02. Legal Aspects of HRM

8/10/2019 02. Legal Aspects of HRM

http://slidepdf.com/reader/full/02-legal-aspects-of-hrm 1/45

LEGAL ASPECTS OF HRM



Why compliance with labour laws is important?

The historical background of Malaysia’s labour law

The role of the Ministry of Human Resources and its

departments in administering labour laws

Some significant provisions in major labour laws

Managerial decisions and practices that will avoid legal

liability

Contents



It helps you do the right thing to do

Recognise the limitations of your firm’s HR

department

Minimise your firm’s potential liability

WHY COMPLIANCE WITH LABOUR

LAWS IS IMPORTANT



The development and enforcement of labour laws in

Malaysia began to take shape upon the arrival of migrantlabourers from China and India during British colonialrules in the 19th century.

The labour laws established pertained mainly to matters

concerning immigration, entry of forced labour, housing,and health.

In 1912, the first labour office was established in theStraits Settlement and Federated Malay States.

THE HISTORICAL BACKGROUND OF

MALAYSIA’S LABOUR LAW

THE EARLY ERA



The basic principles that govern the relationship

between the employer and the employees in

Malaysia were derived from three main sources:

– English Common Law

– Malaysia’ Written Statutes, – Decisions of the Civil and Industrial Courts.

THE HISTORICAL BACKGROUND OF

MALAYSIA’S LABOUR LAW

THE CONTEMPORARY LABOUR LAWS



MAJOR LAWS INFLUENCING

EMPLOYMENT PRACTICES 1. The Employment Act 1955

2. The Wages Council Ordinance 1947

3. Employment (Termination and Lay-Off Benefits) Regulations 1980

4. The Children and Young Persons (Employment) Act 1966

5. The Employment (Restriction) Act 1968

6. The Employees Social Security Act (SOCSO) 1969

7. The Workmen’s Compensation Act 1952

8. Employees Provident Fund Act (EPF) 1951

9. Occupational Safety and Health Act 1944

10. The Trade Unions Act 1959

11. The Industrial Relations Act 1967



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 relations

system;

To equip the unemployed with basic industrial skills

and to improve the skill level of the work force; and To assist in maximising the country’s manpower

resources through manpower planning.



Department of Labor Enforces the:

The Employment Act, 1955

The Workmen’s Compensation Act, 1952 The Wages Councils Act, 1947

The Children and Young Persons Act (Employment), 1966

The Employment (Restriction) Act, 1968

The Workers Minimum Standards of Housing and Amenities Act,

1990

The South Indian Labor Fund Ordinance, 1958 (revoked in 1999)

This department can also convene the labor court

Industrial Court

National Vocational Training Council

THE MINISTRY OF HUMAN

RESOURCES

Departments in the Ministry:



Department of Industrial Relations Administers:

The Industrial Relations Act, 1967 and helps in settling disputes

between employers and employees through conciliation

THE MINISTRY OF HUMAN RESOURCES,

cont’d.

Department of Trade Unions

Enforces:The Trade Unions act, 1959. It has the authority to register and de-

register trade unions, check a union’s annual accounts and generally

to investigate complaints made against a trade union.

Department of Occupational Safety and Health Enforces:

The OSHA, 1994 and the Factories and Machinery Acts, 1967



SIGNIFICANT PROVISIONS OF

MAJOR LABOR LAWS

1. The Employment Act 1955

Employment (Amendment) Act 20002. The Children and Young Persons

(Employment) Act 1966

3. The Employment (Restriction) Act1968



This Act sets the minimum labor standards for workers and

seeks to protect them from exploitation.

THE EMPLOYMENT ACT 1955

The main areas covered in this Act are:

Definition and types of employees covered

Contracts of service (Section 6-17)

Payment of wages (Section 18-32)

Employment of women (Section 34-44) Hours of work and holidays (Section 58-60H)

Termination and layoffs (Section 60J)

Complaints and inquiries (Section 69-81)



THE EMPLOYMENT ACT 1955, cont’d.

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)

– engaged as a domestic servant.



Section 63A of the Act requires employers to inform the nearest

Labor Department's office of their business operations within 90

days 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 false

information is liable, upon conviction, to a fine of RM2,000.

The information required to be furnished includes:




employees’ personal information (names, sex, age, home

address, work permit, etc.); terms and conditions of employment (wage rates, allowances,

rates for overtime work, working hours, period of notice of

termination, paid holidays, etc.);

up-to-date details of wages and allowances earned during each

wage period.

A REGISTER OF EMPLOYEES

Section 61 of the Act requires employer to maintain a register of

employees containing:

The employer should keep the register at the place of employment

and should be made available for inspection by officers from the

Labor Department.

This register must be preserved for a period of not less than six years.





CONTRACT OF SERVICE

Definition: A contract executed, whether orally

or in writing and whether by expressed orimplied condition, whereby one person agrees

to employ another as an employee and that

the other agree to serve his employer as an

employee.



A contract of service must be in writing if the period of employment

is 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 the

employee once he reports for work upon receiving the letter.

The content of the contract of service that must be in writing should

have the occupation, rates of wages and wage period, allowances,

working hours, paid public holidays, annual leaves entitled,

benefits, and notice of termination.

RESTRICTIONS: Conditions of contract cannot be less favorable

than those stipulated in the Act, and that it cannot restrict the right

of an employee to join, participate in activities of, or organize a

trade union.


CONTRACT OF SERVICE



. . . is the usual hours of work per day less any

intervals and rest for tea breaks and meals.


NORMAL HOURS OF WORK

. . . . the number of hours worked in excess of

the normal hours of work per day.

Currently, the EA 1955 do not allow an employee to work

overtime more than 104 hours a month.

OVERTIME WORK



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 be

required 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 hours

in one day);

– More than 48 hours in one week.


NORMAL HOURS OF WORK, cont’d.

NOTE:

Employees can not be asked to work more than 5 hours without a break of

at least 30 minutes (except where work should be continuously performed,

they can be given a total of 45 minutes rest within the 8 hours).



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, certain

categories 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 is

RM250 per month.


WAGES



DEFINITION OF WAGES:

All payments in cash payable to an employee for work

done in respect of his contract of service including his

basic pay but excluding: – 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, cont’d.



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 employercan deduct an employee’s wage for payment to:

– trade unions

– cooperative societies.

Employers can deduct employees’ wages without firstobtaining employees’ consent or permission for

deductions authorized by law (e.g. EPF, SOCSO, etc.).

– The total deduction of an employee’s wage should not exceed

50 percent of the wages.


WAGES, cont’d.



The rate of pay for a day of paid leave (e.g. maternity leave, public

holiday, annual leave and sick leave) and the basis for the

payment for work on a public holiday, a rest day, or for overtime

work is known as the ordinary rate of pay (ORP).

ORP includes basic wages and contractual bonuses but excludes

housing and utility allowances, contribution to funds or schemes

established for the benefit of the employee, traveling allowances,

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

and public holidays


ORDINARY RATE OF PAY



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 chos en publ ic hol id ays/ rest days/any paid hol idays s ubst i tuted

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, cont’d.



The hourly ORP is derived by dividing the ORP per day

with the number of normal hours of work (usually 8

hours).

Section 7A of the EA 1955 allows any employer to

provide employees more favorable terms and

conditions of service than those required in the EA

1955

Thus, an employer may adopt any other method for

calculating the above rate of pay, as long as the results

are not less than the rate determined by the above

method.


ORDINARY RATE OF PAY, cont’d.




WAGE RATE FOR OVERTIME WORK DURING A

NORMAL WORKING DAY

An employee who works overtime during anormal working day should be paid at least

1½ times his hourly ORP.



NORMAL HOURS OF WORK:

– For a daily, hourly or other similar rated employee:

Half a day or less: 1 day’s wage

More than half a day but less than 1 day: 2 day’s wages

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

– For a monthly rated employee:

Half a day or less: half day’s wage

More than half a day but less than 1 day: 1 day’s wages

BEYOND NORMAL HOURS (OVERTIME)

– Overtime payment at the rate of 2 times his hourly ORP


WAGE RATE FOR WORK DURING A REST DAY



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



REST DAY

– one whole day in each week

– where an employee is allowed more than one rest day in a week,that day is also considered a rest day.

– No employee can be compelled to work on a rest day unless

he/she is engaged in work of a continuous nature in two or more

shifts.


REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE

NOTE:

An employer may require any employee to work overtime or to work in

situations such as accidents, work essential for the life of the

community, urgent work to be done to machinery or plant, and

unforeseen interruption of work.



ANNUAL LEAVE


REST DAY, ANNUAL LEAVE, PUBLIC HOLIDAYS& SICK LEAVE, cont’d.

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



PUBLIC HOLIDAYS



• Every employee is entitled to a minimum of ten gazetted public

holidays in a calendar year, inclusive of four compulsoryholidays:

• National Day

• King’s Birthday

• Head of State’s Birthday

• Labor’s Day • The employer can choose the other six days from the list of

public holidays as announced by the government (e.g., Hari

Raya Puasa, Hari Raya Haji, Chinese New Years, Christmas,

Deepavali, etc.).



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



Female employees in agricultural and industrial

undertakings are not allowed:

– To work between 10:00 p.m. and 5:00 a.m. (exceptwith the approval of the Director General of Labor)

– To work continuously for 11 hours without a break

– To work underground.


EMPLOYMENT OF WOMEN



She is entitled to maternity leave of 60 days if she

– had been employed for 90 days during the nine

months and 1 day during the four months preceding

her 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, cont’d.



Notice of termination:

< 2 years of service - 4 weeks

2 - 5 years of service - 6 weeks > 5 years of service - 8 weeks


TERMINATION REQUIRING NOTICE, cont’d.

In lieu of notice:

The party terminating the contract pays to the other partya sum equal to the wages accrued during the period of

notice.



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 danger

of violence or disease he can terminate the contract without

notice.

Breach of Contract

a) By employer - if he fails to pay wages within 7 days at the

end of the wage period, or he fails to provide work or wages.

b) By employee - if he is absent for more than 2 consecutive

days without reasonable excuse and without informing or

attempt to inform the employer


TERMINATION OF CONTRACT OF SERVICE, cont’d.



Regulation 5 of The Employment Ordinance 1980

– 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 notassigned any work.


TERMINATION OF CONTRACT OF SERVICE, cont’d.



The Employment (Termination and Lay-off

Benefits) Regulations 1980 states that the employer

is not liable to pay any termination or lay-off benefitsunder the following categories of termination of services:

upon attaining the age of retirement as stipulated in

the contract of service;

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

voluntary termination of service for personal reason;


TERMINATION & LAY OFF BENEFITS

Cont’d. on next slide



renewal of contract of service or re-engagement made

by the same employer under a new contract of service

on the terms and conditions which are not less

favorable than the previous contract;

renewal or re-engagement takes effect on the ending

of his employment under the previous contract;

renewal of contract of service or re-engagement under

a new contract, has been offered at least 7 days before

the date of termination of service and the terms and

conditions are not less favorable than the previous

contract;


TERMINATION & LAY OFF BENEFITS, cont’d.

Cont’d. on next slide



offer of renewal or re-engagement has been

unreasonably refused by 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 accordance with the EA 1955;

where there is a change of ownership of the business,

the new owner, within 7 days of the change offers to

continue to engage the employee under the terms and

condition of employment not less favorable than those

before and the employee unreasonably refuse the offer.





Regulation 3 of The Employment Ordinance 1980 stipulates that an 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

between the date of resignation and the date of re-

employment exceeds 30 days.





Regulation 6 of The Employment Regulations 1980

stipulates that the lay-off benefits depends on the

employees length of service:



Length of Completed Service

No. of Days’ WagesEntitlement for eachYear of Employment

1 Year but less than two years 10

Two years but less than five years 15Five years or more 20

Pro-rata basis for an incomplete year, calculated to the nearestmonth.



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

in a family business

Young persons (14-16 yrs.) are restricted to working: – in light work which does not involve the use ofmachinery

– 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 1968

All non-Malaysian citizens are required to hold valid work

permits before they can be employed locally.



PRACTICES THAT CAN AVOID LEGAL LIABILITY

PROVIDE TRAINING

• Provide supervisors, managers, and executives withregular 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 justtreatment of all employees.

ESTABLISH A COMPLAINT RESOLUTION PROCESS

• Establish a process for the internal resolution of

employee complaints

• Employee morale can be improved when employees

are able to pass along their concerns to upper level

management.



PRACTICES THAT CAN AVOID LEGAL

LIABILITY, cont’d.

Document HR Decision

– The nature of any HR decision, and the rationale

for it, should be clearly documented. In cases

involving lawsuits, written documents provide

easier preparation for the legal challenge.

02. Legal Aspects of HRM

Documents

Transcript of 02. Legal Aspects of HRM