Employment Act to apply to all employees from 1 January 2023, some sections subject to increased salary threshold of RM4,000/month

 [Note: When this article was first published on 16 August 2022, the amendments to the Employment Act were scheduled to come into force on 1 September 2022. In late August 2022, the government announced that the implementation date would be deferred to 1 January 2023. This article has been edited to reflect the new implementation date, with any new text in red.]

When the Employment (Amendment) Act 2022 (“the Amendment Act”) was gazetted earlier this year, there was much confusion regarding what the scope of the Employment Act (“EA”) would be once the Amendment Act came into force. This confusion was fuelled by the government not amending the First Schedule at the same time the Amendment Act was passed, and also repeatedly stating that the EA’s scope would be expanded so that all employees regardless of salary would be entitled to the EA benefits and protections, with many industry experts sharing the view that such a blanket expansion would be impractical for many reasons.

With the gazetting of the Employment (Amendment of First Schedule) Order 2022 (“First Schedule Amendment Order”) on 15 August 2022, there finally is clarity on the scope of the EA from 1 September 2022 1 January 2023.

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

Prior to the new amendments, the vast majority of the EA only applied to employees earning up to RM2,000/month, or to specified groups of employees irrespective of wages (e.g. those engaged in or supervising manual labour, and several other groups). The existing EA set out specific provisions to enable non-EA employees to also be included in the sections of the EA regarding maternity protection (Part IX) and sexual harassment (Part XVA).

Following the First Schedule Amendment Order which will come into force on 1 September 2022 1 January 2023, the way the EA scope is defined has been reversed. While it previously only applied to employees earning up to RM2,000/month with some specific sections applying to all employees, it will now apply to all employees irrespective of wages, with some specific sections not applying to employees earning more than RM4,000/month. Here are the details:

1. The EA will now apply to “any person who has entered into a contract of service”.
2. However, the sections of the EA in relation to overtime payments and termination benefits will not apply to employees whose wages exceed RM4,000/month (the full list of excluded EA provisions is listed below).
3. The list of EA provisions which do not apply to domestic employees (previously known as domestic servants) has also been expanded.

This is the full list of EA provisions which will not apply to employees earning more than RM4,000/month:

• Subsection 60(3): Overtime for work on rest days.
• Subsection 60A(3): Overtime for work outside of normal working hours.
• Subsection 60C(2A): Shift work allowance.
• Subsection 60D(3): Overtime and allowance for work on public holidays.
• Subsection 60D(4): Overtime for work on holidays on half working days.
• Subsection 60J: Termination, lay-off, and retirement benefits.

What employers need to do

All employers will need to review their existing employment contracts and policies to ensure that they comply with the 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 includes contracts which were entered into before 1 September 2022 1 January 2023.

(For a more comprehensive look at the changes under the Amendment Act, read my earlier article: “Malaysia Employment Act amendments: 7 key changes for employers to note”)

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