within the requirements of EA 1955, because the maximum 8 hours per day and correspondingly with total hours of work per week of 40 hours is within the limit of maximum working hours of 45 per week.
  • Overtime limit remains at the maximum 4 hours per day on the working days.

Scenario 2: Non-Shift Employees working on 8 hours per day (Excluding Break), 6 days per week

  • Whilst the 8-hour limit is adhered to for 5 days in the week, the Company can observe a further 5 hours on the 6th day, to ensure compliance to the maximum 45 working hours per week.
  • Overtime limit remains at the maximum 4 hours per day on 5 working days.

Scenario 3: Non-Shift Employees working on a 9 Hours Per Day (Excluding Break) 5 Days per week

  • By agreement under the employment contract, if the number of hours of work in one or more days is less than 8 hours, the limit of 8 hours may be extended to a maximum of 9 hours on the remaining days, subject always to the maximum limit of 45 hours per week.

Scenario 4: Shift Employees’ possible shift roster adjustment

“Shift work” is defined as “…work which by reason of its nature requires to be carried on continuously or continually, as the case may be, by two or more shifts.”

Employees engaged in shift work may be required to work for more than eight (8) hours per day, subject to the requirement or more than 45 hours per week. It is provided that the average number of hours worked over three (3) weeks does not exceed 45 hours per week.

Working hours may need to be adjusted to ensure compliance with the new amendments. This may include extending the lunch break, or what is termed as “period of leisure” in the EA 1955 so that the normal hours of work is 7.5 hours on six (6) working days a week. Companies will be liable to pay overtime if their working hours exceed 45 hours per week.

Example of Shift Roster Adjustment for Shift Employees after Employment Act Amendment 2022

 

  • Total working hours over 3 weeks: 60 hours + 60 hours + 15 hours = 135 hours.
  • Average working hours per week: 135 hours/ 3 weeks = 45 hours.
  • Referring to the table above and as a further explanation of paragraph above, although a shift worker’s hours of work is 12 hours, no overtime is payable.

 

6. Calculate overtime after change of 45 weekly working hours

Pursuant to the reduction in weekly working hours to 45 hours, the change is reflected in the overtime calculation.
Before 1 Jan 2023, the calculation is based on 48 working hours per week.
From 1 January 2023 onwards, the calculation should be based on 45 hours per week.
There is no amendment to Section 60I on the formula for calculation of employee’s ordinary rate of pay (O.R.P.). Furthermore, overtime at the statutory rates at the hourly rate of pay (H.R.P.) will be payable if the employee works beyond the normal hours of work.
OT Entitlement Calculation
Summary Table of Overtime entitlements under the Employment Act

Scenario 1: Non-Shift Employees Working on an 8 hours per day (Excluding Break), 5 days per week.

Employees working in excess of the 8 hours on their working days, and on their off day, i.e., the 6th day, will be paid overtime, calculated at the prevailing rate of 1.5 times the hourly rate of pay (H.R.P.). Employees working on a rest day or public holiday will continue to be paid on the ordinary rate of pay (O.R.P.).

 

Scenario 2: Non-Shift Employees working on 8 hours per day (Excluding Break), 6 days per week

Employees working in excess of the 8 hours on the 5 working days, and in excess of the 5 hours on the 6th day, will need to be paid overtime, calculated at the statutory rate of 1.5 times H.R.P.. Employees working on a rest day / public holiday will continue to be paid on the O.R.P..

 

Scenario 3: Non-Shift Employees working on a 9 Hours Per Day (Excluding Break) 5 Days per week

Assuming that a company works 9 hours per day, for 5 days per week from Monday to Friday, employees working in excess of the 9 hours on their working days, and on their off day, i.e., the 6th day, will have to be paid overtime, calculated at the prevailing rate of 1.5 times the H.R.P.. Employees working on a rest day / public holiday will continue to be paid on the O.R.P.

 

7. Calculating wages for incomplete month’s work

From 1 Jan 2023 onwards, an employee who is employed on a monthly rate of pay and has not completed a whole month of service-
  • where he commenced employment after the first day of the month;
  • where his employment was terminated before the end of the month;
  • where he took leave of absence without pay for one or more days of the month; or
  • where he took leave of absence by reason of having been called up for national service

shall be paid wages due to him for that month calculated according to the following formula:                  

Monthly wages/Number of days of the particular wage period x Number of days eligible in the wage period

This amendment serves clarify the long-established practice in wage calculation for incomplete month’s work. It is advisable that employers refer to the stated formula when calculating wages for incomplete months.

8. Protection from discrimination

From 1 Jan 2023 onwards, the Director General of Labour may inquire into and decide on any dispute between an employee and his employer in respect of any matter relating to discrimination in employment. Employers who commits an offence and shall, on conviction, be liable to a fine not exceeding RM50,000; and shall also, in the case of a continuing offence, be liable to a daily fine not exceeding one thousand ringgit for each day the offence continues after conviction.
In essence, EA introduces a new measure against discrimination, and it does so by assigning authority to the Director General of Labour to adjudicate and decide on cases of employment discrimination, and the decision of the Director General would be law, and thus non-compliance would be an offence.

 

9. Exhibit Notice on sexual harassment awareness

From 1 Jan 2023 onwards, an employer shall, at all times, exhibit conspicuously at the place of employment, a notice to raise awareness on sexual harassment. In addition, there is ab increase the fine which an employer is liable to pay for failure to, amongst others, inquire into complaints of sexual harassment from RM10,000 to RM50,000.
Employers must post a notice raising awareness on sexual harassment in the workplace to educate employees.
Before 1 Jan 2023, sexual harassment is mentioned in EA. However, there was no strict requirement for employers to display notice explicitly to raise awareness on sexual harassment.

 

10. Bonus: Socso Contribution maximum capped at RM5k

Employees’ Social Security (Amendment) Bill 2022 passed the the maximum monthly salary ceiling limit increase from RM4,000 to RM5,000 for contributions. This will give wider protection to employees earning more than RM4,000 to RM5,000 as the cost of living has now increased. It also involves temporary disability benefits, permanent disability benefits, disability pensions and retirement pension.

Before 1 Jan 2023, for example, an employee who is 30 years old and earns more than RM5,000 will be eligible to receive permanent disability benefits and the calculation of the lump sum payment for that employee, according to the existing salary ceiling, amounting to RM177,252.30.
In contrast, from 1 Jan 2023 onwards, based on the calculation of the new salary ceiling, the employee will receive a total of RM222,126.30. In this regard, there is an increase of 25.3% for the new salary ceiling compared to the existing salary ceiling.

 

Conclusion: What employers need to do after new Employment Act amendments

All employers will need to review their existing employment contracts and policies to ensure compliance with EA. It should be noted that Section 7 of the EA states that any terms or conditions which are less favourable to an employee than those provided under the EA will be void and of no effect. This also applies to contracts entered into before 1 January 2022.

The same categories of employees in the states of Sabah and Sarawak are covered by separate Labor Ordinances that closely mirror the provisions of the EA.

Employers should continue to monitor developments to remain in compliance while reviewing the potential impact of the amendments on their policies and practices.

 

Reference:

Disclaimer: This article by Cheng & Co is for educational and informational purposes only, updated t as of the date of publication and may not take into account changes or developments that occur after this date. All information are of a general nature and does not address the specific circumstances of any particular individual or entity. By proceeding further and in exchange for the use of this document, you agree to this disclaimer and shall not to hold Cheng & Co, the authors and anyone associated with the preparation of this article liable for any damages, losses or claims arising from any decision you make based on the information or contents of this document. You are advised to seek guidance further guidance from the Labour Office (JTK).

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