legal aspects of hrm-031011_115213

8/3/2019 Legal Aspects of HRM-031011_115213

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2006 UNITAR All Rights Reserved

Legal Aspects of HRM


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Why compliance with labour laws is important?

The historical background of Malaysias labourlaw

The role of the Ministry of Human Resourcesand its departments in administering labourlaws

Some significant provisions in major labourlaws

Managerial decisions and practices that willavoid legal liability

Contents


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The development and enforcement of labourlaws in Malaysia began to take shape upon thearrival of migrant labourers from China andIndia during British colonial rules in the 19 th century.

The labour laws established pertained mainly to

matters concerning immigration, entry of forcedlabour, housing, and health.In 1912, the first labour office was established inthe Straits Settlement and Federated Malay

States.

THE HISTORICAL BACKGROUND OFMALAYSIAS LABOUR LAW

THE EARLY ERA


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The basic principles that govern therelationship between the employer andthe employees in Malaysia were derivedfrom three main sources: English C ommon Law Malaysia Written Statutes, Decisions of the Civil and Industrial Courts.

THE HISTORICAL BACKGROUND OF

MALAYSIAS LABOUR LAW THE CONTEMPORARY LABOUR LAWS


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MAJOR LAWS INFLUENCING

EMPLOYMENT PRACTICES 1. The Employment Act 19552. The Wages Council Ordinance 19473. Employment (Termination and Lay-Off Benefits) Regulations 19804. The Children and Young Persons (Employment) Act 1966

5. The Employment (Restriction) Act 19686. The Employees Social Security Act (SOCSO) 19697. The Workmens Compensation Act 1952 8. Employees Provident Fund Act (EPF) 19519. Occupational Safety and Health Act 1944

10. The Trade Unions Act 195911. The Industrial Relations Act 1967


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THE MINISTRY OF HUMAN

RESOURCESThe basic objectives of the Ministry are: To protect the welfare of workers their safety,health and rights;To promote good employer-employee relationshipsthrough a stable and peaceful industrial relationssystem;To equip the unemployed with basic industrial skills

and to improve the skill level of the work force; andTo assist in maximising the countrys manpower resources through manpower planning.



Department of Labor Enforces the:

The Employment Act, 1955

The Workmens Compensation Act, 1952 The Wages Councils Act, 1947The Children and Young Persons Act (Employment), 1966The Employment (Restriction) Act, 1968The Workers Minimum Standards of Housing and Amenities Act,

1990The South Indian Labor Fund Ordinance, 1958 (revoked in 1999)This department can also convene the labor courtIndustrial CourtDepartment of Skill Development

THE MINISTRY OF HUMANRESOURCES

Departments in the Ministry:



Department of Industrial Relations Administers:The Industrial Relations Act, 1967 and helps in settling disputesbetween employers and employees through conciliation

THE MINISTRY OF HUMAN RESOURCES,contd.

Department of Trade Unions Enforces:The Trade Unions act, 1959. It has the authority to register and de-register trade unions, check a unions annual accounts and generallyto investigate complaints made against a trade union.

Department of Occupational Safety and Health Enforces:The OSHA, 1994 and the Factories and Machinery Acts, 1967


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THE EMPLOYMENT ACT 1955, contd.

Employees Covered Under The Act: All employees who earn less than RM1,500 per month;Employees, irrespective of their wages, who work

as manual laborers

supervise manual laborers operate or maintain a mechanically propelled

vehicle engage in any capacity in any vessel registered in

Malaysia (except officers)


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Section 63A of the Act requires employers to inform the nearestLabor Department's office of their business operations within 90days of formation/ registration or commencement of their business.

ADMINISTRATIVE REQUIREMENTS

the registered name, address and nature of business the name of the manager or persons in charge a statement of the categories and total number of workers

employed.

An employer who fails to provide such information or who gives falseinformation is liable, upon conviction, to a fine of RM2,000.

The information required to be furnished includes:



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CONTRACT OF SERVICE

Definition: A contract executed, whether orallyor in writing and whether by expressed orimplied condition, whereby one person agreesto employ another as an employee and that

the other agree to serve his employer as anemployee.


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A contract of service must be in writing if the period of employmentis more than 1 month.The contract of service is detailed out in the letter of appointment,and that the contract is deemed to have been accepted by theemployee once he reports for work upon receiving the letter.The content of the contract of service that must be in writingshould have the occupation, rates of wages and wage period,allowances, working hours, paid public holidays, annual leavesentitled, benefits, and notice of termination.RESTRICTIONS: Conditions of contract cannot be less favorablethan those stipulated in the Act, and that it cannot restrict the rightof an employee to join, participate in activities of, or organize atrade union.

THE EMPLOYMENT ACT 1955, contd. CONTRACT OF SERVICE


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. . . is the usual hours of work per day lessany intervals and rest for tea breaks andmeals.


NORMAL HOURS OF WORK

. . . . the number of hours worked in excess ofthe normal hours of work per day.Currently, the EA 1955 do not allow an employee to workovertime more than 108 hours a month.

OVERTIME WORK


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Employees can not be required to work: More than 8 hours a day (except where an employee

works less than eight hours on any days he can berequired to work up to nine hours on other days);

More than 10 hours a day working intermittently (i.e.that is in excess of a spread over a period of 10 hoursin one day);

More than 48 hours in one week.

THE EMPLOYMENT ACT 1955, contd. NORMAL HOURS OF WORK, contd.

NOTE:Employees can not be asked to work more than 5 hours without a break ofat least 30 minutes (except where work should be continuously performed,they can be given a total of 45 minutes rest within the 8 hours).


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Currently, there is no minimum wage legislation.The wages paid is subject to negotiations:

between an employer and an employee, or

between a trade union and an employer.

NOTE: However, under the Wages Councils Ordinance 1947, certaincategories of occupations (not unionized) are subjected to a

minimum wage. shop assistants, hotel and catering industry workers, Penang

stevedores, and cinema workers.Currently, the minimum wage for these groups of employees isRM250 per month.

THE EMPLOYMENT ACT 1955, contd. WAGES


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DEFINITION OF WAGES: All payments in cash payable to an employee for work done inrespect of his contract of service including his basic pay butexcluding:

housing and utility allowances, contribution to funds or schemes established for the benefit of

the employee, traveling allowances,

termination benefits, bonuses, commissions overtime payment.


WAGES, contd.


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The wage period should not exceed one month. Wages must be paid, in legal tender, within seven days after the

end of the wage period.

Upon a written request from the employee, the employer candeduct an employees wage for payment to: trade unions cooperative societies.Employers can deduct employees wages without first obtaining

employees consent or permission for deductions authorized by law(e.g. EPF, SOCSO, etc.). The total deduction of an employees wage should not exceed

50 percent of the wages.


WAGES, contd.


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The rate of pay for a day of paid leave (e.g. maternity leave, publicholiday, annual leave and sick leave) and the basis for thepayment for work on a public holiday, a rest day, or for overtimework is known as the ordinary rate of pay (ORP).

ORP includes basic wages and contractual bonuses but excludeshousing and utility allowances, contribution to funds or schemesestablished for the benefit of the employee, traveling allowances,

termination benefits, non-contractual bonuses, commissions,overtime payment, and payments for any work done on rest daysand public holidays


ORDINARY RATE OF PAY


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Section 60(I) provides the method for determining ORP.For a daily rated or a piece rate employee:

Total wages earned in the preceding wage period* Actual No. of days worked in that wage period*

*excluding the ten chosen public holidays/ rest days/any paid holidays substituted

For a weekly rated employee:

Weekly rate of 6 days

For a monthly rated employee:

Monthly rate of pay

26 days


ORDINARY RATE OF PAY, contd.


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The hourly ORP is derived by dividing the ORP per day with thenumber of normal hours of work (usually 8 hours).

Section 7A of the EA 1955 allows any employer to provideemployees more favorable terms and conditions of service thanthose required in the EA 1955

Thus, an employer may adopt any other method for calculating theabove rate of pay, as long as the results are not less than the ratedetermined by the above method.


ORDINARY RATE OF PAY, contd.


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WAGE RATE FOR OVERTIME WORK DURING ANORMAL WORKING DAY

An employee who works overtimeduring a normal working day should bepaid at least 1 times his hourly ORP.


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NORMAL HOURS OF WORK: For a daily, hourly or other similar rated employee:

Half a day or less: 1 days wage

More than half a day but less than 1 day: 2 days wages

For a piece -rated employee: Twice the ORP per piece

For a monthly rated employee: Half a day or less: half days wage

More than half a day but less than 1 day: 1 days wages

BEYOND NORMAL HOURS (OVERTIME) Overtime payment at the rate of 2 times his hourly ORP


WAGE RATE FOR WORK DURING A REST DAY


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NORMAL HOURS

Two days wages at his/her ORP, in addition tohis/her pay he is entitled to for that day.

BEYOND NORMAL HOURS 3 times his hourly ORP.


WAGE RATE FOR WORK DURING PAID PUBLICHOLIDAY


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ANNUAL LEAVE


REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE, contd.

Year of Completed Service With the SameEmployer

Annual LeaveEntitled

(No. of Days)

One year and over but less than two years 8

Two years or more but less than five years 12

Five years or more 16


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PUBLIC HOLIDAYS



Every employee is entitled to a minimum of ten gazetted publicholidays in a calendar year, inclusive of four compulsoryholidays:

National Day Kings Birthday Head of States Birthday

Labors Day The employer can choose the other six days from the list of

public holidays as announced by the government (e.g., HariRaya Puasa, Hari Raya Haji, Chinese New Years, Christmas,Deepavali, etc.).


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SICK LEAVE



Length of Service No. of Days EntitledPer Year

Less than two years 14

Two years but less than five years 18

Five years or more 22


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Female employees in agricultural and industrialundertakings are not allowed: To work between 10:00 p.m. and 5:00 a.m. (except

with the approval of the Director General of Labor) To work continuously for 11 hours without a break To work underground.


EMPLOYMENT OF WOMEN


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She is entitled to maternity leave of 60 days if she had been employed for 90 days during the nine months and at

least 90 days anytime within the 4 months immediately before

the confinement, does not have 5 surviving natural children, and has notified her employer.

She is entitled to receive maternity allowance at her normal rate of pay or RM6.00 a day, whichever is higher.


EMPLOYMENT OF WOMEN, contd.


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Normal Termination The period in the contract expires, at the completion of thework, or in accordance with the provisions in the contract.

Termination requiring notices , where: The contract has no provision on termination The employer has ceased operation or moved The requirements of the job have diminished

The employee refused to accept a transfer (if there is nosuch requirement in the contract).

a change in the ownership of the business


TERMINATION OF CONTRACT OF SERVICE


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Notice of termination:< 2 years of service - 4 weeks2 - 5 years of service - 6 weeks> 5 years of service - 8 weeks


TERMINATION REQUIRING NOTICE, contd.

In lieu of notice:The party terminating the contract pays to the other partya sum equal to the wages accrued during the period ofnotice.


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Termination for Special Reasons a) If the employee commits misconduct the employer may

dismiss him/her without notice after due inquiry (or

downgrade or impose any lesser punishment).b) If the employee or his dependents are threatened by dangerof violence or disease he can terminate the contract withoutnotice.

Breach of Contract

a) By employer - if he fails to pay wages within 7 days at theend of the wage period, or he fails to provide work or wages.

b) By employee - if he is absent for more than 2 consecutivedays without reasonable excuse and without informing orattempt to inform the employer


TERMINATION OF CONTRACT OF SERVICE, contd.


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Regulation 5 of The Employment Ordinance1980 states that an employee is deemed to have been

laid-off if: he is not assigned any work for 12 or more normal

working days within a period of 4 consecutive weeks;

he is not paid for the period in which he is not assignedany work.


TERMINATION OF CONTRACT OF SERVICE, contd.


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The Employment (Termination and Lay-off Benefits) Regulations 1980 states that the employer is not liable to pay any termination or lay-off benefits under the following categories of termination of services:

upon attaining the age of retirement as stipulated in the contractof service;

dismissal as a result of misconduct after due inquiry (i.e. a properdomestic inquiry);

voluntary termination of service for personal reason;


TERMINATION & LAY OFF BENEFITS

Contd. on next slide


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renewal of contract of service or re-engagement madeby the same employer under a new contract of serviceon the terms and conditions which are not lessfavorable than the previous contract; renewal or re-engagement takes effect on the endingof his employment under the previous contract;

renewal of contract of service or re-engagement undera new contract, has been offered at least 7 days beforethe date of termination of service and the terms andconditions are not less favorable than the previouscontract;


TERMINATION & LAY OFF BENEFITS, contd.

Contd. on next slide


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offer of renewal or re-engagement has been unreasonably refusedby the employee;

after receiving notice of termination of contract of service, the

employee leaves the service without prior consent of the employer,or without paying the employer the indemnity due in accordancewith the EA 1955;

where there is a change of ownership of the business, the newowner, within 7 days of the change offers to continue to engage the

employee under the terms and condition of employment not lessfavorable than those before and the employee unreasonably refusethe offer.




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Regulation 3 of The Employment Ordinance 1980 stipulates thatan employer can be liable for payment of termination or lay-off benefits to employees if:

the contract of service of the employee is terminated; if the employee is being laid off (retrenched) the employee has worked for at least 12 months

continuously for the same employer and the period betweenthe date of resignation and the date of re-employment

exceeds 30 days.




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Regulation 6 of The Employment Regulations 1980 stipulates that the lay-off benefits depends on the

employees length of service:



Length of Completed ServiceNo. of Days WagesEntitlement for eachYear of Employment

1 Year but less than two years 10Two years but less than five years 15Five years or more 20Pro-rata basis for an incomplete year, calculated to the nearestmonth.


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PURPOSE: Prevent exploitation of child labor. A child (under 14 yrs.) can only engaged in light work in a familybusiness

Young persons (14-16 yrs.) are restricted to working:

in light work which does not involve the use of machinery a maximum of 7 hours a day not later than 8:00 p.m.

THE CHILDREN AND YOUNG PERSONS(EMPLOYMENT) ACT 1966

THE EMPLOYMENT (RESTRICTION) ACT 1968All non-Malaysian citizens are required to hold valid work permitsbefore they can be employed locally.


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PRACTICES THAT CAN AVOID LEGAL LIABILITY

PROVIDE TRAINING Provide supervisors, managers, and executives with regular

updates on labor law and other related issues through regular,focused training sessions.

Employers should focus on communicating to employees their

commitment to a fair and just treatment of all employees.ESTABLISH A COMPLAINT RESOLUTION PROCESS

Establish a process for the internal resolution of employeecomplaints

Employee morale can be improved when employees are able topass along their concerns to upper level management.


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PRACTICES THAT CAN AVOID LEGALLIABILITY, contd.

Document HR Decision The nature of any HR decision, and the rationale

for it, should be clearly documented. In casesinvolving lawsuits, written documents provideeasier preparation for the legal challenge .

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