Exchange Control
Foreign Equity
Investment Incentives
Labour Policy

Labour Policy  
Malaysia's Labour Force
One of Malaysia's key assets is her youthful labour force. Most Malaysian youths who enter the labour market will have undergone at least 11 years of school education, that is, up to secondary school level. A large proportion of Malaysia's labour force possesses the basic skills required by industries.

There is an increasing supply of professionals, technologists and skilled workers graduating from both local and foreign universities, colleges and technical and industrial training institutions.

The labour market in Malaysia is free and competitive and industrial relations are generally good. Labour costs are low relative to the industrialized countries while productivity remains high.

Manpower Development
The manufacturing sector in Malaysia requires an increasing number of technically trained workers. The Government is therefore taking measures to increase the number of engineers, technicians and other skilled personnel.

Training facilities
There has been an increase in the number of vocational and technical schools, polytechnics and industrial training institutions to prepare youths for employment in various industries. Most of the training institutions are run by government agencies, although a number of private institutions supplement the government's efforts to produce the skilled workers needed by industry.

The Ministry of Human Resources currently runs 10 industrial-training institutes and the Centre for Instructors and Advanced Skill Training (CIAST). The industrial training institutes offer several types of training programs including an indentured type of apprenticeship training in the mechanical, electrical, building and printing trades. Intermediate level training programs are also carried out to train youths in industrial skills at job entry level. Apart from these, other training programs conducted by the Ministry of Human Resources include skill upgrading courses, in-plant training and trade instructor training.

MARA (Majlis Amanah Rakyat or Council of Trust for the Indigenous People) operates ten skill-training institutes in different parts of the country.

The Ministry of Education is responsible for the running of 49 vocational and 29 technical schools, as well as seven polytechnics. The Ministry of Youth and Sports also provides industrial training for youths at its seven centres.

National Vocational Training Council
The National Vocational Training Council established under the Ministry of Human Resources coordinates the planning and development of vocational training activities and programs of all public sector- training agencies. It also assesses on a continuous basis, existing and future skill shortages, evaluates existing and future vocational training programs, and establishes national trade standards. At present, there are 52 trade standards covering basic, intermediate and advanced level training.

Management Personnel
Annually, the universities and colleges in Malaysia produce about 20,000 degree and diploma holders, half of whom are from the science and technical disciplines. They provide the necessary professional, technical and management personnel needed by industry. This supply of professionally qualified personnel is augmented by Malaysians from studies abroad.

The training of management personnel is provided by a number of agencies like the National Productivity Corporation, the Malaysian Institute of Management, and the Malaysian Institute of Personnel Managers.

Human Resources Development Fund
The Human Resources Development Fund (HRDF) was launched off with a grant by the Government in 1993 to encourage direct private sector participation in skills development programs. It operates on a pool concept where employers who have contributed continuously to the fund for six months will be entitled to grants from the fund to defray or subsidize costs incurred in training their employees.

Companies which employ 50 or more Malaysian workers and companies which employ less than 50 to a minimum of 10 employees and with a paid-up capital of RM2.5 million and above, have to contribute 1% of the monthly wages of their employees to the HRDF.

^ Top Of Page

Labour Costs
There is no national minimum wage law applicable to the manufacturing sector in Malaysia. Basic wage rates vary according to location and industrial sector. Supplementary benefits, which could include bonus, free uniforms, free or subsidized transport, performance incentives and other benefits vary from company to company.

Salary rates and fringe benefits offered for management and executive level personnel also vary according to the industry and employment policy. In addition to salaries, most companies also provide fringe benefits such as free medical treatment, personal accident and life insurance coverage, free or subsidized transport, annual bonus, retirement benefits and enhanced contributions to the Employees Provident Fund.

Facilities for Recruitment
Employment offices located throughout the country provide free assistance to both employers and job seekers. Potential employers can obtain detailed information on job seekers who are registered with the employment service. The functions of the employment offices include:

1. Undertaking publicity campaigns to assist employers in their recruitment drive.

2. Arranging preparatory work related to holding interviews and aptitude tests.

3. There are also registered private employment agencies in Malaysia.

Labour Standards

Employment Act 1955
The Employment Act 1955 is the main legislation on labour matters. The Act covers all employees in Peninsular Malaysia whose wages do not exceed RM1, 500.00 per month. It sets out the minimum conditions of employment which include the following:

(i) A contract of service between an employee and an employer may be in writing or oral, expressed or implied, specifying the period of notice required to terminate it.

(ii) Wages earned must be paid not later than the seventh day after the last day of any wage period.

(iii) Female workers are not permitted to work in any industrial or agricultural undertakings between the hours of ten o'clock in the evening and five o'clock in the morning, unless with the prior approval of the Director-General of Labour.

(iv) Female employees are entitled to maternity leave for a period of not less than 60 consecutive days. They are also entitled to full pay or a maternity allowance at the ordinary rate of pay subject to a minimum rate of RM6.00 per day.

(v) Normal hours of work shall not exceed eight hours in one day or 48 hours in one week.

(vi) Paid holiday on ten gazetted public holidays in any one calendar year.

(vii) Eight days of paid annual leave for employees with less than two years of service; 12 days of paid annual leave for employees with two or more years but less than five years of service, and 16 days for those with over five years of service.

(viii) Fourteen to 22 days paid sick leave per calendar year depending on length of service and, where hospitalization is necessary, up to an aggregate of 60 days sick leave per calendar year.

(ix) Payment for overtime work is at a minimum of one-and-a-half times the hourly rate of pay on normal working days, two times the hourly rate on rest days and three times the hourly rate on public holidays.

The Labour Ordinance, Sabah and the Labour Ordinance, Sarawak The Labour Ordinance, Sabah is the principal legislation, which regulates the terms and conditions of employment in the State of Sabah and the Federal Territory of Labuan, while the Labour Ordinance, Sarawak covers employment matters in the State of Sarawak.

Employees Provident Fund Act 1951
The Employees Provident Fund Act 1951 provides for a compulsory contributory provident fund which is payable to employees in full on reaching the age of 55 years. All employers and employees are required to contribute to the Employees Provident Fund (EPF) at the rates of 12% and 11% respectively of the employees' monthly wages.

Among the categories of employees precluded from compulsory contributions are expatriates and domestic servants, that is, persons who are employed to work in or connected with work in a private dwelling house, including a valet and gardener, and who are paid from the private account of the employer. However, expatriate employees, domestic servants and self-employed persons can opt to contribute to the fund.

Employees' Social Security Act 1969
The Social Security Organization (SOCSO) administers the Employment Injury Insurance Scheme and the Invalidity Pension Scheme, as provided for under the Employees' Social Security Act 1969.

All establishments, including factories, employing workers earning wages not exceeding RM2, 000 a month, are required to insure their workers under the two social security schemes.

The Employment Injury Insurance Scheme provides employees with coverage in the event of any disablement or death due to employment injury by way of cash benefits and medical care. The contribution is borne solely by the employer and is about 1.25% of the wages of an employee.

The Invalidity Pension Scheme provides a 24-hour coverage to employees against invalidity and death due to any cause before the age of 55 years. The total contribution is about 1% of the wages of an employee and is shared by the employer and the employee equally.

Occupational Safety and Health Act 1994
The Department of Occupational Safety and Health is responsible for the safety and health of persons at workplaces or in the operation of high-risk machinery. The Department promotes a self regulatory approach in safeguarding workers' safety and health which involves the employers, workers and manufacturers, designers and importers of plant and machinery. This main function is backed by the Occupational Safety and Health Act 1994.

^ Top Of Page

Employment of Foreign Workers
In Malaysia, employment of foreign workers is allowed in the construction, plantation, service (domestic servants, hotel industry, trainers and instructors) and manufacturing sectors. Only nationals of Bangladesh, Indonesia, Pakistan, the Philippines and Thailand are allowed to be employed.

The Task Force on Employment of Foreign Workers, under the Ministry of Home Affairs, is the approving authority for the employment of foreign workers belonging to the skilled, semi-skilled and unskilled categories (i.e. does not include expatriates under the management, professional and technical/supervisory categories).

Approval is based on the merits of each case and subject to conditions that will be determined from time to time. An employer's application to employ foreign workers will only be considered after efforts to find qualified local citizens and permanent residents have failed.

To ensure that foreign labour is employed only when necessary, an annual levy on foreign workers is imposed. The rates of levy on various categories of workers for the manufacturing sector are as follows:

Category of Workers Per Year
General worker
Semi-skilled worker
1, 200
Skilled worker
1, 800
Technical personnel
2, 400
3, 600
Middle management
3, 600
Upper management
4, 800

Industrial Relations
Trade Unions
In line with the Government's policy to encourage the growth of responsible trade unions, the following legislations have been enacted:

i. Trade Union Act 1959
ii.Trade Union Regulations 1959

Under these legislation's:

Trade unions should confine their membership to employees within a particular trade, occupation or industry.
All trade unions must be registered.
A union cannot organize a strike without first obtaining the consent by secret ballot of at least two-thirds of its total members.
All unions are inspected regularly to ensure compliance with the laws.

Industrial Relations Act 1967
The Industrial Relations Act 1967 provides for the regulation of relations between employers and workmen and their trade unions, and the prevention and settlement of trade disputes.

Some of the main features of the Act are:

1. Protection of the legitimate rights of employers and workmen and their trade unions.
2. Exclusion of workmen in managerial, executive, confidential or security capacities from the scope of recognition of trade unions, the majority of whose membership are not employed in any of these capacities.
3. Procedure relating to submissions of claims for recognition and scope of representation of trade unions and collective bargaining.
4. Non-inclusion in unions' proposals for collective bargaining on matters relating to promotion, transfer, recruitment, retrenchment, dismissal, reinstatement and allocation of duties, and prohibition of strikes over any of these matters.
5. Emphasis on direct negotiation between employers and workmen and their trade unions to settle their differences and provision for speedy and just settlement of trade disputes by conciliation or arbitration when direct negotiation fails.
6. Provision for the Minister of Human Resources to intervene and to refer at any stage any trade dispute to the Industrial Court for arbitration.
7. Prohibition of strikes and lockouts after a trade dispute has been referred to the Industrial Court and on any matter covered by a collective agreement or by an award of the Industrial Court.
8. Protection of pioneer industries during the initial years of their establishment against any unreasonable demands from a trade union. Trade unions cannot demand better terms of employment than those stipulated under the Employment Act 1955.

Relations in Non-unionized Establishments
The normal practice for dispute settlement in a non-unionized establishment is for the employee to try and obtain redress from his supervisor, foreman or employer directly. A complaint can be lodged by the employee with the Ministry of Human Resources, which will then conduct an investigation.

The figures shown above are subject to alteration.

^ Top Of Page

All information are compiled by Jesselton Communications Sdn.Bhd. 2000.