The Employment Act 1955 is the primary legislation governing employment practices in Malaysia. It outlines the rights and responsibilities of both employers and employees, ensuring fair labour standards across industries. Recent amendments have further refined the Act to align with modern work arrangements, focusing on employee welfare and employer compliance.

For business owners, HR professionals, and managers, understanding the Employment Act 1955 is crucial in maintaining a compliant and productive workplace. This guide provides a practical breakdown of key employer obligations, covering contract terms, wages, leave entitlements, termination procedures, and workplace protections.

By staying informed and adhering to legal requirements, employers can foster a positive work environment while avoiding penalties for non-compliance.

Who is Covered Under the Employment Act 1955?

The Employment Act 1955 applies to certain categories of employees, primarily those earning a monthly salary of RM4,000 and below. However, recent amendments have expanded certain provisions to cover all employees, regardless of salary, particularly in areas like maternity benefits and sexual harassment protection.

Key Coverage Details:

Employers must ensure that contracts and policies align with the Act’s provisions, as failing to comply can result in legal repercussions.

Core Employer Obligations Under the Employment Act 1955

1. Employment Contracts

A written employment contract is mandatory for employees covered under the Employment Act 1955. The contract should clearly outline:

To prevent disputes, contracts should be clear, detailed, and legally compliant with the Act.

2. Wages & Overtime Regulations

To address rising living costs, the minimum wage has been increased to RM1,700, effective February 2025.

While bonuses and incentives are not mandatory, many employers offer them to retain and motivate employees.

Failure to adhere to wage regulations under the Employment Act 1955 can lead to hefty fines or legal action.

3. Working Hours & Rest Days

Under the 2022 amendments, weekly working hours have been reduced from 48 to 45 hours to improve work-life balance. Employers must:

Flexible Working Arrangements

4. Leave Entitlements

Employees covered under the Employment Act 1955 are entitled to various types of leave:

Employers must strictly adhere to leave entitlements to avoid disputes or penalties.

Termination & Retrenchment Guidelines

1. Notice Period & Compensation

Termination must follow proper procedures under the Employment Act 1955. Employers must provide:

2. Misconduct & Disciplinary Action

For dismissals due to misconduct, a domestic inquiry should be conducted before termination. Employers must:

3. Retrenchment & Redundancy

If businesses undergo downsizing, retrenchment procedures must comply with the Act:

Workplace Protections & Compliance

1. Sexual Harassment Prevention

Employers must take proactive steps to prevent and address sexual harassment in the workplace, including:

Failing to address workplace harassment can lead to legal penalties and reputational damage.

2. Equal Employment Rights

Discrimination based on gender, race, religion, or disability is prohibited. Employers should promote fair hiring practices and equal opportunities.

3. Employment of Foreign Workers

Employers hiring foreign workers must comply with additional regulations, including:

Strict enforcement of foreign labour laws under the Employment Act 1955 helps prevent exploitation and legal risks.

4. Enhanced Social Protection: EPF & SOCSO

To strengthen employee financial security, new provisions now mandate:

These amendments aim to expand financial protection to a broader workforce.

Penalties & Risks of Non-Compliance

Failure to comply with the Employment Act 1955 can result in:

Employers should conduct regular audits and review policies to ensure ongoing compliance.

How These Changes Impact Employers

While these updates enhance employee welfare, employers must also adapt:

Although some of these changes may pose short-term challenges, they foster a more engaged, motivated, and productive workforce, ultimately benefiting businesses in the long run.

Conclusion & Next Steps

Understanding the Employment Act 1955 is essential for employers to maintain fair workplace practices while avoiding legal pitfalls. As employment laws continue to evolve, businesses must stay updated on new amendments and best practices.

At MECA, we specialise in employment law compliance, legal advisory, and HR best practices. Our team can help your business navigate the complexities of the Employment Act 1955, ensuring smooth and lawful HR operations.

Need expert guidance? Contact MECA today to safeguard your business with professional employment law advisory.

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