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Training Malaysian Managers on the Employment Act 1955: Key Responsibilities

As a manager in Malaysia, you juggle multiple roles: you’re a coach, a strategist, and a problem-solver. But one of your most critical and often overlooked roles is that of a legal compliance officer for your team. Every decision you make, from approving overtime to handling a leave request, is governed by a foundational piece of legislation: the Employment Act 1955.

Many managers believe that legal compliance is solely HR’s job. This is a costly and dangerous assumption. In reality, you are the one on the ground implementing company policy, and your daily actions directly determine whether the business is upholding the law. This guide will break down the key responsibilities you have under the Employment Act 1955, turning legal jargon into a practical checklist for effective and compliant leadership.

Why the Employment Act 1955 is a Manager’s Guide, Not Just an HR Rulebook

Understanding this Act is not about becoming a lawyer; it’s about becoming a more effective and fair manager who protects both your employees and the company.

Understanding your role: How daily decisions impact legal compliance

Think about your recent tasks. Did you ask an employee to stay late? Did you approve a sick leave request? Did you discuss performance issues? Each of these actions is regulated by the Act. When you approve overtime, you are responsible for ensuring it’s calculated correctly. When you handle leave, you are applying a legal entitlement. Your decisions are the company’s decisions in the eyes of the law.

The cost of ignorance: Moving beyond “common sense” management

Relying on “common sense” or “how things have always been done” can lead to serious legal trouble. The Employment Act sets out minimum standards and procedures that must be followed. Failing to do so can lead to employee disputes, costly fines, and damage to the company’s reputation – all of which fall back on managerial oversight.

What is the Employment Act 1955? A Briefing for Leaders

Before diving into your responsibilities, let’s clarify what this law is and who it affects.

A quick overview: What the Act governs

The Employment Act 1955 is the primary labour law in Peninsular Malaysia and the Federal Territory of Labuan. It sets the minimum terms and conditions of employment, covering critical areas like payment of wages, working hours, rest days, holidays, different types of leave, and termination procedures.

Who is covered? Understanding the scope post-2022 amendments

This is the most important part for modern managers to understand. Historically, the Act primarily protected employees earning below a certain salary threshold. However, as of January 1, 2023, the Act applies to all employees, regardless of their wages. While some specific clauses (like those for overtime and rest day pay) still have a salary cap, the core protections around leave, termination, and working hours now apply to your entire team.

A Manager’s Core Responsibilities Under the Act

Here are the five key areas where your direct involvement is crucial for ensuring compliance.

Responsibility 1: Upholding the Employment Contract

The employment contract is a legally binding document. Your responsibility is to ensure that the work arrangements and expectations you set for your team align with what is stated in their contracts. This includes job scope, reporting lines, and other terms of employment.

Responsibility 2: Correctly Managing Wages and Deductions

While payroll is often handled by HR or finance, your input is critical. You are responsible for accurately tracking and approving work hours, claims, and any allowances. The Act strictly governs salary payments, stating they must be paid by the 7th day of the following month. Any deductions from salary (other than statutory ones) are illegal without the employee’s consent. Check out our guide on salary payslip rights in Malaysia for more details.

Responsibility 3: Enforcing Rules on Working Hours, Overtime, and Breaks

This is a daily managerial duty. You must ensure that:

• Working hours do not exceed the legal limit of 45 hours per week.
• Employees receive at least one rest day per week.
• Overtime work is only performed at the employee’s consent and is correctly recorded and paid according to the law.
  For more details, refer to our guides on Malaysian working hours and overtime calculation.

Responsibility 4: Administering Leave Entitlements Lawfully

Managers are the gatekeepers of leave. You must know and approve leave requests based on the legal minimums provided by the Act:

• Annual Leave: Varies by years of service.
• Sick Leave: A set number of days per year, requiring a medical certificate.
• Maternity Leave: 98 days for new mothers.
• Paternity Leave: 7 continuous days for new fathers.
  Unreasonably denying a valid leave request is a breach of the Act. For a full breakdown, see our guide to leave entitlement in Malaysia.

Responsibility 5: Handling Termination and Misconduct Procedures

This is one of the highest-risk areas for any manager. You cannot fire an employee “on the spot” without a valid reason and a fair process. Your role is to:

• Document performance issues or misconduct clearly and factually.
• Provide clear feedback and warnings.
• Participate in any formal investigation or domestic inquiry.
  Following the correct termination notice period and procedures is essential to avoid claims of unfair dismissal.

Key Updates from the 2022 Amendments That Affect Your Team

The recent changes to the Act have introduced new responsibilities for managers.

Reduced weekly working hours: A new standard

The standard work week was reduced from 48 to 45 hours. As a manager, you must ensure your team’s schedules and workloads reflect this new, lower limit.

Flexible Work Arrangements (FWA): Your role in the application process

Employees now have the legal right to request FWA (changes in hours, days, or location of work). When an employee submits a request, you have 60 days to approve or refuse it in writing. Any refusal must be justified with clear business grounds.

Increased maternity and new paternity leave entitlements

The maternity leave entitlement was increased to 98 days, and paid 7-day paternity leave was introduced for the first time. You must be aware of these new entitlements when managing team leave.

Stronger protections against discrimination and forced labour

The Act now empowers the Director General of Labour to investigate and rule on matters of discrimination in employment. As a manager, you must ensure hiring, promotion, and daily treatment of employees are free from any form of bias. The Act also introduced specific provisions against forced labour.

The Consequences of Non-Compliance for Managers and the Company

Ignoring the Employment Act 1955 is not an option. Breaches can lead to serious consequences.

Financial penalties and potential imprisonment

The Act imposes fines, and in some severe cases, imprisonment for employers who violate its provisions. These penalties have been increased under the recent amendments.

Industrial relations disputes and reputational damage

A disgruntled employee can file a complaint with the Labour Department, leading to lengthy and costly disputes. This can damage the company’s reputation and make it harder to attract and retain talent.

How non-compliance can erode team trust and morale

When employees feel their rights are not being respected, trust in management collapses. This leads to a toxic work environment, low engagement, and poor performance. A manager who knows and respects the law builds a foundation of trust with their team.

Conclusion: Lead Your Team with Confidence and Legal Awareness

As a manager, you are the crucial link between your company’s policies and your team’s daily experience. By understanding your key responsibilities under the Employment Act 1955, you are not just ticking a legal box: you are creating a fairer, more respectful, and more productive workplace. This knowledge empowers you to lead with confidence, knowing that your decisions are both effective for the business and compliant with the law.