The main categories recognized are for individuals who are engaged on a contract for services and  those on a contract of employment.

A contract of employment may be on a permanent or fixed-term basis. The employment may also be on a full-time, part-time or casual basis.

In order for there to be a valid employment contract, the usual requirements of a valid contract must be satisfied, namely that there is an offer of employment, there is acceptance of the offer and there must be consideration flowing between the parties.  The contract may be in writing, may be orally made or may be inferred from the conduct of the parties.

Pursuant to the Employment Act 1955 ("EA"), employment contracts lasting for more than one month are required to be in writing. However, failure to provide a written contract does not invalidate the employment relationship or contract terms.

Part-time employees receive similar protection as full-time employees, save that it is adapted to meet the nature of their part-time employment. This protection which includes statutory minimum benefits of annual leave, sick leave, holiday, and hours of work, is provided for under the Employment (Part-Time Employees) Regulations 2010 ("Regulations"). 

Yes, subject to the employer, employee and the assignee company consenting.

Upon a change in ownership of the business, the employment contracts of those employees who are part of the business being transferred terminate automatically upon the change occurring. There is no automatic transfer of employees to the buyer. If the buyer makes an offer of employment to the employees, the employees then have a right to accept or reject the said offer of employment. 

Unless it is otherwise provided for in their terms of employment, where the offer of employment is made within 7 days of the change of ownership on terms no less favourable and with the employee's years of service recognized, if the employee unreasonably refuses the offer of employment, he/she will not be entitled to termination benefits. 

Also, the statutory entitlement to minimum termination benefits only applies to employees who earn monthly wages of RM4,000 or below, or regardless of amount of monthly wages earned, are engaged in certain functions specified in Schedule 1 of the EA. 

No, a change in share ownership of the employer does not affect the employment relationship.

Generally, employers are not allowed to unilaterally change the employees' terms of employment. If the contract provides the right to effect unilateral change, such clauses are usually read in a restricted way so that any change is not to the detriment of the employee.

No. Malaysia does not recognize at-will employment. An employee whose employment is caused to be terminated by an employer can bring a claim for reinstatement on grounds of dismissal without just cause or excuse under s.20 of the Industrial Relations Act 1967.

Yes. In the event the Industrial Court, in adjudicating a claim under s.20 of the Industrial Relations Act 1967, finds that an employee was dismissed without just cause or excuse, in the case of a permanent employee, the Court may award the following: 

• reinstatement and up to 24 months back wages from the date of dismissal to date of reinstatement; or 
• up to 24 months last drawn salary as back wages and one month’s salary for each year of service in lieu of reinstatement (less payments already made to the employee, if any).

The Whistleblower Protection Act 2010 accords protection to a person who makes a disclosure of improper conduct to any enforcement agency in Malaysia. A whistleblower shall, upon receipt of the disclosure of improper conduct by any enforcement agency, be conferred with whistleblower protection as follows:

1. protection of confidential information;
2. immunity from civil and criminal action; and
3. protection against detrimental action,

and for the purpose of paragraph (c), the protection shall be extended to any person related to or associated with the whistleblower.

There is no general right to privacy in Malaysia except in very limited situations such as violation of modesty.

There is, however, personal data protection afforded to employees under the Personal Data Protection Act 2010 ("PDPA"). There are 7 principles under the Personal Data Protection Act 2010 which an employer must comply in processing the personal data of the employees. The principles are as follows: 

1. General Principle – processing of personal data must be with the consent of the owner of such personal data (data subject); 
2. Notice and Choice Principle – a written notice in both the national and English languages must be given to the data subject;
3. Disclosure Principle – personal data must not be disclosed without the consent of the data subject;
4. Security Principle – a data user must take practical steps to protect the personal data when processing it;
5. Retention Principle – personal data must not be kept longer than necessary;
6. Data Integrity Principle – a data user must take reasonable steps to ensure that the personal data is accurate, complete, not misleading and kept up-to-date; and
7. Access Principle – a data subject must be given access to his personal data. 

Employees may lodge a complaint to the Data Protection Commissioner should there be a breach of the employers' obligations under the PDPA.

Yes. Pursuant to the amendments to the EA which came into effect on 1.1.2023, the Director General of Labour may inquire into and decide any dispute between an employee and his/her employer in respect of any matter relating to discrimination in employment, and may also pursuant to such decision, make an order. 

Also, a private sector employee who has been unjustly discriminated against, can use that as a basis to make a claim for constructive dismissal or as grounds for victimization.

There was a change to leave benefits in Malaysia pursuant to the amendments to the EA, which came into effect on 1.1.2023. Post-amendment of the EA, the statutory minimum entitlement to annual leave and medical leave (which previously only applied to a specific group of employees) now applies to all employees.

Hence, now, all employees are entitled to paid annual leave to a statutory minimum of:-

• 8 days for every twelve months of continuous service if he has been in employment for a period of less than 2 years;
• 12 days for every twelve months of continuous service if he has been in employment for a period of 2 years or more but less than 5 years;
• 16 days for every twelve months of continuous service if he has been in employment for a period of 5 years or more.

Similarly, for medical leave, where hospitalization is not necessary, all employees are entitled to a statutory minimum of paid sick leave of:

• 14 days in each calendar year if he has been in employment for a period of less than 2 years;
• 18 days in each calendar year if he has been in employment for a period of 2 years or more but less than 5 years;
• 22 days in each calendar year if he has been in employment for a period of 5 years or more.  

Where hospitalization is necessary, the employee is entitled to an additional 60 days of paid leave. Prior to the amendments, where hospitalization is necessary, there was a cap of 60 days in total for medical and hospitalization leave. 

In addition to the above, the amendments to the EA introduced an increase from 60 consecutive days to 98 consecutive days of maternity leave, and 7 consecutive days of paternity leave. 

Where the employer provides more favourable leave benefits to their employees, the more favourable leave benefits would continue to apply. 

Post-termination non-competition clauses are not enforceable pursuant to Section 28 of the Contracts Act 1950. The law provides that any agreement in restraint of trade is void. Non-compete clauses during the validity of the contract are enforceable.  

Non-solicitation clauses are enforceable post-termination, if reasonable. 

The restraint must be reasonable to both parties and must not afford anything more than adequate protection of the interest it seeks to protect in particular in terms of duration, geographical coverage and scope of activity.

No, they cannot be terminated for not agreeing to a restrictive covenant as it is a new term which the employer is seeking to impose. If a restrictive covenant is to be agreed with the employee during the employment period, the consideration must be something more than what is provided for in their existing contract and is usually in the form of incentive payment.

Yes. Employers and employees are obliged to make contributions to the Employees Provident Fund ("EPF") which is governed by the Employees Provident Fund Act 1991. In relation to employees who are Malaysian or who have permanent residence, EPF is a compulsory retirement fund managed by the EPF Board, a federal statutory body under the purview of the Ministry of Finance. The EPF rate of contributions from the employer is calculated based on a proportion of the employee’s monthly wages. The usual contribution rate to EPF is 12% of wages by employers (13% for those earning RM5000 and below) and 11% by employees where the employees are aged 60 and below. 

Employers and employees are obliged to make contributions to the Employees’ Social Security Organisation (“SOCSO”) which is a scheme to provide certain benefits to the employees in cases of employment injury including occupational diseases and invalidity arising out of and during their employment. 

Statutory contributions are also required to be made to the Employment Insurance Scheme (“EIS”) which is an unemployment insurance scheme aimed to assist employees who have lost their jobs. 

Also, employees who earn monthly wages of RM4,000 or below, or regardless of monthly wages earned, are engaged in certain functions specified in Schedule 1 of the EA, are entitled to certain additional statutory minimum benefits pertaining to overtime payments, work on a rest day, shift allowances and termination benefits.

Mandatory retirement age clauses are permitted provided that they do not breach the Minimum Retirement Age Act ("MRA"). The MRA sets the minimum retirement age at 60 years old. An employer may not retire an employee before he or she attains this age. Any existing contractual term that provides for retirement at an earlier age is revised by law to 60 years. However, optional early retirement according to the employee’s contract of service or any applicable collective agreement is allowed.

Employers are still required to pay statutory EPF and SOCSO contributions post-retirement age, although at a rate that is lower than those below the age of 60. However, it is possible to have different contractual benefits under a post-retirement contract compared with a contract of employment of those who have not retired.

No, an employer generally cannot make the vaccine mandatory for its employees and the law does not make vaccination mandatory in Malaysia. The government encourages the public to take the vaccine, but it does not compel them to do so.

As there is no law compelling vaccination in Malaysia, the refusal to vaccinate would not, as a general rule, constitute just cause or excuse for dismissal. It is arguable though that in certain exceptional situations where due to the nature of work, there is a high risk of infection (e.g. hospital front-liners) or a high risk of serious consequences from infection (e.g. working in elderly care), that due to competing duties owed by an employer, the employer may be said to be acting reasonably in giving instructions to require an employee to be vaccinated and that the failure to comply without good reason, could justify dismissal. However, this position has yet to be tested in the Malaysian courts and it remains to be seen if this argument will be accepted.

Generally, employers are in a position to require employees to return to work in the office in the absence of a government order to shut down and their failure to be in the office would be regarded as misconduct. However, if the employee has a reasonable excuse for not returning to the office (e.g. the employee has been ordered to be quarantined), then that reasonable excuse would constitute a defense to the allegation of misconduct.