CHAPTER 2

Terms and conditions of

Employment
AGR255 LEGAL, ETHICAL AND SOCIAL ISSUES IN PLANTATION
 • At the end of the chapter, students
should be able:
Course
• to explain the objectives and
Learning important of labor laws in Malaysia
Outcomes
 Labor laws in Malaysia
2.2 Children And Young
2.1 Employment Act 2.3 Workmen's
Persons Employment Act
1955 (Revised 1981) Compensation Act 1952
1966 (Revised 1988) (Act
(Act 265) (Revised 1982) (Act 273)
350)

2.4 Employee's Social 2.5 Employees Provident

Security Act (SOCSO) Fund Act (EPF) 1991 (Act 2.6 Foreign Workers
1969 (Act 4) 452) In Plantation Sector
 2.1 Employment Act 1955 (Act 265)
Not all employees are protected by the Employment Act. Those covered,
according to first schedule to the act, include:

Any person who has entered into a contract of service with an employer under
which such person’s wages do not exceed RM2000 a month.

Any person who has entered into a contract of service with an employer
without regard to his wages who:
• is engaged as a manual laborer
• supervise employees engaged in manual labor
• is engaged in the operation or maintenance of any vehicle for the transport of passengers or
good
• is engaged as a domestic servant
Cont.
Although domestic servants are within the scope of the Act according to
the 1st Schedule, they are exempted from all minimum benefits.

The only section of any importance which applies to domestics servants is

requirement that the servant must give 14 days notice prior to resigning.
• Domestics servant include workers who are employed in private homes e.g. maid, butler,
nanny, cook or gardener.
 Cont.
All employees in the private sector in West Malaysia (Peninsular) whose
wages are not more than RM2000/month are covered even if they are
an executive, officers or managers.

Public sector employees consisting the civil service, statutory bodies &
local authorities have been exempted from the Employment Act.
 Coverage of the Employment Act
2.1.1 Working hours
2.1.2 Salary/wages
2.1.3 Leaves
2.1.4 Benefits
 2.1.1 Working hours
According to Sect. 60A
of the Employment However, under Sect. 60(2) of the
Act, an employee in his Employment Act, an employee may
contract of service be required to exceed the above
SHALL NOT BE limitation by the employer when:
required to work:

> 5 consecutive Urgent

hours without a Accident, Work that work to be
period of >8 > 48 hours threatened involves carried out
leisure of not < hours in in one in or at the to
one day week workplace defence of machinery
30 min Malaysia
duration or plant
 a) Overtimes
Overtime means the number of hours of work carried out in excess of the
normal hours of work per day.

Therefore, the employee shall be paid at the rate not less than one & half (1.5)
times the hourly of pay.

Any work carried out by an employee employed on a daily, hourly or other rate of
pay who WORKS ON REST DAY shall be paid:
• 1 day’s wages if he works less than half his normal hours of work
• 2 day’s wages if he works between half the normal hours and the full hours
• If employee employed on piece rate who work on a rest day, he shall be paid twice his ordinary rate
per piece
Piece work rate is any type of employment in which a worker is paid a fixed piece rate for each unit produced.
 Cont.
Any work carried out by employee during a PUBLIC HOLIDAY, he shall
be paid 3 times the normal hourly rate.

The reasons why organization do overtime are:

• The work requires a worker to be present to complete or the work has to be finished
according to schedule
• Work has to be done but the organization does not have enough employees and it’s
expensive to recruit
• Work has to be done because during the normal working hours, work had to stop due to
unforeseen circumstances for e.g. a 4-hr blackout during working hours
 b) Shift works
• The shift worker may be required to work for more than
8 hours a day or more than 48 hours a week but must
have a break of 30 min for every 5 consecutive hours of
work.
• The employee may work in the morning shift, afternoon
shift or the night shift that is normally between 11pm –
7am.
• However, the average number of hours worked over any
period of 3 weeks shall not exceed 48hours/week.
• Employers will normally provide several types incentives
to their employees for e.g. free transportation from
house to workplace, free food & shift allowances.
 Reasons for shift work

There is urgent
There is actual or
To meet demands work to be done to
threatened accident
of the products machinery or plant
in the place of
produced or interruption of
work.
work
 c) Flextime
Flextime/flexible working hours allow employees control over
the starting & ending times of their daily work.

In the government sector, beginning 1 March 2019, Waktu Kerja

Berperingkat (WBF) is implemented in all Ministries and Federal
Departments in several states to replace the current “Waktu
Bekerja Berperingkat (WBB)” that used on 1 January 2018.

Kaedah WBB ditetapkan berdasarkan empat peringkat waktu

iaitu waktu masuk kerja jam 7.30 pagi, 8 pagi, 8.30 pagi dan 9
pagi manakala waktu balik kerja pula pada jam 4.30 petang, 5
petang, 5.30 petang dan 6 petang.
 d) Compressed work week
Any arrangement of An example will be 4
work hours that days workweek and There are many
permits employees to the length of the different types of
fulfil their work work day will be compressed work
obligation in fewer days increase to 10 or week schedule, e.g.:
than the typical 5 day or more hours.
6 day workweek.

4/40: employees
work 10 hours a day
each day for 4 days,
then they are off
work for 3 days.
 Advantages of compressed Disadvantages of compressed
work work
• Employees can schedule their leisure • Longer work day is physically and mentally
time for family life, personal business challenging.
& recreation
• Employee morale could suffer due to the long hours.
• Lower absenteeism & lateness rates at • Difficult to arrange dependent care or transportation
companies
around the longer workday.
• Tend to be more productive during • Managers may be required to work the same
scheduled work days
schedule as the employee for support and to provide
• Time for personal care supervision.
• Motivation to work • May result in overtime expenses, creating salary
equity issues among those not participating in the
• Work life balance
program.
 e) Part time
An employee can be working during the normal working hours but he/she is
employed on an hourly basis.

They can earn extra income through part-time work without being tied to the
organization.

Organization use part-time jobs to increase in the number of employees to

complete a certain demand or projects.
• E.g. students, housewife, pensioners, etc.
 2.1.2 WAGES/SALARY
Wages means basic salary & other payments in cash to an employee due
under the contract of service excluding:
• Annual bonus
• Overtime payments
• Commissions
• Subsistence allowances Money paid to an employee traveling on company's business to cover cost of lodging, meals,
laundry, and other associated expenses.
• Travelling allowances
• Any gratuity payable on discharge or retirement
• Any contribution paid by the employer account’s to any pension fund, provident fund,
superannuation scheme, retrenchment, termination, lay off or retirement scheme established for
the benefits of employee
• The value of house accommodation or supply of food, fuel, light, water, or medical attendance
• Any retrenchment or termination benefits
 a) Wage periods
The employer must
make payment of
Must be paid at wages not later
least once every than 7 days after
month. the end of that
wage period.
 b) Wage payment
However, the
Employment Act Section
Wages paid to employees
25(10) do allow payment
must be in legal tender.
to be made in the
following form:

Payment on the name of Payment through cheque

the employee through any issued directly to the
bank accounts in Malaysia worker
 c) Advances of wages
• Employers are not encouraged to lend money to their employees – lead to IR
problems
• Therefore, the giving advances on wages are strictly regulated.
• The maximum advance that can be given is equivalent of one month’s wages.
• The only exception to this is when to help employee:
• To purchase land
• Purchase, build, or improve a house
• Purchase a motorcar, motorcycle or bicycle
• Purchase livestock
• Purchase shares of the employers’ business offered for sale by the employer
• However if the employer want to provide an advance for any other purpose where
the amount is more than one month’s wages he must request permission from the
Director- General of Labor.
 d) Deduction from wages
The maximum monthly deduction must not exceed 50% of the employee’s wages
unless the amount to be deducted includes repayment of a housing loan.

In this case, with the permission of the DG of labor, the total deductions may be
increased to 75% of the monthly wage.

The following deductions can be made by the employer without prior

permission from the employees:
• Payment to the EPF, SOCSO and Inland Revenue Board, Income Tax etc.
• Recovery of advances of wages provided no interest is charged on the advances.
• Overpayments made by mistake during the immediate proceeding 3 months from the month in which deductions
are to be made.
• Indemnity (insurance) due to the employer by the employee under Section 13 (1).
 Cont.

Any other • Payment into welfare or insurance scheme which for

the benefit of the worker
deductions • Repayment of any advance given to the worker
require the written where an interest payment is imposed
• Payment to the third party on the employee’s behalf
permission of • Payment for purchases of the company goods made
both the employee by the employee
and the DG of • Payment of rental for accommodation provided by
the employer or the cost of any service provided by
Labor include: the employer to employee
 e) Employers are not required to pay wages
when

The employee is being held The employee is in prison The employee is required to
in custody (protect) by the attend a court hearing or trial;
authorities except where he is a witness
for the employer
f) Priority of wages
If an employer is forced by a
court to sell off property &
assets to pay debt, employees
who have not been paid their
wages receive priority over all
debtors, but they can only
claim a maximum of 4
months wages.
 2.1.3 LEAVES
• Also known as the period of time during which you are absent
from work or duty with the permission from your employers.
• Several types of leaves that include:
• Rest days
• Public holiday
• Annual leaves
• Sick leaves
• Maternity leaves
 a) Rest days
• All employees are entitled to at least one rest day per week.
• The day of the rest day will depend on the employer’s decision.
• It can be on a Sunday, Friday, or any other day.
• For employees who do not work the normal work hours (e.g. shift work), the employer
will prepare a roster for the employees’ rest days & this roster will be informed to the
employees in advance.
• When a daily rated employee agrees to work on his rest day at the request of his
employer he is entitled to a higher than normal rate of pay:
• If he works less than half his normal hours of work, he is paid one full days’ wages.
• If he works between half the normal hours & the full hours he is entitled to 2 day’s wages.
 b) Public holiday The remaining gazette
public holidays are:
• New Year’s Day
4 compulsory of public • Wesak Day
holidays out of 10 • Thaipusam
gazette shall be: • Awal Muharam
• National Day • Hari Raya Puasa
• Birthday of the Yang • Christmas
According to the Act, Di Pertuan Agong • Chinese New Year
there were 10 public • Birthday of the Ruler • Deepavali
Every employee is holidays per year.
entitled to enjoy public or Yang Di Pertuan
holidays in a year. Negeri of the State
where the employee
is employed
• Worker’s Celebration
Day
 c) Annual leaves
Workers with 1 to 2
years service are
entitled to 8 days/year

Workers with 2-5 years

An employee is entitled
service can take 12
to paid annual leave of:
days/years

More > 5 years service

can take 16 days annual
leave/year
 d) Sick leaves
• Before employee can take sick leave they must undergo an examination by a
registered medical practitioner appointed by the employer (panel doctor).
• The employer is required to pay for this medical examination.
Workers with 1 to 2 years service
=14 days sick leave per year

Employees annual sick leaves Workers with 2-5 years service

include: = 18 days sick leave per year

More > 5 years of service

= 22 days annual sick leave
 e) Maternity
leaves
• A female employee is entitled
to maternity leave for a period
of not less than 60 DAYS’
maternity leave EVERY TIME
they give birth.
• Normally, government
employee get 90 days leave
but, last 30 days depend on
employer's discretion.
 2.1.4 BENEFITS
Something that aids or promotes well-being, an advantage
to the employee that includes:

Termination Layoff Retrenchment Resignation Medical Maternity

benefits benefits benefits benefits benefits benefits
 a) Termination benefits
• Voluntary : an employee may quit because of resignation
due to other job outside or retirement (employees are not
Termination can be entitled to termination benefit)
voluntary or involuntary.
• Involuntary : referred to dismissal or being retrenched due
to company economy problems

Only workers with a

minimum of 12 months • 1 to 2 years service = 10 days wages for each year service
service are entitled to • 2 to 5 years service = 15 days wages for each year service
termination benefits. The • > 5 years service = 20 days wages for each year service
quantum is:
 i) Notice of termination
• The Employees Rights Under The Employment Act 1955.
• The notice of termination in accordance with the contract of service but shall not
be less than those specified in the Employment Act 1955, i.e. :
• 4 weeks notice if the worker has been employed 1 - 2 years;
• 6 weeks notice if the worker has been employed for 2 to 5 years;
• 8 weeks notice if the worker has been employed >5 years.
• Should the employer failed to give sufficient notice, the employee is entitled to be
paid wages in lieu of notice.
• Wages in lieu of notice must be paid in full, latest on the day the contract of
service is terminated.
 b) Layoff benefits
• Layoff is the elimination of jobs, often without regard to employee
performance, usually when a company is experiencing financial difficulties or
the temporary suspension or permanent termination of employment of
an employee or (more commonly) a group of employees for business reasons,
such as when certain positions are no longer necessary or when a business
slow-down occurs.
• An employee will be entitled to layoff benefits not less than the following :
• 1 to 2 years service = 10 days wages for each year service
• 2 to 5 years service =15 days wages for each year service
• > 5 years service = 20 days wages for each year service
 c) Retrenchment
• Retrenchment means termination of the contract of service of the
employees in a redundancy situation which arise from several factors
such as closure of business, restructuring, reduction in production,
mergers, technological changes, take-over, economic downturn and
others.
• When the retrenchment involves local workers, the ‘LIFO’ principle
(last-in-first-out) must be practiced for the same category of work.
• However, employers may carry out retrenchments in accordance with
certain criteria after consultation and the approval of the workers and
trade unions representing them.
 What measures should be taken by employers
to avoid termination of employees?
❑ To limit overtime work
❑ To stop recruitment of new workers except for critical areas
❑ To limit work on weekly rest days and public holidays
❑ To reduce weekly working days or reduce the number of shifts
❑ To reduce daily working hours
❑ To conduct retraining programs for workers
❑ To identify alternative jobs and to transfer workers to other divisions /other jobs in the same
company
❑ To implement temporary lay-off i.e. temporary shut down by offering fair salary and to assist the
employees affected in obtaining temporary employment elsewhere until normal operation resumes
 i) Retrenchment benefits
• Retrenchment benefit must be in accordance with the contract of service but
should not be less than the rate specified in the Employment Act 1955 which is:
• 1 to 2 years’ service = 10 days wages for each year service
• 2 to 5 years’ service =15 days wages for each year service
• > 5 years’ service = 20 days wages for each year service
• Retrenchment Benefits must be paid latest by the 7th day after the date of
retrenchment.
• Should the above rights be denied, the worker can file a claim at the nearest Labor
Office.
 d) Resignation
• These benefits apply to members who resign or are discharged due to
misconduct or an illness or injury caused by the member’s own doing.
• These members have two options either;
• They can be paid a gratuity (a once-off cash lump sum) or have their benefits
transferred to an approved retirement fund.
• If benefits are being transferred, the KWSP pays the member’s actuarial
interest (interest on a monthly basis) to the member’s new fund. The amount
that is transferred to an approved retirement fund is not taxed at this point,
tax is only deducted when the member retires or withdraws cash from the
new fund.
 Dismissal/Discharge
Unsatisfactory performance
• Employees are failed to performed
• Dismissal should occur assigned duties that can be seen through
excessive absenteeism, excessive wastage
only after all reasonable of materials, tardiness (lateness),
negatives attitudes towards the company,
steps to rehabilitate the supervisors of fellow employees.
employee have failed.
• There are 4 bases for
dismissal: Lack of qualifications
• The employees are unable to do assigned
work although he/she tries hard or even
after the company has sent them for
training.
Misconduct
• Wilful violation of the employer’s rules
and include being drunk, stealing,
insubordination (disobedience) and
fighting at place or work.
Changed requirements of the job
• The employees are now incapable of
doing the work assigned after the nature
of the job changed.
• This may be because of new technology,
the job has now become obsolete (out of
date).
 e) Medical benefits
• Employee medical benefits are the additional benefits provided to the employees by
the company.
• Almost all the companies provide their employees with medical benefits so that they
can give their best during their working hours without any fear.
• Examples of medical benefit are:
• Employee medical plan.
• There is a regular medical check up for the employees to provide the healthy
working condition to the employees.
• Employees are provided with healthy and hygienic food by the company.
 Employment of Women
Women and night work

• Employer may not permit women to work between 10.00

pm and 5.00 pm in industrial and agriculture businesses
unless employer provides transport to and from the
workplace, do rotating shift system, pays shift allowance

Women and underground work

• Women may not work in underground mining operations.

Maternity protection

• Section 37 Employment Act 1955

f) Maternity Leave - Section 37 Employment Act 1955
A female employee is entitled to maternity leave for a period of not less than 60 DAYS’ maternity leave
EACH and EVERY TIME they give birth and maternity allowance in respect of the eligible period. For govt
sector,
maternity
Maternity leave period may begin anytime within 30 days before her confinement (gives birth) but can not leaves is 90
be later than the next day after her gives birth. days

However, most of the women prefer to keep all their maternity leave after their baby is born.

Section 2 stated that confinement means parturition (process of giving birth) resulting after at least 22
weeks of pregnancy whether alive or dead.

A female employee is not entitled to rest day and paid sick leave benefits during maternity leave.
 Maternity allowances
A female employee is qualified for maternity allowance if she fulfils certain conditions;

• She have less than 5 surviving children;

• She has been employed at any time in the 4 months immediately before her confinement;
• She has been employed for a period of not less than 90 days during the 9 months immediately before her
confinement

Where a female employee is employed on a monthly pay rate, maternity allowance is based
on her monthly wages. Otherwise the maternity allowance is the ordinary rate of pay for
one day or RM6 per day whichever is higher for 60 consecutive days.

Maternity allowance shall be paid in the same manner as if such allowance is wage and is
payable not later than the 7th day after the last day of any wage period.
 2.2 Children And Young Persons
(Employment) Act 1966 (Act 350)
• An act to regulate the employment of children and young persons.
• Be it enacted by the Seri Paduka Baginda Yang di-Pertuan Agong
with the advice and consent of Dewan Negara and Dewan Rakyat
in Parliament assembled, and by the authority of the same as
follows:
1) This act may be cited as the Children And Young Persons (Employment)
Act 1966
2) This act shall apply only to the states of Peninsular Malaysia
a) Interpretation of age
Child means any person who has
not completed his 14th year of
age.

Young person means any person

who not being a child, has not
completed his 16th year of age.
 b) Employment in which children
and young person may be engaged
• A child may be engaged in any of the following employments:
• Employment involving light work suitable to his capacity
• Employment in any public entertainment with the terms and conditions of licence
granted
• Employment requiring him work approved or sponsored by Federal Government
of the Government of any state and carried on in any school, training institution or
training vessel
• Employment as an apprentice under a written apprenticeship contract approved by
the Director General whom a copy of such contract has been filed.
 Cont.
• A young person may be engaged in any of the following
employments:
• Any employment involving light work suitable to his capacity
• Employment as a domestic servant
• Employment in any office, shop (including hotels, bars, restaurants
and stall), factory, workshop, store, theatre, cinema, club or
association
• Employment in an industrial undertaking suitable to his capacity
• Employment on any vessel under the personal charge of his parent
or guardian
 Cont.
No female young person may be engaged in any employment in
hotels, bars, restaurants, or clubs unless under the management of
her parent or guardian;

Female young person that engaged in any employment in a club

not manage by their parent or guardian need approval from the
Director General of Labour;

No child or young person shall be or required or permitted to be,

engaged in any employment contrary (differ) to the provision of
Factories and Machinery Act 1967 or in any employment requiring
him to work underground.
 c) Number of days work
• No child or young person engaged in any employment shall in any
period of 7 consecutive days be required or permitted to work for
more than 6 days.
d) Hours of work of children
• No child engaged in any employment shall be required
or permitted:
✓ To work between of 8 o’clock in the evening and 7
o’clock in the morning (except to any child engaged
in any public entertainment)
✓ To work for more than 3 consecutive hours without
leisure at least 30 minutes;
✓ To work for more than 6 hours in a day or if the
child is attending school, for a period of which
together with the time he spends attending school,
exceed 7 hours;
✓ To start work on any day without having a period of
not less than 14 consecutive hours free from work.
 e) Hours of work of young person
• No young person engaged in any employment shall be required or permitted:
✓ To work between the hours of 8 o’clock in the evening and 6 o'clock in the
morning
✓ To work for more than 4 consecutive hours without any period of leisure for at
least 30 minutes duration
✓ To work for more than 7 hours in any one day or if the young person is
attending school. For a period which together with the tie he spends attending
school, exceed 8 hours
✓ To start work on any day without having a period of not less than 12 consecutive
hours free from work
f) Example of
licence
 2.3 Workmen's Compensation Act 1952
(Act 273)
• An Act to provide for the payment of compensation to workmen
for injury suffered in the course of their employment.
• Meaning of “workman”
• Any person who has entered into works under a contract of service or of
apprenticeship with an employer, whether by way of manual labour or
otherwise, whether the contract is oral or in writing, whether the remuneration
is calculated by time or by work done and whether by the day, week, month or
any longer period
 The persons are covered from this act are
All manual
Any workers workers
Worker of Workers of
who works irrespective of
non-manual in non-manual in
under any their salary and
public sector private sector
corporation who is not
whose income whose income
who employs covered under
is less than is less
no less than 5 Employee
RM400/month RM500/month
workmen. Social Security
Act 1969.

Non-manual workers –
A person whose job involves the use of their mind, rather than the use of their hands or physical strength
 The persons are excepted from this act are:
Non-manual workers whose earnings exceed five hundred ringgit a month;
‘Casual worker’ are workers that are
A casual worker and who is employed for the purposes of the employer’s trade or not part of the permanent
business; workforce, but who supply services
on an irregular or flexible basis,
often to meet a fluctuating demand
A domestic servant; for work

Any person who is a member of the armed forces in Malaysia;

Outworkers are contractors or

Any police officer, and any other person engaged to perform police duties; employees who perform their work
at home or at a place that wouldn't
normally be thought of as a
An out-worker; business premises. Outworkers are
common in the textile, clothing or
footwear industry.
A tributer - a miner who is paid in a certain portion of the ore, or its value.;
 Employer’s liability for compensation

An employer shall not

If the workmen be liable to pay No compensation
injury by accident compensation to a shall be payable to a
during working, his workman resulting from No compensation shall be workman in respect
employer have to pay an accident if it is payable under this Act in of any disease
compensation and proved that the injury to respect of any unless the disease is
any expenses incurred the workman is directly disablement or death directly attributable
in the treatment and attributable to the resulting from a deliberate to a specific injury
rehabilitation of such influence of alcohol or a self-injury (dengan sengaja); by accident arising
workmen; drug, unless such injury out of during the
results in the death; employment.
 The conditions that cause an employee is not
entitled to compensation
An injury caused directly above the influence of alcohol or drugs at the time
of the accident unless the injury results in death.

A disability or death caused by inflicted (dengan sengaja) self injury or an

accident injury.
 Amount of compensation
What is the maximum
• The maximum payment amount for cases of
payment for cases of permanent disability is RM23,000.00
permanent disability?

What is the total • Total payment for death cases is RM18,000.00 +

payment for death cases RM7000.00 (SPPA-Skim Pampasan Pekerja Asing)
during working hours? = RM25,000.00

What is the total

payment for death cases • Total payment for death cases is RM23,000.00
outside working hours?
 2.4 Employee's Social Security Act (SOCSO)
1969 (Act 4)
Also known as Pertubuhan Keselamatan Sosial (PERKESO)

SOCSO is able to provide free medical treatment, facility for physical or vocational
rehabilitation, and financial assistance to employees if they have loss their abilities due to
accidents or diseases that have reduced their abilities to work or rendered them
incapacitated. If an employee has died, their dependants are provided for financially through
pensions.

Any workers who are not covered under Worker Compensation Act 1952, they will be
benefited under the SOCSO Act 1969.
Effective 1 Jun, 2016, the employees’ social security
act, 1969 has been amended as below:-

The ceiling of wage for contribution payment has been raised from RM3,000.00 per
month to RM4,000.00 per month;

All employees who are employed under a contract of service or apprenticeship in the
private sector and contractual/temporary staff of Federal/State Government as well
as Federal/State Statutory Bodies need to be insured under the Employees’ Social
Security Act, 1969 by operations of law regardless (tidak mengira) of their salary.
However, contribution will be limit at monthly remuneration of RM4,000.00.
 Contribution

• Principal employers are required to contribute monthly

for every employee that is eligible according to the rates
as stipulated by the Act. (Refer to Rates of Contribution
Schedule)
• The rates are based on the total sum of the monthly
wages received by an employee.
 Types and categories of contribution

First Category (Employment Injury and Invalidity (ilat) Schemes)

• All employees who have not attained 60 years of age are required
to contribute under the first category, except those who have
attained 55 years of age and have made no prior contributions
before they reach 55 years. (Amendment Act w.e.f. 1 January
2013).
• The rates of contribution under this category comprise of 1.75%
employer’s share and 0.5% employee’s monthly wages.
 Types and categories of contribution

Second Category (Employment Injury Scheme)

• For employees 60 years old and above and still working
• For employees above 55 years old when he first register and contribute to SOCSO
• Insured Person receiving Invalidity Pension and still working and receiving less than
1/3 of the average monthly wages before the invalidity.
• Under this Category, the contribution is paid by the employer for the Employment
Injury Scheme.
• The rate of contribution under this category is only 1.25% of the employee’s
monthly wages solely borne (ditanggung) by the employer.
 Example of contribution calculation
• “Wages” for contribution purposes • Basic salary = RM1,000.00
refers to all remunerations payable in
money by an employer to an employee • Overtime allowance = RM 250.00
as follows : • COLA Allowance = RM 100.00
• Basic salary
• Total wage = RM1,350.00
• Overtime
• Commission • Contribution to SOCSO is RM30.40
• Payments in lieu of annual leave, (Refer to Rate of Contribution Schedule)
medical leave, maternity leave, rest days,
off days, public holidays and so forth
• Allowances (e.g: incentive, good
behavior, cost of living and so forth)
• Service charge
Second Category
Social Security Protection Schemes

1. Employment Injury Scheme (Skim Bencana Pekerjaan)

• This scheme provides coverage and protection for employees who suffers from employment injury.
• “Employment Injury” means a personal injury to an employee caused by accident or an occupational
disease arising out of an in the course of his employment in an industry to which this Act applies.
• Coverage of the scheme:
• Industrial accidents while carrying out their duties
• Accidents while travelling:
• On a route between his place of residence and his place of work
• On a journey made for any reason which is directly connected to his employment
• On a journey between his place of work and the place where he takes his meal during any rest
hour
• Accident during emergency - Fire disaster at employer's premise
• Occupational Disease - Loss of hearing due to continuous excessive noise exposure or asthma due
to work involving constant exposure to the inhalation of dust or harmful chemical and etc
 Cont.
Benefits under the scheme
• Medical benefit
• Temporary disablement benefit
• Permanent disablement benefit
• Constant-attendance allowance
• Facilities for physical and vocational rehabilitation
• Return to work programme
• Dependants' benefit
• Funeral benefit
• Education benefit
First Category

Social Security Protection Schemes

2. Invalidity Scheme (Skim Keilatan)
• An insured person shall be considered as suffering from invalidity by reason of specific morbid condition of
permanent nature (suatu keuzuran yang berkekalan) either incurable (yang tidak boleh diubati) or is not likely to be
cured and no longer capable of earning, by work corresponding to his strength and physical ability dengan
(dengan melakukan kerja yang berpadanan dengan kekuatan dan tenaganya) at least one–third (1/3) of the customary
earnings of a sound insured person (spt orang normal).
• The scheme provides 24-hour coverage to employee who suffers from invalidity or death due to any cause.
• Benefits under the scheme
• Invalidity pension
• Invalidity grant
• Constant-attendance allowance
• Survivor’s pension
• Funeral benefit
• Facilities for physical and vocational rehabilitation and dialysis
• Return to work programme
• Education benefit
Punishment for failure to pay contributions

• Under section 2(10) the employer is responsible to

deposit all deducted amount of money to the SOCSO.
• If failed to deposit, Section 94 under SOCSO Act 1969,
the employer may be:
• Fine RM10,000
• Imprisonment of 2 years or both
 2.5 Employees Provident Fund Act
(EPF) 1991 (Act 452)
❖The EPF is a social security institution formed according to the
Laws of Malaysia.
❖Employees Provident Fund Act 1991 (Act 452) which provides
retirement benefits for members through management of their
savings in an efficient and reliable manner.
❖The EPF also provides a convenient framework for employers to
meet their statutory and moral obligations to their employees.
 EPF
contributors
Who are members of EPF?
Compulsory Optional
Employees in the private sector including: Domestic servants (both foreign and Malaysian)
✓ Fulltime workers Foreign employees working in Malaysia
✓ Part time workers Self-employed persons including:
✓ Permanent workers ✓ Sole proprietors
✓ Temporary/contract workers ✓ Partners in partnership
✓ Probationers Pensionable employees in the public sector
Employees in the private sector, above 55 years Employees who withdrawn their savings under
and who have not withdrawn all their savings Leaving the Country Withdrawal Scheme and have
returned
Employees who withdrawn their savings at the age
of 55 and who are subsequently re-employed
 Contribution meaning
The employee's share is deducted
A contribution is the amount of
from the employee's salary and
money paid to the EPF based on
The EPF contributions of an contributed to the EPF. The
the monthly salary of an
employee are made up of the employer's share is the amount of
employee. The monthly
employee's and employer's share. money contributed by the employer
contributions will be credited into
based on the salary of the employee
the employee's EPF account.
and contributed to the EPF.

EPF contributions can be paid by:

• Cash
• Postal order Payments must be made to the
• Cheque nearest ringgit at the rate specified
• Internet banking in the Third Schedule of the EPF
• Electronic fund transfer (EFT) Act 1991.
• Bank draft
• Any other channel approved by the EPF
 Persons obligated to contribute to EPF account

Except for the persons mentioned in the 1st Schedule of the EPF Act 1991, an
employer shall be liable to pay EPF contributions in respect of any person whom he
has engaged to work under a Contract Of Service or Apprenticeship and includes:
• Part time, temporary and probationary employees
• Directors who receive wages from company;
• Employees until the age of 75 years old if they are still working regardless whether they have or have not
made the full withdrawal/part of it after attaining the age 55 or 60 years old;
• Employees who have withdrawn their savings under the Pensionable Employees and Optional Retirement
Withdrawal, and work with employers other than the Federal or State Governments, or any statutory
bodies or local authorities;
• Employees who have previously made full withdrawal under the Incapacitation Withdrawal and have since
recovered and are re-employed in any service. (Pekerja yang telah mengeluarkan simpanannya di bawah Pengeluaran
Hilang Upaya, dan telah sembuh dan bekerja semula).
 Payments that are liable for EPF contribution:
Bayaran yang dikenakan caruman KWSP

❑ Salary
❑ Payment for unutilised annual or medical leave
❑ Bonus
❑ Allowance
❑ Commission
❑ Incentive
❑ Arrears of wages
❑ Wages for maternity leave
❑ Wages for study leave
❑ Wages for half day leave
 Payments not liable for
EPF contribution: Bayaran yang tidak dikenakan caruman KWSP

❑ Service charges
❑ Overtime payment
❑ Gratuity (ganjaran) - Any payment made by the employer to the employee payable at the end of a
service period or upon voluntary resignation in acknowledgment of the employee's service.
❑ Retirement benefits
❑ Retrenchment, temporary and lay-off termination benefits
❑ Any travelling allowance
❑ Payment in lieu of notice of termination of employment
❑ Director's fee - Remuneration or fee paid to the director.
 Mandatory contributions
❑ Workers who are still working until the of age 75 are compulsory to make contribution
to the EFP Account
❑ The rates of the contribution is depend on age and monthly wages of the workers.

Contribution Rate
Age Wages (RM) Employee Employer
< 60 years ≤ RM5000 11% 13%
> RM5000 11% 12%
> 60 – 75 years ≤ RM5000 0% 4%
> RM5000 0% 4%

Dividends - the EPF ensures that your savings are secure and receive reasonable dividends.
In fact, it guarantees a minimum of 2.5% dividend annually.
 Employee account at the EPF
• Employee EPF account is divided
into two, namely Account 1 and
Account 2, based on the following
percentages:
❖70% for Account 1- Account 1
can be withdrawn when
retirement at age of 55
❖30% for Account 2 - Account 2
can be withdrawn for advance
purchase of the first house;
financing education; medical fees;
• Members who have reached age 55
will have two accounts:
❖Akaun Emas - Withdrawal at
age of 55
❖Akaun 55 - Withdrawal at age of
60; upon reaching age 60,
balances in Akaun 55 and Akaun
Emas will be combined for
withdrawal
 2.6 Foreign Workers in Plantation Sector
POLICY ON EMPLOYMENT OF FOREIGN WORKERS
• The Department of Labour of Peninsular Malaysia is responsible for
employment and labour matters concerning foreign workers who are legally
employed and entitled to enjoy the protection and benefits stipulated by labour
laws.
• The employment of foreign workers is a temporary measure to fill job
vacancies. Employers must notify the Department of Labour of vacancies by
registering at JobsMalaysia to ensure registered local job seekers are given
priority.
• Foreign workers are employed for a period of 10 years for all permissible sectors
and they may not marry nor bring their family members into Malaysia.
• Foreign workers are allowed to work in 5 sectors, namely manufacturing,
agriculture, plantation, construction and services.
Department of Labour of Peninsular Malaysia
 Foreign workers' compensation
• Department's roles
1) To enforce the Workmen’s Compensation Act 1952 on all employers
hiring foreign workers
2) To conduct assessment of compensation for foreign workers injured as a
result of workplace accidents
3) To pay compensation to the relatives of foreign workers in fatal
accidents
 Employer's responsibilities
Every employer must ensure every
foreign worker employed is insured with
an insurer appointed under the Foreign
Workers’ Compensation Scheme.
Every employer must bear the full cost of the insurance premium of the Foreign Workers’ Compensation
Scheme of RM72 per year for each foreign worker.
• It is an offence if the employer failure to insure foreign workers and if convicted (disabit kesalahan) the employer shall be liable to a fine
not exceeding RM20,000 or imprisonment not exceeding two years or both [section 26 of the Workmen's Compensation Act 1952].

Every employer must report an accident involving foreign workers within 10 days of the date of the accident.
• Failure of the employer to report an accident involving foreign workers is an offence and if convicted the employer is liable to a fine
not exceeding RM5,000 for the first offence and a fine not exceeding RM10,000 for any subsequent offence [section 13 of the
Workmen's Compensation Act 1952].

Each employer must furnish the latest information of

the workers’ relatives when buying the insurance policy
such as the relatives name, complete address in the
country of origin, relationship and telephone number.
Coverage benefits
 E-compensation System (SPPA)

• To facilitate the management of foreign workers' compensation

cases, the Department of Labour of Peninsular Malaysia has taken
the initiative to develop the e-Pampasan system.
• The system is intended to assist the officers to manage workers'
compensation cases more effectively and systematically. It is also
used as a database to collect information of foreign workers who
have been insured under the Foreign Workers’ Compensation
Scheme.