Employment Act amendment 2022: what changed for Malaysian employers

What the Employment Act amendment 2022 is

The Employment Act 1955 is the main statute on minimum terms of employment in Peninsular Malaysia and Labuan: contracts, wages, hours, rest days, leave, termination and the powers of the Department of Labour (JTKSM). The Employment (Amendment) Act 2022 (Act A1651) made the largest set of changes to it in decades. After a deferral from 1 September 2022, the amendments came into force on 1 January 2023.

JTKSM describes the purpose as improving employee protection and welfare and bringing the law in line with international labour standards. In practice the changes fall into three groups: who is covered, time and leave, and new protections against forced labour, discrimination and harassment.

The amendment applies to private-sector employment. The public service and Sabah and Sarawak, which are governed by their own Labour Ordinances, follow separate rules.

Who the Act covers now: the RM4,000 wage threshold

Before 2023 the Act protected mainly employees earning RM2,000 a month or less, plus manual workers and some other categories. Through the Employment (Amendment of First Schedule) Order 2022, which took effect on the same date, the Act now applies to every employee under a contract of service, irrespective of wages.

A wage line still matters for a short list of provisions. For employees earning more than RM4,000 a month, the Act's provisions on the following do not apply:

• overtime pay for work beyond normal hours;
• pay rates for work on rest days and public holidays;
• shift work allowance;
• termination, lay-off and retirement benefits.

Those items are then a matter for the contract. The exclusion does not apply to the categories listed in the First Schedule, such as manual workers, people supervising manual workers and drivers: they keep the full protection whatever they earn.

Everything else, including the 45-hour limit, leave entitlements, the flexible working right and the anti-discrimination and anti-harassment rules, applies to all employees. A common mistake is assuming the amendment gave every employee statutory overtime; it did not. Overtime under the Act still stops at the RM4,000 line for employees outside the First Schedule categories.

Working hours: the 45-hour week

Maximum normal hours of work dropped from 48 to 45 hours a week. The daily limits and rest-break rules stay in place, and the reduction also applies to shift work. Work beyond normal hours is overtime and is paid at the statutory rate for employees within the overtime threshold.

What to check:

• Rosters, shift patterns and attendance systems built around a 48-hour week.
• Contracts and handbooks that still state 48 hours.
• How overtime is approved and recorded, especially for employees who moved into overtime coverage when the threshold rose from RM2,000 to RM4,000.

Our Shift Change Room lesson walks staff through hours, rest days and overtime decisions in a 3D scene, so supervisors can practise the calls they make on a real roster.

Leave: maternity 98 days, paternity 7 days, sick and hospitalisation

The amendment also widened protection against dismissal for pregnant employees and those with an illness arising from pregnancy. Termination is allowed only on limited grounds such as misconduct, wilful breach of contract or closure of the business, so line managers need to route any such case through HR.

Paternity leave is for married male employees and has eligibility and notice conditions in the Act. Check the current text and your leave policy wording, and make sure your HR system can count births and track the separate hospitalisation balance. The Leave & Time Off lesson covers the entitlements and the common edge cases.

Flexible working arrangements

The amendment introduced a right for employees to apply for a flexible working arrangement that varies their:

• hours of work,
• days of work, or
• place of work.

The application is made in writing, subject to the terms of the contract or any collective agreement. The employer must approve or refuse in writing within 60 days and, if it refuses, must state the grounds.

This is a right to request, not a right to receive. The Act does not require an employer to run a hybrid or remote-work scheme. What it does require is a documented, timely decision with reasons. Good practice:

• Publish a short procedure: how to apply, who decides, how long it takes.
• Give managers objective grounds to assess requests (operational cover, safety-critical roles, client commitments).
• Keep the application, the decision and the reasons on file.
• Apply the same criteria consistently so the decision cannot be read as discriminatory.

See the Flexible & Hybrid Work lesson for worked requests.

Forced labour, discrimination, harassment and foreign employees

Forced labour

It is now an offence for an employer to threaten, deceive or force an employee to do any activity, service or work and to prevent that employee from leaving the place where it is done. The penalty is a fine of up to RM100,000, imprisonment of up to two years, or both. Withholding passports, debt bondage through recruitment fees and locking accommodation are typical red flags that compliance and procurement teams should audit, including at contractors.

Discrimination complaints

The Director General of Labour can now inquire into and decide disputes about discrimination in employment between an employee and employer, and make orders. Failing to comply with an order is an offence. Recruitment, promotion, pay and termination decisions should be documented with job-related reasons. The Anti-discrimination lesson covers the decisions where bias most often creeps in.

Sexual harassment

Employers must display a notice conspicuously at the workplace to raise awareness of sexual harassment, in addition to the existing duty to inquire into complaints. This sits alongside the Anti-Sexual Harassment Act 2022, which set up a tribunal for complaints. Pair the notice with training; the Anti-Sexual Harassment lesson lets staff practise recognising and reporting harassment in a 3D workplace.

Foreign employees and contractors for labour

Hiring a foreign employee now needs the Director General's prior approval, not just notification, and approval can carry conditions. Contractors for labour must have a written contract with the principal. The amendment also presumes an employment relationship in certain situations unless the employer proves otherwise, which matters for gig-style or "consultant" arrangements.

Employer checklist

1. Map your workforce against the RM4,000 threshold and the First Schedule categories, so payroll knows who gets statutory overtime and termination benefits.
2. Update contracts and the handbook: 45 hours, leave figures, flexible working procedure, pregnancy protection and the harassment complaint route.
3. Reconfigure payroll and HR systems for paternity leave, separate hospitalisation leave and overtime for newly covered staff. The Pay, Payslips & Claims lesson helps staff read the result.
4. Display the sexual harassment notice at every workplace and site.
5. Audit for forced labour indicators in your own operations and labour contractors, and check foreign-worker approvals.
6. Train managers, because most breaches happen in a line manager's decision on a roster, a leave request or a flexible working application.

The HR Compliance & Respect at Work topic groups these lessons into one programme with a certificate.