Employment Act 1955 Malaysia | Key Points Explained

Introduction: What Is the Employment Act 1955?

The Employment Act 1955 is Malaysia’s main piece of labour legislation, regulating the relationship between employers and employees in Peninsular Malaysia and Labuan.

It sets the minimum standards of employment, including wages, working hours, leave, benefits, and termination rights.

This law ensures that employees are treated fairly and that employers follow standard labour practices that align with Malaysia’s labour policy and international standards.

In simple terms: The Employment Act 1955 = Malaysia’s foundation for fair employment and HR compliance.

The Purpose of the Employment Act 1955

The main goal of the Employment Act 1955 is to protect workers’ rights and provide a legal framework for employment relationships.
It aims to ensure fairness, transparency, and harmony between employers and employees.

Define employee rights and employer duties.

It outlines what employers must provide (e.g. wages, rest days, leave) and what employees are entitled to.

Prevent exploitation and unfair treatment.

It ensures employees receive fair pay and safe working conditions.

Standardize employment practices.

The Act provides uniform standards for employment across Malaysia.

Support social and economic stability.

A fair labour system helps maintain a productive and equitable workforce.

The Employment Act provides the “minimum floor” of protection — companies can offer more benefits, but not less.

Why Do We Need the Employment Act?

Before the Act, everything depended on “trust” and individual contracts. That easily leads to abuse and disputes.

The Employment Act exists to:

Protect basic rights

so employees are not underpaid, overworked, or unfairly dismissed.

Give clear rules

so employers know the minimum standards and don’t accidentally break the law.

Create a level playing field

so companies compete on productivity and service, not on who can exploit staff the most.

The Act as a Minimum “Floor”: Sections 7, 7A & 7B

These three sections are the “philosophy” of the Act:

Section 7

If your employment contract gives less than what the Act says (for example, less annual leave), that clause is void. The Act’s more favourable term automatically replaces it.

Section 7A

You can give better benefits (more leave, higher allowance, etc.). The Act is a floor, not a ceiling.

Section 7B

If the Act is silent on something (e.g. bonus structure), you can decide by contract.

Where Does the Act Apply, and Who Is Covered?

Geographic Scope: Section 1

The Employment Act 1955 applies to:

It does not apply in Sabah and Sarawak – those are covered by the Labour Ordinance (Sabah Cap. 67) and Labour Ordinance (Sarawak Cap. 76) instead.

If your SME has branches in both KL and Kota Kinabalu, you are dealing with different laws.

Who Is an “Employee”? Section 2 & First Schedule

After the 2022 amendments (in force from 1.9.2022 and 1.1.2023), the Act now covers all employees under a “contract of service”, regardless of salary.

The First Schedule now says:

However, there are important exceptions for certain provisions.

Employees Earning More Than RM4,000 (Paragraph 1A, First Schedule)

If an employee earns more than RM4,000/month, the following sections do not apply to them unless they fall into certain special categories (manual workers etc.):

Section 60(3)

Overtime for work on rest days

Section 60A(3)

Overtime for work in excess of normal hours

Section 60C(2A)

Shift work allowance

Section 60D(3) & (4)

Extra pay for work on public holidays

Section 60J

Statutory termination, lay-off and retirement benefits

Practical meaning for SMEs:

A manager on RM6,000 is still covered by the Act for maternity, paternity, discrimination, sexual harassment, etc.

But their overtime, rest day pay, PH pay and termination benefits are based on contract, not those sections of the Act (unless they are manual workers, drivers, etc.).

Who Is Not Fully Covered? Domestic Employees & Others

The Act also treats domestic employees differently under the First Schedule, paragraph 2(5):

“He is engaged as a domestic employee.”

For domestic employees (maid, live-in cleaner, etc.), the following do not apply:

So domestic employees do not enjoy many of the core protections of the Act, including maternity leave under Part IX.

SME takeaway:

Most SME staff (admin, sales, warehouse, drivers, technicians, etc.) are fully within the Act. Domestic employees and some higher earners are partially excluded from specific sections, not the whole law.

Key Areas Covered by the Employment Act 1955

The Act covers several major aspects of employment relationships, including:

Working Hours & Rest Days

Wages & Payment

Leave Entitlements

Flexible Working Arrangements (FWA)

Protection for Women & Maternity

Termination and lay-off benefits

Prohibition of Forced Labour & Harassment

HR Insight: Compliance isn’t just about avoiding penalties — it’s about maintaining fairness and a good employer brand.

Who Enforces the Employment Act 1955?

The Director General of Labour (DGL) under the Ministry of Human Resources (MOHR) is responsible for enforcing the Act.

The DGL has the authority to:

Penalties for non-compliance can reach up to RM50,000 per offence.

Why Is the Employment Act So Important for SMEs?

For SME owners, the Act is important because it:

Reduces disputes – clear rules mean fewer arguments about “what is fair”.
Prevents costly claims – non-compliance can lead to fines, back pay, and industrial court cases.
Builds trust with staff – when employees know you follow the law, they are more loyal and productive.
Supports digitisation & HR systems – payroll, overtime, leave, and HR software (like your accounting/HR system) must be configured based on EA 1955 rules.

Clerks handling HR/payroll should treat the Act as their daily reference manual.

Why the Employment Act Matters for Employers & HR

HR Perspective:

Employer Benefits:

When your HR policies align with the Employment Act, your company operates confidently within the law.

Employment Contracts: Get It Right from Day One

Written Contract Requirement: Section 10

Under Section 10, a written contract of service is compulsory when:

Tip: In practice, you should always issue written contracts. Verbal agreements = future headaches.

What Your Contract Should Cover (At Minimum)

Based on Sections 10–12, 18, 59, 60A, 60D, your contract should clearly state:

Job title & brief job description
Work location (and transfer clause if any)
Wage rate and wage period (e.g. monthly) – Section 18
Normal hours of work and any shift arrangements – Section 60A
Rest days & public holidays – Sections 59 & 60D
Overtime rules & rate (if applicable) – Sections 60A(3), 60D(3)
Leave entitlements: annual, sick, maternity/paternity (where applicable) – Sections 60E, 60F, 37, 60FA
Termination and notice period – Section 12

A good contract mirrors the Act or goes beyond it – never below.

Wages, Deductions & Payment Rules

Wage Period & Payday: Sections 18 & 19

Wage period (Section 18)

Cannot exceed one month.

Payment deadline (Section 19)

Wages must be paid no later than the 7th day after the last day of the wage period.

How Wages Must Be Paid: Sections 25 & 25A

Based on Sections 10–12, 18, 59, 60A, 60D, your contract should clearly state:

The employee requests it in writing

The Director General approves.

Lawful Deductions: Section 24

You cannot simply deduct anything you like from wages. Section 24 allows only specific deductions, such as:

Overpayment of wages (within the last 3 months)
Indemnity for termination without notice (Section 13)
Advances (without interest)
Statutory deductions (EPF, SOCSO, EIS, PCB)
Other deductions with employee’s written consent and, in some cases, Labour Department approval

In general, total deductions in a month cannot exceed 50% of that month’s wages.

SME tip: Always keep written proof for any non-statutory deduction. No “verbal only”.

Working Hours, Overtime & Leave (Part XII)

This is where SMEs most often get caught.Wage Period & Payday: Sections 18 & 19

Normal Hours of Work & Weekly Limit: Section 60A

Under the amended law:

Overtime (Section 60A(3))

Important:
For employees earning more than RM4,000/month, Section 60A(3) on overtime does not apply unless they fall under the special categories in the First Schedule (manual workers, drivers, etc.).

Rest Days: Sections 59 & 60

Public Holidays: Section 60D

Employees are entitled to 11 paid public holidays per year, 5 of which are compulsory:

Work on a public holiday is subject to special rates under Section 60D(3) — typically at least double or triple the hourly rate (depending on whether it’s normal hours or overtime), or a substitute holiday.

Again, Section 60D(3) & (4) do not apply to those above RM4,000/month (unless non-exempt).

Annual Leave: Section 60E

Minimum annual leave per year of service:

Sick Leave: Section 60F

Paid sick leave (with medical certificate) per year:

Maternity & Paternity Leave

Maternity Protection: Part IX, Sections 37, 41A & 42

Section 37 – Maternity Leave

Maternity Allowance

Job Protection (Sections 41A & 42)

Wilful breach of contract (Section 13(2))

Misconduct (Section 14(1))

Closure of business

The burden of proof is on the employer to show termination is not based on pregnancy.

Paternity Leave: Section 60FA

The 2023 amendment introduced paternity leave:

Employed by the same employer for at least 12 months immediately before the leave

Has notified the employer of the pregnancy at least 30 days before expected confinement or as early as possible after the birth

Flexible Work, Discrimination & Sexual Harassment

Flexible Work Arrangements: Part XIIC, Sections 60P & 60Q

Employees can now apply for flexible work arrangements (working hours, days, or place of work).

Whether the application is approved

If rejected, reasons for rejection (Section 60Q).

Anti-Discrimination: Section 69F

Section 69F gives the Director General the power to inquire into and decide disputes relating to discrimination in employment (e.g., unfair treatment based on gender, religion, etc.). Failure to comply with his order can lead to a fine up to RM50,000, with RM1,000 per day for continuing offences.

Sexual Harassment: Part XVA (Sections 81A–81H)

Key points:

SME tip: Even small offices should have a simple written policy and reporting channel.

Foreign Employees: Part XIIB (Sections 60K, 60KA, 60M)

If your SME hires foreign workers:

Section 60K – You must obtain prior approval from the Director General before employing a foreign employee and meet certain conditions (no outstanding offences, etc.).
Section 60KA – Imposes further obligations on employers regarding the welfare and management of foreign employees.
Section 60M – You cannot terminate a local employee just to replace them with a foreign employee.

Termination, Notice & Misconduct

Notice Periods: Section 12

Minimum notice periods under Section 12 (if not otherwise agreed by contract):

Termination Without Notice: Section 13

Under Section 13, either party can terminate the contract without notice by paying an indemnity in lieu of notice equal to the wages for the notice period.

Termination for Misconduct: Section 14

For dismissal due to misconduct (Section 14):

Skipping proper inquiry = very risky in industrial disputes.

Statutory Termination Benefits: Section 60J

Section 60J provides for statutory termination, lay-off and retirement benefits but does not apply to employees earning more than RM4,000/month (unless they fall under the special categories in the First Schedule).

Record-Keeping & Inspections

Registers & Records: Section 61

Employers must keep proper registers of employees and payments and preserve them for at least 6 years.Registers & Records: Section 61

Labour Inspections: Part XIV

Under Part XIV, labour officers have the power to:

If your records are in order (or digitised properly), inspections are much less stressful.

Offences, Penalties & Forced Labour

Forced Labour: Section 90B

Section 90B makes forced labour a specific offence. An employer commits an offence if they:

Penalty on conviction:

General Penalty: Section 99A

If the Act or regulations are breached and no specific penalty is provided, Section 99A applies:

There are also specific penalty provisions like Section 100 for failures relating to rest days, overtime, holidays, annual leave and sick leave.

Common Misunderstandings About the Employment Act 1955

HR Perspective:

Myth Reality The Act only covers low-wage workers.

Wrong. It now covers all employees in Malaysia.

HR can decide leave benefits freely.

No. Minimum entitlements are fixed by law.

High-salary staff don’t have labour rights.

They do — only certain financial benefits differ.

Verbal contracts are enough.

Always have a written contract of service for legal clarity.

Conclusion: Employment Act 1955 — The Foundation of Malaysia Labour Law

The Employment Act 1955 forms the backbone of Malaysia’s labour law, ensuring every employee is treated fairly and every employer understands their obligations.

For HR and business owners, compliance isn’t just legal — it’s strategic.
A company that respects Malaysia’s labour laws builds stronger teams, reduces disputes, and creates long-term business stability.

For SME owners and clerks:

The Employment Act is not just a legal threat – it’s a guide to building a fair, sustainable workplace.
When your HR and payroll systems follow the Act, you reduce risk, build trust, and make it easier to scale and digitise operations.
Use the section references in this article to cross-check against the official Act whenever you set or review your HR policies.

Disclaimer: This article is for general information only and does not constitute legal advice. For specific cases, always consult a qualified lawyer or the Labour Department (JTK).

Frequently Asked Questions

What is the Employment Act 1955?

It’s Malaysia’s main employment law that governs the terms and conditions of employment, ensuring fair treatment for all employees.

Who does the Employment Act 1955 apply to?

It applies to all employees in Peninsular Malaysia and Labuan, regardless of salary, with some exceptions for financial benefits above RM4,000/month.

What is the purpose of the Employment Act 1955?

To protect workers’ rights, regulate employer-employee relationships, and promote fair labour practices.

How many working hours are allowed in Malaysia?

The Act limits working hours to 45 hours per week, excluding meal breaks.

What leave benefits are employees entitled to?

Employees are entitled to annual leave, sick leave, maternity/paternity leave, and paid public holidays.

What happens if an employer violates the Employment Act?

Employers can face fines of up to RM50,000 per offence, and employees may file complaints with the Labour Department.

Is the Employment Act the same across Malaysia?

It applies to Peninsular Malaysia and Labuan. Sabah and Sarawak have separate labour ordinances.

Why do I need the Employment Act if I already have a contract?

Because Section 7 says any contract term that is less favourable than the Act is void. The Act’s minimum standard will automatically overwrite it.

Who is not fully eligible under this Act?

Employees in Sabah & Sarawak – they are governed by different labour ordinances.
Domestic employees – many core protections like rest days, OT, annual leave and maternity/paternity do not apply to them under the First Schedule.
Employees earning more than RM4,000/month – they are excluded from statutory OT, rest day/PH OT, shift allowance and statutory termination benefits under certain sections (60(3), 60A(3), 60C(2A), 60D(3), 60D(4), 60J) unless they fall into special categories (manual workers, etc.). Ganlaw +1

What is the current maternity leave in Malaysia?

Under Section 37, the minimum paid maternity leave is 98 consecutive days for each confinement, subject to conditions.

Is paternity leave mandatory?

Yes. Section 60FA gives eligible married male employees 7 consecutive days of paid paternity leave per confinement (up to 5 confinements), subject to 12 months’ prior service and proper notice.

What is the current maximum working week?

Under Section 60A (as amended), the maximum normal hours of work are:

Any work beyond normal hours is overtime and must be paid at not less than 1.5x the hourly rate of pay for employees covered by Section 60A(3).

How much notice must I give to terminate an employee?

Under Section 12, if there’s no other agreed notice in the contract:

Can I terminate a pregnant employee?

Very risky. Under Section 41A, it is an offence to terminate or give notice of termination to a pregnant employee or one ill due to pregnancy, except for:

The burden of proof is on the employer.

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