INVESTMENT INCENTIVES & POLICIES
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.
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.
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
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.
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
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.
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
1. Undertaking publicity campaigns to assist employers in their recruitment
2. Arranging preparatory work related to holding interviews and aptitude
3. There are also registered private employment agencies in Malaysia.
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
(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
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
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.
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:
of Workers Per Year
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
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
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
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
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.