Human Resource Management U1

UNIT 1 i
Introduction to HRM and associated Acts in Malaysia
Unit 1
BBM 207/05
Human Resource
Management
Introduction to HRM
and Associated Acts
in Malaysia
ii WAWASAN OPEN UNIVERSITY
BBM 207/05 Human Resource Management
COURSE TEAM
Course Team Coordinator: Mr. Fakir Mohamed Omar Din
Content Writers: Associate Professor Dr. Intan Osman and Mr. Liew Yueah Cin
Instructional Designer: Professor Dr. Ng Wai Kong
COURSE COORDINATOR
Dr. Tung Lai Cheng
EXTERNAL COURSE ASSESSOR

Associate Professor Dr. Khulida Kirana Yahya, Universiti Utara Malaysia
PRODUCTION
In-house Editors: Ms. Jeanne Chow and Mr. Khoo Chiew Keen
Graphic Designers: Ms. Chrisvie Ong and Ms. Audrey Yeong
Wawasan Open University is Malaysia’s first private not-for-profit tertiary institution dedicated to
adult learners. It is funded by the Wawasan Education Foundation, a tax-exempt entity established
by the Malaysian People’s Movement Party (Gerakan) and supported by the Yeap Chor Ee Charitable
and Endowment Trusts, other charities, corporations, members of the public and occasional grants
from the Government of Malaysia.
The course material development of the university is funded by Yeap Chor Ee Charitable and
Endowment Trusts.
© 2008 Wawasan Open University
First revision 2011

Second revision 2013
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or
transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or
otherwise, without prior written permission from WOU.
Wawasan Open University

Jalan Sultan Ahmad Shah,
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Tel: (604) 2180333 Fax: (604) 2279214
Email: enquiry@wou.edu.my
Website: www.wou.edu.my
UNIT 1 iii
Contents
Unit 1 Introduction to HRM and
Associated Acts in Malaysia
Course overview 1
Unit overview 3
Unit objectives 5
1.1 The strategic role of human resource 7

management
Objectives 7
Introduction 7
The manager’s human resource management 8

(HRM) activities
Why is HRM important to all managers? 11
HR line and staff functions 13
HR department organisational chart 15
Environment of HR management 18
The changing nature of HRM functions 18
Globalisation 19
Technology 20
The nature of work 20
New proficiencies and competencies 22
Ethics and HR 22
HR and technology 23
HR and networking 24
Suggested answers to activities 26
1.2 Malaysian labour laws and their enforcement 29
Objectives 29
Introduction 29
The Employment Act 1955 (latest amendments 30

in 1998)
The Wages Councils Ordinance 1947 35

iv WAWASAN OPEN UNIVERSITY
The Employees Provident Fund (EPF) Act 1951 37

(The Employeees Provident Fund Board)
The Workman’s Compensation Act 1952 39
The Employees Social Security Act (SOCSO) 1969 39
The Occupational Safety and Health Act (OSHA) 1994 41
The Children and Young Persons (Employment) 47

Act 1966
The Trade Unions Act 1959 47
The Industrial Relations Act 1967 50
Code of practice for the Prevention and Handling of 53

Sexual Harassment at the Workplace (1999)
1.3 Strategic human resource management 61
Objectives 61
Introduction 61
HR’s strategic challenges 62

What is strategic management process? 62
The strategic management process 63
Types of strategic planning 66
Strategic human resource management 67

Strategy execution role 67
Strategy formulation role 67
How HR creates a strategy oriented HR system 69
Translating HR strategy into action 70
Using HR scorecard approach 72

UNIT 1 v
Summary of Unit 1 77
Unit practice exercise 81
Suggested answers to self-tests 83
Suggested answers to unit practice exercise 87
Terminology 89
References 93
vi WAWASAN OPEN UNIVERSITY
UNIT 1 1
Course Overview
B BM 207/05 Human Resource Management (HRM) is a five-credit middle-level

course within the Bachelor of Business Administration (BBA) programme. This
course is specially tailored to provide you with both the theoretical and practical
aspects of the key activities, functions and contemporary issues in HRM. It introduces
the concepts and theories that will help you to understand and analyse the various
aspects of HRM. It starts off with the role HRM plays in formulating the overall
strategy of the organisation and the methods used to evaluate HR activities. It
then goes on to discuss about the recruitment and placement exercise, training and
development, compensation and finally employee relations. To further enhance the
analytical skill and the application of key concepts, case studies form an integral
part of this course.
By the end of this course, you should be able to:
1. Define and describe the key elements of HRM activities and functions.
2. Discuss and review the Malaysian HRM environment and its influence on
HRM activities and functions.
3. Identify, analyse and discuss key human resource management issues and
their impact on the workplace; and recommend effective strategies to
overcome HRM problems in the employment relationships and practices.
4. Identify and conduct training needs analysis, and help design specific
programmes to address these needs.
5. Discuss and review performance appraisal techniques and identify problems

associated with the techniques.
6. Define and elaborate on the importance and types of compensation and

benefits in HRM and employee retention.
7. Identify and implement policies and practices of employee relations that

would result in healthy workforce and organisation.
8. Recognise the roles of union, collective bargaining and negotiations in

employment.
9. Identify and implement programmes at organisational and individual levels

for employees to improve their health, team spirit (‘esprit de corp’) and safety
at work.
2 WAWASAN OPEN UNIVERSITY
UNIT 1 3
Unit Overview
W elcome to Unit 1 of BBM 207/05 Human Resource Management. This unit

comprises of two sections. The first section introduces you to the strategic
role Human Resource Management (HRM) plays in any organisation, especially a
business organisation. It introduces you to the basic concepts and knowledge of the
strategic roles and functions of HRM in any organisation.
In earlier times, the Human Resource Department was seen as one area which
was not important and did not play a major role in the overall formulation of the
organisation’s strategy. Today, this has changed especially with the recognition
that human resources are a company’s most valuable assets. It is very difficult for
a company to claim monopoly in other areas, but it can certainly claim monopoly
to having the best human resources.
In view of this, due recognition has been given to the HR department and HR
managers today to perform tasks that are bigger and important in scope and authority.
In other words, HR managers are involved, both in the development and execution
of the strategic management process. To help you get a better insight about the
involvement of HRM in the strategic management process, we will discuss the
HRM functions versus the overall general managerial functions. We will also see the
types of strategic planning that HRM undertakes to meet industry competition and
business uncertainties. HR managers are expected to provide services that support,
complement and supplement the company’s strategic plan. The strategic plan helps
companies to move from the current or present state to a desired state in the future,
which may be to achieve higher profits through market growth and a greater market
share. In short, it is the attainment of the organisation’s vision through a sound
mission which demands sound strategies.
The organisation needs its HRM to develop its HR strategies, policies and activities
to support the organisation’s corporate strategies which will give it the competitive
edge and ensure survival and sustenance in the marketplace.
In the execution of HRM’s strategic roles, technical understanding and practices of

employment laws of the country concerned is very crucial so as to ensure that the
organisation does not flout the law of the land but depicts itself as a responsible
corporate citizen. In view of this, you will be introduced to some important Malaysian
labour laws. Having the knowledge and being able to interpret these laws will protect
the organisation from any legal suits and discrimination claims. Through your own
reference, you will notice that these laws differ from nation to nation but the basic
underlying principles are universal.
This unit illustrates how HRM practices undertake strategic roles in activities such
as selection, training, compensating, appraising, training and employee development
to help organisations create a pool of suitable people with skills, talents and potential
required in today’s business environment.
As well as performing their strategic roles and networks within their own organisation
and outside parties, human resource managers are expected to create competitive
advantage through people, by attracting, motivating and retaining high-performing
employees.
Through its special functions, HRM is helping all managers of the company in
various ways.
This unit discusses the jobs or duties of HR management and is the manner in
which they are related to the management process. You will learn that management
activities such as planning, organising, staffing, leading and controlling functions
are performed by any manager including HR managers.
However, HR managers are responsible for staffing or managing human resources

as well as employing the other four management activities (planning, organising,
leading and controlling). In dealing with human resource policies and procedures,
HR managers are bounded by ethical conduct and this section will provide you
examples and issues of ethical considerations. Students will learn that Malaysian
employment laws and Acts protect both employers and employees from unfair
employment practices and discrimination.
Understanding the employment contract, its abiding laws and enforcements are
mandatory for employees and employers alike. In this aspect, HR managers will
need to educate employees so that they understand their employment contractual
obligations. The unit will also enable you to understand how HR managers perform
tasks that are broader and more significant in scope and authority. In other words,
HR managers are involved in the strategic management process. You will see the types
of strategic planning that HR managers undertake to meet industry competition
and business uncertainties.
HR managers are expected to provide services that support the company’s strategic
plan. Strategic plans help companies move from where they (the companies) are
now to where they desire to be. Their aim could be to achieve a target profit or
market growth level. The company needs HRM to develop its HR strategies, policies
and activities to support the company’s corporate strategies which will determine
the company’s survival and sustenance in the marketplace. Therefore, the roles of
HRM these days have been expanded to include working and planning with top
management in programmes and strategies which are needed to stay competitive
and profitable.
We also include the topic on High Performance Work System which distinguishes
HR practices of high performance companies with those of low performance
companies.
UNIT 1 5
Unit Objectives
By the end of Unit 1, you should be able to:
1. Explain what human resource (HR) management is and how it relates to

the management process.
2. Provide two examples of how managers could use recruitment concepts and
techniques in staffing their personnel.
3. Discuss line, coordination and staff authorities of HR management and

differentiate the activities and authority each of these functions carry.
4. Provide some examples of how HR’s roles are changing in relation to a

globalised environment, technological advancement, nature of the work and
demography of the workforce.
5. Discuss various employment and labour laws currently in place to encourage

industrial harmony between employers and employees, as well as protecting
both parties from unlawful actions.
6. Identify instances of behaviours that may be seen as practices of sexual

harassment under the Code of Practice for the Prevention and Handling of
Sexual Harassment at the Workplace (Malaysia).
7. Identify instances of employment practices such as hiring and transfer that

may discriminate certain groups of job applicants.
UNIT 1 7
1.1 The Strategic Role of Human

Resource Management
Objectives
By the end of this section, you should be able to:
1. Describe the roles and functions of HR managers whose work has strategic
implications on organisational objectives.
2. Differentiate the core activities performed by the HR manager.
3. Explain how HRM expands its roles beyond the normal boundaries and the
reasons for taking up such challenges.
4. Demonstrate examples or instances in which the HR manager not only needs

HR proficiencies (employment laws, salary administration) but also business,
leadership and learning proficiencies (new technologies) in order to help
the organisation establish sound human resource policies and practices.
5. Explain how HR addresses challenges at the local, regional and global

levels.
Introduction
What is human resource management? How different or similar is it from general
management?
If we look at any organisation say, Wawasan Open University (WOU), we can see
that the university has academic programmes to promote and run degree courses
such as the one you are enrolled in.
We can see that WOU has a general management function mainly to develop and
promote programmes for its students.
To accomplish this important goal, WOU will need to plan the types of courses
needed by certain target groups who do not have access to other higher learning
institutions, which require formal pre-university entry qualifications and full time
learning participation.
Who will do what, how it will be done and what resources are necessary for activities
to be carried out, need to be organised.
Once the job activities and other structures, as well as the types of people required
to carry out the jobs are determined, WOU must recruit or appoint personnel
or specialists (program managers, marketing executives, course designers, course
developers, course coordinators, tutors, publication editors, graphic artists, or

general administrators), and train, appraise and compensate them appropriately
so that they are able to develop, promote, run and evaluate the programmes to be
offered. This is termed as staffing, a HRM process and the focus of this unit.
Then the last function of general management is controlling or evaluating the plans,
the progress of the activities under these plans as well as monitoring employees’
conduct.
What about the roles of human resource management itself? As HRM students, you
need to understand how an organisation functions and how plans are developed
and implemented at the corporate, organisational, departmental and operational
levels.
At the corporate level, the role of the chief executive officer (the top management)
is to develop the mission, goals and strategic plans which are translated into
objectives such as where the organisation is heading, how it wants to be known or
how competitive it should be 5 – 10 years from now.
In this respect, all middle management including human resources managers need
to work with top management in policy formulation and implementation. In other
words, the HR’s role is also strategic in nature as it broadens its scope and breadth
to include strategic human resource planning, staffing, training, appraisals and
compensation.
To equip themselves for these strategic roles, human resource managers are
expected to have knowledge, skills and competencies in areas of strategic planning,
productivity measures, human resource costing, Total Quality Management
(TQM) and other related IT skills. The latter include the use of spreadsheets, and
presentation packages (e.g., MS Word and PowerPoint) as well as statistical packages
(e.g., SPSS).
In future, organisations will require HR applicants to have attributes such as maturity,

assertiveness and emotional intelligence that reflect an understanding of self and
others besides being competent on the job. They are also expected to have strong
analytical, decision-making and negotiation skills.
The manager’s human resource management (HRM) activities

At the beginning of Unit 1, we learnt that human resource management is more
focused on the staffing process than the other four functions such as planning,
organising, leading and controlling.
Management refers to the five basic functions of a manager: planning organising,

staffing, leading and controlling as in Figure 1.1, whereas, human resource
management (HRM) refers to the policies and practices employed in managing the
“people” or human resources functions including recruiting, screening, training,
rewarding and appraising.
UNIT 1 9
The similarities of these terms are that they are responsible in planning the
programmes or activities to meet the goals set; organising the programmes by
allocating resources and putting the right people to conduct the related activities;
staffing or recruiting, selecting, training, appraising and rewarding human
resources so that they develop the right skills and competencies. It also includes
leading or motivating subordinates to do the jobs using their respective skills,
knowledge and talents; and controlling or evaluating performance and the plans
or standards set to achieve specific goals or objectives.
Staffing & Leading

Organising Controlling
Planning
Determine who to hire,
Assign recruit, select, train, Monitor
Select goals
responsibility appraise and reward  activities
and ways to
for task HRM’s activities. Use and make
attain them.
accomplishment. influence to motivate corrections.
employees.
Feedback
Figure 1.1 Functions of management
Activity 1.1
Think about examples of job activities that one does when she/
he has the following functions to perform as part of his/her job
responsibilities. Use the third column of Table 1.1 to record your
observed activities which represent your own or someone else’s
workplace situation.
These functions are also topics that will be covered in order to

learn the concepts and techniques which enable you to perform
the HR aspects of your management job.
As part of conducting a job analysis, you might observe the

corresponding activities which appear in the third column of
Table 1.1. These activities are usually conducted by a job analyst.
Try to think of the activities that managers conduct as part of

HRM activities at your workplace or someone else’s workplace.
You need to match these activities to the rest of the HR topics in
the first column.
HR activities/
Topics to be What a manager should know Your observed activities
learnt
Conducting Knowing what jobs are needed Review jobs, check certain
job analysis and why? job activities, and observe
how jobs are carried out.
Planning Aware of future internal human
manpower resource requirements, the current
needs number of employees internally,
know how to forecast human
resource requirements in relation
to current and future business
needs.
Recruiting Know recruitment sources and
and selecting methods of selecting the right
candidates candidates, and fair employment
practices.
Orienting and Orientation programmes meant
training new to instil new employees the
employees corporate culture (how things are
done in his/her organisation),
training programmes that teach
new employees knowledge, skills
and practices of a given job, use
methods that can test and evaluate
the knowledge and practices.
Managing Know wage and salary market
wages and rates and salaries of the jobs
salaries available in own organisation,
regular wage and salary review,
adhering to a fair wage and salary
administration.
Providing Incentive packages that meet the
incentive and employment laws yet provide
benefits employees more security, protection
and motivation to stay with current
organisation.
Appraising Practising management by
performance objectives (MBO) in setting
employees’ performance goals,
using performance criteria
measured quantitatively and
qualitatively.
UNIT 1 11
HR activities/
learnt
Communicating Sound communication skills:
(interviewing, verbal, written and non-verbal.
counselling, Lead internal communication via
disciplining) discussions, meetings at the
department, functional levels,
asking questions and probing
(during interviews), summarising,
reflecting, rephrasing (counselling),
and asserting and reasoning
(disciplining).
Training and How to identify employees’ training
developing needs: what skills, knowledge
employees and attitudes needed to perform
current jobs; What developmental
needs will they require to perform
future jobs?
Building How to make employees committed
employee to their jobs? Are there rewards
commitment and recognition programmes?
How about job characteristics that
allow creativity, meet challenging
goals and provide feedback on
how well jobs have been performed?
Table 1.1 HRM activities
Why is HRM important to all managers?
You have been made aware that HRM is linked to the duties devoted in planning,
recruiting, selecting, training, appraising and rewarding human resources whose
performance enables the achievement of organisational objectives.
An organisation that does not have a proper HRM (Personnel) department may
have faced problems in getting the right people to do the right jobs. Even when a
new staff has been recruited, he/she might not stay long enough to contribute to
the achievement of the organisational objectives.
How often have you heard or encountered situations where jobholders leave their
current employment because they were promised a better job prospect, but not given
what they were promised in their new position? Even when people hold on to their
jobs in an economic downturn where employment opportunities fall, often these
people will underperform or become complacent.
Normally, without a HRM department in any organisation, HRM policies and

procedures may not be properly instituted. In this situation, the organisation may
not be able to retain valued employees. Those leaving, or who have left, are normally
those who have the talent and the experience sought after by other employers. The
organisation will normally incur further employment costs to hire new recruits in
order to replace the ones that have left, as follows:
• Advertising costs  To attract a prospective employee, an organisation needs

to restart the cycle of advertising, contact employment agencies to look for
candidates, send a recruitment team of internal interviewers (and job
informants) to colleges/universities, and send notices to referrers to
recommend prospects, in which case rewards will be given for successful
referrals.
• Selection costs (screening, interviewing, and testing)  Often, personnel

involved in selection will be involved in the process so much so that they
would be sacrificing other core duties in human resource administration.
• Orientation and training costs  To equip new recruits with the necessary
knowledge, skills and attitude, an employer needs to spend money and time
on training employees. Training new employees on the job or off the job
often implies zero productivity to the organisation as new employees are
usually not productive while they are on training.
A high employee turnover rate has financial implications and may bring about
other serious organisational issues such as:
1. Failure to hire the right person for the job.
2. Inability to retain employees (high turnover).
3. Underperformance by current employees.
4. Legal actions by employees due to unfair employment practices.
5. Legal actions by employees due to occupational health and safety breaches.
6. Low morale amongst employees.
This unit will help you as a human resource professional, to avoid common
mistakes made by many organisations who fail to understand the importance of
HRM in managing an organisation.
Those managers who have been successful in HRM are likely the ones who hire the
right people for the right job, train, motivate, appraise and reward these human
resources appropriately even though they may lack in planning, organising and
control.
UNIT 1 13
If you are working, what does your company do to retain long-time employees who
are performing well in their jobs? How do you see your company conducting its
HRM activities?
For those of you who have worked before, reflect on what your former company
did to retain long-time employees who were performing well in their jobs? How did
you see your company conducting its HRM activities?
Activity 1.2
What do you think McDonalds or KFC does to maintain an

adequate number of employees in order to provide the “just-in-
time” and satisfactory services to the customers?
HR line and staff functions
Having discussed the need to have HR management in an organisation, you may

want to know how companies establish the duties of HR managers to that of line
and staff authority. To answer this question, this unit will explain the terms line
versus staff authority.
The right to direct the work of subordinates, and the responsibility to achieve the
department or the organisation’s task is known as line authority. Line authority is
given to functional managers who direct subordinates to be responsible in producing
or selling the organisation’s products or services.
Employees’ outcomes or results can be quantified (in terms of units, quantities

and dollars). The person occupying the position has autonomy to exercise decision
making in the given job.
A typist will have the authority to make adjustments, corrections or improvement

on a piece of work. Similarly, an accountant has the authority to approve
the purchase of all internal supplies and to direct his/her employees to close
the accounts at 4.30 pm on working days. A bank manager can authorise an
additional credit limit to a client and insist that all bank tellers provide customers
information on credit facilities.
Staff authority differs from line authority in terms of the roles and duties they
play. The staff manager who holds staff authority has the responsibility to assist and
advise the line managers. In other words, staff authority deals with advising and
providing support and services to managers who have the responsibility to produce
products through their subordinates.
HR managers have both line and staff authority. Line managers, irrespective of
their departments, are authorised to direct the work of their own subordinates.
The HR manager of a typical medium size food manufacturing company (e.g.,

Mary Biscuits) might have several section heads to lead the HR activities in
supporting the company’s biscuits production process.
Being a line manager, the incumbent will have the right to exercise supervision
and control over these personnel who report directly to him/her. The line functions
of an HR manager cover all the aspects of acquiring human resources, training,
appraising and rewarding them.
In this case, as the head of HR department of the food manufacturing company,

the line functions he/she undertakes will include the following.
1. Staffing:
Audit current
HR and plan
for HR
requirements.
3. Orientation: 4. Employee 5. Counselling and

2. Job
Provide new training: handling grievances/
placement:
employees Train new Industrial matters:
Placing the
information employees Handle employee
right person
about the or those complaints. Counsel
to the right
company with new employees on job
job.
and the job. jobs. performance.
6. Appraise and
reward employees:
Motivate those
who perform well.
Reward good
performers.
Figure 1.2 HRM’s line and staff functions
We can see that the HRM’s line and staff functions as shown in Figure 1.2, cover
all the main aspects of HRM activities.
These functions start with planning for HR requirements, hiring and selecting
candidates, orientation of new employees, training them, counselling, as well as
rewarding them accordingly. In addition, HR managers are staff managers who
are authorised to assist and advise line managers in attaining their basic goals. In
this example, the HR manager’s staff function includes carrying out core duties to
assist and advise other line managers in production, sales, quality control and on
financing of HR activities.
UNIT 1 15
These HR activities include hiring, placement, training, counselling, appraising,

evaluating, rewarding, promoting and even terminating employees. These activities
need to be consistently practised throughout the company and within departments.
The company also depends on the HR manager to administer policies, procedures

and practices of various human resource programmes. These programmes will cover
monetary and non-monetary benefits, further education, management development,
health and safety, grievances, employee relations, retirements, and well-being
amongst others. In addition, the HR manager has a coordination function 
assisting senior management to ensure that other line managers (production, sales)
comply with the organisation’s human resource programmes such as health and
safety.
The role of the HR manager in this case is to coordinate the HR activities of all
departmental managers to ensure that they practise a sound and equitable HRM
policy. This coordination role assumed by the HR manager is also referred to as
functional control.
HR department organisational chart
In order to view the functions and duties of HR management and understand the
kind of HR activities a large company undertakes, let us look at Chart 1.1. This
depicts an organisational chart of a large organisation.
The chart represents the primary and sub-functional activities of the HR department
headed by the VP of HR. Under him/her, there are departmental heads that are
responsible for the HR programmes or activities. You will see that some departments
are headed by directors, whereas some are led by managers. The chart indicates both
direct and indirect lines of command. For example, the VP of HR has direction
of all the work undertaken in the departments under his/her control, indicated by
a line below his/her position. He/she has indirect control of all units or functions
under these departments.
From the chart, you can determine how people are combined into work groups so
that organisational goals can be met. You will also notice how HR functions are
integrated  there is a pattern of coherence in activities that reflect the need to
retain and reward human resources who have the talent and the potential to grow
with the organisation. So, each function will have various programmes to support
the respective HR objectives.
Vice President
Human Resources
Administrative
Assistant
Administrative Director Administrative

Wage/Salary Recruitment & Manager Employment Administrative Director Administrative Director Manager,
Employment Health Director, Training
Administration Placement Relations Services Benefit Services Benefit Services Labor Relations
Services and Education
Appraisal and Mgmt. Search/

Worker Comp STD/LTD Employment Benefit Payroll Benefit Payroll
Performance Employment Agency Orientation
Case Management Counseling Processing Processing
Management Coord.
Employment Retention Employee Recognition

Wellness Programs Training Employee Benefits Employee Benefits
Programs Programs
Personnel Records/
Management Employee Special
Safety Manager HRIS/Payroll Benefit HRIS Benefit HRIS
Development Events
Processing
Chart 1.1 Monetary aggregates: M1, M2 and M3 (RM million)

Source: Bank Negara Malaysia, Monthly Statistical Bulletin (June 2006)
UNIT 1 17
In a small company where the number of employees is confined to 10 – 15 people,

the HR activities will normally fall under a senior manager who could be the owner
or someone who works for the company. An example of an organisational chart of
a local book store that promotes and sells university/college textbooks is depicted
in Chart 1.2.
The chart shows only two levels of management and non-management. The
owner/manager has both the line and staff authority. He/she carries out every
HR management function as well as marketing, purchasing, obtaining funds and
book-keeping.
A small company such as this local bookstore will need to have a good personal
assistant, book suppliers and buyers.
Owner/Manager
Shop assistant
Chart 1.2 An example of an organisation chart of a Small Bookstore
The company represented by Chart 1.1, due to its size and nature of activities
will probably concentrate on retaining human resources and ensure that they
perform and achieve the company’s objectives. However, the job of the HR
manager, whether in big or small size companies essentially includes the following
activities (although the scope and magnitude of these activities may differ to those
undertaken in a larger organisation):
1. Recruiting employees to fill posts and jobs necessary for production of

products and services.
2. Training new and current employees to equip them with new skills.
3. Evaluating (appraising) employees’ performance.
4. Rewarding employees with financial and non-financial incentives for

superior performance.
5. Counselling employees to facilitate improved job behaviour and

performance.
6. Represent and advise the company on all aspects of employment relations.

Activity 1.3
Explain the duties of a computer shop owner who has only five
staff.
Do you see the owner as managing human resources or selling

computers? Which aspects of line and staff authority are applicable
to the owner?
Briefly indicate the computer shop owner’s functions when he/she

holds line authority and in instances when he/she holds staff
authority.
Environment of HR management
HR roles are evolving and changing with the environment. For example, at Xerox,
due it’s relative superiority in human resource management, the company is forging
ahead (Noe, Hollenbeck, Gerhart and Wright, 2006).
Since 1993, Xerox has been one of the innovators in the use of technology for HR
functions.
The Xerox HR model provides a shared service in which pay, bonuses, staffing,
recruiting, benefits, diversity, learning, and HR systems are all part of corporate
HR.
HRM underpins at Xerox’s overall corporate strategy. To date, HRM at Xerox

continues to ensure that talented employees get the right experience, job assignments,
promotions (visibility) and learning opportunities.
The changing nature of HRM functions
How do you see the HRM function changing?
The traditional role of the personnel function which was devoted primarily to
administrative tasks is decreasing.
These administrative tasks basically involved hiring and terminating employees as

well as administering payroll and benefit plans.
As technology in areas like testing and interviewing are more applicable and reliable,
the personnel function has expanded to include recruiting, testing, training, and
promotion. Consequently, HRM has replaced personnel management in most of
today’s medium and large organisations. HRM brings on board new roles such as
being a strategic business partner, change agent, and employee advocate. These
new HRM roles are very demanding and require new HR skills and competencies.
UNIT 1 19
In the case of Xerox, the HR manager takes part in the strategic planning process,
for example, participating in corporate strategy formulation (as a corporate strategic
partner) to penetrate Asian markets. The HR manager also helps the company to
implement new corporate culture (as a change agent) and educate employees through
organisational learning (as employee advocacy).
Globalisation
Dessler & Tan (2009) refer to globalisation as the tendency of companies to

extend their sales, ownership, or manufacturing to new markets in other countries.
From an economic standpoint, globalisation is viewed as a process of increasing
involvement in the international business operations (Welch & Luoston, 1999 in
John Saee, 2005).
What it means is that, globalisation creates interdependencies and processes in

manufacturing products or delivering services across nations and countries to
enable consumers enjoy these products and services worldwide.
Can you think of some companies in Asia or Malaysia which have become global?
Why?
Many companies including Air Asia, Proton, Celcom and Genting have gone global
to market their products or services all over the world in order to compete and
survive in their respective industry. Confining operations to local or regional markets
is not economically feasible and profitable for many companies. Global companies
will need new HRM roles and competencies to support the new structure of the
organisations.
A case in point is Price Waterhouse Coopers (PWC), a global organisation

providing insurance, tax and advisory services. It has more than 120,000 employees
worldwide with 25,000 stationed in the USA. In pursuing a common company
culture in a global environment, PWC have developed a global leadership training
programme to encourage the development of innovative ideas and relationships
among future company leaders.
The role of HRM in this global organisation in supporting, building and sustaining
the common culture is more geared towards strategic partnerships, consulting (as
an agent of change) and advocating. Another example is Northern Telecom which
operates in 90 countries and has created a central database of employee records
worldwide. Headcount, salary, and recruiting data are updated regularly. This
system has improved Northern Telecom’s ability to meet customer needs and address
global staffing issues.
Technology
Secondly, the emergence and availability of modern technology such as the Internet
and intranet allow businesses to structure and organise their operations differently.
Meetings and business dealings and negotiations are a lot faster and economical with
Internet facilities which allow teleconferencing and virtual global meetings. Internal
communications are made easier through the use of the intranet which is another
way of reducing paperwork, physical meetings, use of resources or utilities (meeting
rooms are only used to convene people when intranet is not feasible). In order for
HR managers to use the technology effectively and ethically in managing human
resources, they need to develop the “know how” among users and implement a code
of conduct in communication and work performance in the organisation.
The nature of work
Companies too, face challenges in addressing changes in the nature of work due
to technological advances. They need to redesign the jobs and reporting structures
to ensure products or services suit the needs of the customers and reach them on
time. You may be aware that most banks have merged. One example was the merger
of Bumiputra Commerce (formally Bank Bumiputra and Bank of Commerce) and
Southern Bank to CIMB. For instance, when you enter a CIMB branch, you will
notice that the physical structures and the frontline counters have been centralised
to provide customers with different product or service transactions by one point
of contact. This type of structure provides an improved one-stop service for its
customers.
Another feature that improved customer service in CIMB is that enquiries can be
referred to a customer service officer who sits in the waiting area and this officer can
help you solve your personal banking matters. To improve efficiencies and reduce
paperwork, most banks including CIMB use Internet banking and auto-teller
machines to deposit cheques and cash. Customers can now pay bills via these teller
machines. The branch manager’s title in one of the CIMB banks in Penang has now
changed to Customer Relationship Manager, to create better banking products and
services, so as to foster good relationships with customers.
CIMB to some extent demonstrates the necessity to capitalise on its knowledge

and skills to support the development of value-added products (software, ICT) and
services. Bank customers need to understand and be able to use the technology and
self-service banking facilities to enjoy 24-hour banking from home.
This is an example of building human capital in the financial sector. Human

capital is linked to:
1. Intellectual capital  the creativity, productivity and services provided by

employees. Bank employees in the case of CIMB, will need to use creativity
in solving customers’ issues. These issues can be viewed as routine, or
irregular; in the latter case requiring one-off technique for resolution. The
job of a Customer Relationship Manager is to lead staff under their control
and develop their potential so as to boost the value of intellectual capital.
UNIT 1 21
2. Knowledge workers  employees who have the resources required to

produce a product or service. If CIMB employees are able to provide the
services customers want and these services are competitive, if not superior
to other bank competitors, they are known as knowledge workers.
In this regard, alternative work arrangements using non-traditional workers are

being practised and considered by many organisations which do not have much
choice but to change to suit environmental forces. Non-traditional workers
which include independent contractors, on-call workers, temporary workers, and
contract company workers offer companies the opportunity to be more efficient
and effective in HRM.
Another issue HRM needs to address is the changing nature of the workforce
demographics, namely, the background or profile of the workforce in terms of
gender, education, ethnicity, religious faith, marital status, nationalities, cultural
orientation and other related characteristics. Even in Malaysia, the number of
immigrant workers especially from neighbouring Asian countries: Bangladesh,
Myanmar, Pakistan, Sri Lanka, India and China, working in the various services
and manufacturing sectors is increasing.
Their presence will pose challenges to HRM in facilitating the work culture
and employment relationships. The number of working couples and women in
the workforce would also challenge HRM to be more attentive and sensitive in
practising equal employment opportunities. Figure 1.3 poses the challenges that
companies have to face and most of these challenges are global in nature. It means
that most companies who are operating beyond their own local economies will
face similar issues. How does HRM develop its competencies to help their own
organisations address these challenges? We will see the types of new competencies
that HR needs in the following section.
® Three competitive challenges

The Nature of Work:
that companies now face will
Outsourcing foreign
increase the importance of
workers
HRM practices.
The Technology:
Globalisation:
Conferencing using
Outsourcing
Maxis/Skype
foreign workers
workers
Figure 1.3 Competitive challenges influencing HRM

New proficiencies and competencies
The changing role of HRM will require HR managers to acquire new proficiencies
and competencies. As we have learnt and discussed, HRM is wide in terms of
functional scope: staff, line and coordination. In view of the new HRM roles, it
will be necessary for the organisation to look for or train HR managers in these
proficiencies: Technical HR, Business, Leadership or People Management and
Learning. Some examples of these skills are:
1. Business proficiencies: Ability to consider current and future business

goals and how HRM can contribute to them. This is the new role of HRM in
creating profits and providing satisfaction to the customers. The role
of strategic partnership with the senior management team in planning and
deploying human resources for jobs is critical to meet the company’s goals.
2. Technical HR proficiencies: Ability to analyse turnover, retention,

productivity, and customer service problems to recommend potential HRM
solutions (strategic partner). The HR manager is expected to be competent
in HR skills: selection, training, compensation, and employee relations.
3. Leadership proficiencies: Ability to work with management groups and

his/her own team members. Having the knowledge and skills to overcome
resistance to new HRM policies and procedures, technology, and work designs
(change agent). As a change agent, the HR manager needs people management
skills which include intra and interpersonal, cross-cultural management,
and consultations and negotiations.
4. HR proficiencies: Ability to coach and counsel employees and represent

their views to the management (employee advocate).
5. Learning proficiencies: Ability to design and deliver effective HRM

systems and understand how technology can contribute towards making
HRM systems more efficient and less costly.
Ethics and HR
It is necessary that HR managers understand and practise the employment laws

that apply in each country. Typically these statutory obligations will vary from
country to country. If you scan the advertisements inviting applicants to fill the
post of HR manager, the advertisers sometimes do not indicate that the applicant
must have a sound knowledge in employment law as one of the required selection
criteria. For instance, there are provisions in the Malaysian Employment Act
(1955) that guide employers and employees on issues of discrimination, and related
unlawful employment practices in employee selection, interviews, termination
and the like. As an advocate of change, advisor to senior management, and as a
professional or a practitioner, the job of the HR manager is constantly evolving
and involves interaction with people, both internally and externally at different
categories and sectors, and of different background and culture, at the local, regional
and international levels.
UNIT 1 23
It is highly important that HR managers understand the ethical issues involved

in performing his/her HRM roles. Dessler & Tan (2009) define ethics as the
“principles of conduct governing a person or a group; specifically, the standard
you use to decide what your conduct should be.” Giving gifts in Asian culture is a
form of appreciation or hospitality but not to some Europeans or Americans.
Ethics has a bigger implication or greater repercussions when questionable

behaviour occurs. The activities of some companies like Enron and Arthur
Andersen in the US caused the said companies to go out of business. In the daily
work environment, the use of emails or Internet may breach certain personal
information affecting individual privacy and confidentiality. Deciding if a practice
is ethical or not is subjective and depends to some extent on how one perceives
what is morally right or wrong, yet it is the job of the HR manager to put in place
a model of ethical conduct for the organisation.
HR and technology
The learning skills expected of the HR manager is very much technology related.
The HR manager may not be required to design for example, a database system
to track employee skills inventories but is required to understand its application
and deliverables (output). In most HRM activities, technology has helped to
speed up processes and output deliverables. For instance, Intel University and a
few other training centres of multinational organisations in Malaysia, use websites
to announce promotion, training and other employee relations programmes.
Employees are able to check, inquire and send in requests without much hassle.
Technology has made it easier to procure (ordering and purchasing of raw
materials online) and outsource HR activities to specialist service providers.
Technology has made employer’s data accessible to service providers through real-
time Internet.
Obviously, technological applications play an important role in HR. For instance,

by using the company’s intranet, employees can self-service many HR transactions
such as updating personal information and changing benefits allocation. In
Malaysia, many companies have installed Internet or computer-based systems to
improve HR productivity.
Technology has also made the HR manager’s job easier especially in staff
recruitment. JobStreet.com for instance has made HR’s recruitment job easier and
more efficient. Any organisation that wants to recruit new hires from a large pool
of applicants may use Jobstreet.com, besides using other means of recruitment.
JobStreet.com will match applicants’ specifications with the job descriptions that
clients have established.
HR and networking
To sustain sound HRM professionalism and good ethical conduct, networking

with other HRM specialists and professionals is a necessity. In Malaysia, the
Malaysian Institute of Human Resource Management, the Association of Human
Resource Management in the various Free Trade Zone areas and other institutions
that encourage members to share and update themselves in the latest HRM
techniques, are available for networking. HRM specialists are able to develop the
required HR and learning proficiencies by their respective organisations to stay
competitive in the industry through regional and global networks.
Activity 1.4
Look up for the requirements of a HR manager advertised in

the NST, the Star and other leading newspapers. Name three (3)
main areas that he/she must be competent in to hold the post as
head of HR in a medium sized manufacturing (computer parts
manufacturer) company.
Summary
1. This section discussed the role of the human resource

management (HRM) function, an effort on the part of the
organisation to gain the competitive advantage.
2. It emphasised the roles and skills that a human resource

management department and/or managers need for any
company to be competitive.
3. New proficiencies required of the HR manager today are

leadership, HR and learning. These competencies are, working
with other management groups, leading own team, knowledge
and practices in HRM and knowing how technology works to
improve the HR systems.
4. The need to “Know Your Employment Law” is increasingly

important as HR related laws affects virtually every HR
decision. Equal employment laws, occupational safety and health
laws, and labour laws are among the areas in which HR
professionals need to know.
UNIT 1 25
5. Ethics and HR are gaining increasing exposure as a result of

ethical lapses in corporate behaviour. Ethics have clearly
played a bigger role in managers’ decisions. HR has an important
role in promoting ethical behaviour at work and this will be
explored in greater depth in the later section.
6. HR and technology improves HR functioning in various ways,

namely, productivity improvement, and outsourcing.
7. To improve their HR operations, more firms are installing

Internet and computer-based systems. Technology also makes
it easier to outsource HR activities to specialist service providers
by allowing them to have real-time Internet-based access to the
employer’s HR database.
Self-test 1.1
Answer the following questions:
1. Are there similarities and differences between Management and

HRM? In what ways are there similarities and differences?
2. In what ways can HRM contribute to corporate strategic

planning and implementation?
3. If you aspire to be a HRM specialist, what proficiencies do you

need and how will you get these proficiencies?
Name and discuss any three (3) of these skills.
Suggested answers to activities
Feedback
Activity 1.1
HR activities/
learnt
Conducting Knowing what jobs are needed Review jobs, check certain
job analysis and why? job activities, and observe
how jobs are carried out.
Planning Aware of future internal human Ask departments to check
manpower resource requirements, the current on manpower requirements
needs number of employees internally, on monthly, half yearly,
know how to forecast human yearly or 3 yearly basis.
resource requirements in relation Forecast retirement, transfer
to current and future business or promotion on a yearly
needs. basis.
Conduct job analysis as
business grows.
Recruiting Know recruitment sources and Analyse job market, talk to
and selecting methods of selecting the right recruiting agencies, discuss
candidates candidates, and fair employment requirements: job description
practices. and job specification, review
testing methods.
Orienting and Orientation programmes meant Review company policies,
training new to instil new employees the communication/information
employees corporate culture (how things are packs for new employees,
done in his/her organisation), train or update officers/
training programmes that teach supervisors on orientation
new employees knowledge, skills procedure.
and practices of a given job, use Update on the job training
methods that can test and evaluate manual or SOP; review
the knowledge and practices. qualifying procedures.
Managing Know wage and salary market Get latest salary survey,
wages and rates and salaries of the jobs review employee salary
salaries available in own organisation, regularly, talk to salary
regular wage and salary review, experts, send compensation
adhering to a fair wage and salary manager/personnel to
administration. compensation seminar.
Know salary rate given by
competitor companies,
take note of exit interviews
or complaints on salary,
analyse reasons why
employees leave for other
companies.
UNIT 1 27
HR activities/
learnt
Providing Incentive packages that meet the Review overall incentives
incentive and employment laws yet provide and benefits package,
benefits employees more security, protection analyse benefits offered
and motivation to stay with current by competitors; analyse
organisation. incentive and benefit needs
by various job category
holders; talk to insurance
companies for latest group
insurance; review medical
insurance regularly.
Appraising Practising management by Discuss how objectives are
performance objectives (MBO) in setting set within an organisation.
employees’ performance goals, Look for consistencies. Review
using performance criteria measured with heads on problems or
quantitatively and qualitatively. issues on appraisals. Monitor
complaints on unfair ratings.
Communicating Sound communication skills: Check for communication
(interviewing, verbal, written and non-verbal. consistency and clarity. Train
counselling, Lead internal communication via managers on communication
disciplining) discussions, meetings at the effectiveness, interviewing
department, functional levels, and counselling skills. Review
asking questions and probing disciplinary procedures and
(during interviews), summarising, monitor how disciplines are
reflecting, rephrasing (counselling), conducted. Update managers
and asserting and reasoning on self-discipline.
(disciplining).
Training and How to identify employees’ training Conduct regular training
developing needs: what skills, knowledge needs. Analyse needs. Pro-
employees and attitudes needed to perform vide training as solutions
current jobs; what developmental instead of yearly activities.
needs will they require to perform Use performance apprais-
future jobs? als as identification and
reason for staff develop-
ment. Review development
needs through jobs analy-
sis and requirements and
human capital potentials.
Institute development re-
imbursement programmes
based on merits.
Building How to make employees committed Make employees proud of
employee to their jobs? Are there rewards their good jobs through
commitment and recognition programmes? some recognition pro-
How about job characteristics that grammes such as “em-
allow creativity, meet challenging ployee of the month” or
goals and provide feedback on “employee of the week”
how well jobs have been performed? and employee outreach
programme.
Table 1.1 HRM activities

Activity 1.2
As students, you may need to revisit or refer again to topics on

HRM planning, recruitment and staffing. Managers or supervisors
in charge of staffing at Mc Donald will need the HR competencies
or knowledge in job analysis: jobs description and job specification;
the number of employees to manage and handle the volume of sales
expected for the day, the week, the month, etc. These managers will
have to forecast the number of personnel (employees) to meet the
above target. They will also need to have a manpower inventory
which contains information on the number who might leave the
company, go on transfer, promotion or training. Again, employees
might take emergency leave, leave on 24 hours notice, in which
case the managers concerned might need to keep a list of applicants
whom they can call to fill in the vacancies if needed.
Activity 1.3
Students may want to draw an organisation chart representing the

authority level: Owner and subordinates who are one level down
from him/her. In terms of functions, he/she has to manage the
business which requires him/her to play the role of a manager. He/
she does the planning, organising, staffing, leading and controlling,
meaning he/she is responsible to get the products sold or assembled
or serviced as planned. In this aspect he/she carries out the line
functions. Whereas, as a staff authority, he/she may have to decide
on the number of staff, their qualifications, positions to be held,
salaries, benefits, training, etc. The HR line authority fits him/her
as he/she is the owner as well as the manager responsible for sales
of computers and the work of five staff under him/her.
Activity 1.4
Students can get various samples of advertisements on HR posts.

They need to identify the proficiencies or requirements of the
persons who can fit the posts. Students are expected to look for
skills, knowledge, characteristics, or other experience or qualifications
needed by the post.
UNIT 1 29
1.2 Malaysian Labour Laws and Their

Enforcement
Objectives
1. State as well as interpret the various identified laws and regulations with
regard to employer/employee functions and actions.
2. Interpret and discuss the applications of actions and solutions to instances

of employer/employee behaviours that might have impinged on the rights,
terms and conditions, and obligations as provided by the various acts of
employment.
3. Make objective judgements and decision making to the best of your

understanding of the rules and terms thereof, for amicable employer/
employee relationship.
Introduction
In the earlier sections of the unit, we learnt that HRM needs various proficiencies
and knowledge to manage human resources in the changing work environment,
influenced by internal and external forces. Internal forces such as the diversity of
the workforce (more women, special needs, and/or working couples of younger
cohorts), the need to keep the workforce fluid (employing part-timers or on
contract) and external forces such as economic downturn and globalisation require
HRM to acquire knowledge and skills in managing the organisation’s workforce.
We also learnt that one of the proficiencies that a HR manager must acquire the
HR skills in understanding, practising and enforcing labour laws to maintain and
sustain fair and ethical treatment in employment.
Being knowledgeable and having good judgement in the interpretation and use
of employment laws and acts will obviate the need to involve the company in any
legal suits and discrimination claims.
Although different countries have their own laws and enforcement, the basic
principles in providing and maintaining fair and non-discriminatory practices
in employment might be the same. However, they may also differ based on the
availability or absence of affirmative action programmes in employment in any
specific country.
This section provides you with information on current Malaysian Labour Laws
and their enforcement. As far as Malaysian employees are concerned, the most
important piece of legislation is the Employment Act 1955. The Act provides a
number of minimum benefits for employees covered by the Act. It also dictates
certain rights on employer-employee relationships.
The Act also outlines the important aspects of the Wages Council Ordinance 1947,
which dictates the definition of wages given to the employees employed under
a contract of service. Under this Act, employees contribute to the Employees
Provident Fund (EPF). The Act also covers other aspects of employers, employees,
and monthly contribution towards pension funds. Likewise, the Workman’s
Compensation Act 1952 provides you with an understanding on minimum wages
and benefits for manual workers. Other Acts such as the Employees Social Security
Act (SOCSO) 1969, establishes an insurance system to provide employees with
financial assistance or compensation in cases where they are involved in accidents
at work or have contracted work-related diseases.
The Occupational Safety and Health Act 1994 on the other hand, outlines
the need to keep the work environment safe and requires that employees protect
themselves from any form of workplace hazard. You will learn the provisions
and conditions that allow young workers to be employed under the Children
and Young Pensions Act 1966. The Trade Union Act 1959 and the Industrial
Relations Act 1967 will give you an understanding of why employees join unions
and how management with non-unionised workers motivate workers to remain
employed with their company and become dedicated to their employers. The
Code of Practice for the Prevention and Handling of Sexual Harassment at
the Workplace (1999) outlines the need to educate employers and employees on
the terms and implications of sexual harassment.
All the above Acts originated and are administered by various departments at the
federal level (centralised in various Ministries in Putrajaya) whose responsibilities
are to review, recommend and implement laws pertaining to its respective
employment provisions. You are advised from time to time, to keep an eye on
current employment developments as interpretations of certain aspects of these
Acts may change in the future.
The Employment Act 1955 (latest amendments in 1998)

Employment laws as stipulated in the Malaysian Employment Act (1955) guide
employers and employees on discrimination, and related unlawful employment
practices in employee selection, interviews, termination and the like. The Act is
enforced by the Department of Labour headed by a Director-General and assisted
by the Deputy Director-General. Every state in Malaysia has its own labour office.
The Employment Act is applicable only to employees and their respective employers.
It does not cover those persons who are self-employed (who work in their own
firm/business) and other workers who are not employees (for example, contractors).
When one becomes an employee, his/her employment is defined by a contract of
service, also termed a contract of employment.
UNIT 1 31
You need to differentiate between workers who are employed under a contract of
services (employees) and those who are hired under a contract for services (known
as non-employees). An example of the second group is when a company hires
someone to undertake a project or an assignment that lasts a couple of months.
Hiring someone to paint your house is a form of contract for services.
Outsourcing services to a service provider is another way of hiring employees

temporarily and a strategy of “just-in time” employment.
Contingent or contract workers who are mostly foreigners (maids, operators,

technicians, cleaners) are being outsourced to provide services to individual house
owners or as operators, cleaners or technicians to manufacturing organisations.
These workers will be entitled to pay and benefits as contract workers whose
headcount falls under their respective employment contractors or agents. You will
know the status of workers employment by asking the following questions and if
employers have control over most of the responses to the questions, then it is likely
that there is a contract of services between the workers and the employers.
1. When and how the work is carried out and who does it?
2. Who provides the tools, raw materials and equipments necessary to do the
work?
3. How is payment made? On a regular basis or after the work is completed?

Any invoice submitted by the service provider?
4. Any contributions to EPF being made?
5. Any written contract? If yes, what are the terms and conditions?
6. Do workers need to follow the organisational rules?
The terms in a contract of employment that may vary between jobs within and
across industries normally contain the following elements:
• Job title.
• Wages and details of other monetary payments such as allowances and bonus.
• Normal working hours, any requirement for the employee to work overtime.
• Holiday and leave entitlements.
• Other benefits.
• Probationary periods, if applicable.
• Notice of termination (employee and employer).

Workers covered by the Employment Act are:
1. All those who earn not more than RM1,500 per month.
2. All those who conduct manual labour.
3. All those who supervise manual labour.
4. All those who are employed to drive or maintain vehicles for the transportation
of passengers or goods.
5. All those employed as domestic servants. One section of the Employment

Act that applies to domestic servants including those workers employed
in private home (maids, butlers, nannies, cooks) is that the servant must
give 14 days’ notice prior to resignation.
The Act covers termination, maternity benefits, the right to a weekly rest day, annual
leave and sick leave. The following details outline each of the terms of contract of
services covered by the Act.
1. If an employee is found guilty of misconduct after conducting a domestic

inquiry, the employer under section 14 has the right to dismiss, downgrade,
demote or impose any other lesser punishment on the said employee. Prior
to the domestic inquiry, the employer can suspend the employee for a
maximum of 2 weeks from work either to carry out investigations or for
other reasons. During the period of suspension, the employee is paid half
of the wages; however, the employer must pay back the remaining half-pay
if he/she was found not guilty.
2. The employer is said to breach a contract if he or she fails to pay the

employees’ wages. In this instance, employees can leave their employment
without prior notice if this is breached.
3. Employees who do not show up at work continuously for more than two
consecutive days without leave of absence are deemed to have breached the
contract of service. In this case, employer has the right to establish the
reasons of this absence, with efforts on the part of employees to attempt
to call or inform the employer of the absence. If there are no valid reasons
and no attempt has been made to call or inform the employer of the absence,
the employee has breached the contract and is liable to be terminated from
his/her current employment.
4. Employees protected under the Act receive basic wages and all other
payments due under the contract of service excluding annual bonus,
overtime payments, commissions, subsistence allowance and travelling
allowances.
UNIT 1 33
5. Wages paid to the employees must be at least once every month, although
some employers pay more frequently, once in 2 weeks. The wage period
can be anytime between 1 – 15th of the month or from the 15th to the 14th
of next month. However, once the calendar wage date has been determined
by the employer, the wage must be paid to the employees not later than 7
days after the end of the wage period.
6. The Act allows an employer to give employees an advance on wages;

however, the practice is based on the employees’ needs and is at the
employer’s discretion to avoid any Industrial Relations implications which
may result from lending money to the employees.
7. Deducting employees’ wages is only allowed if the purpose is to:
a. Recover wages overpaid in the immediate preceding 3 months prior to

the deducting month.
b. Contribute to the EPF, SOCSO and Income Tax.
8. The Employment Act provides special benefits to women employees such as

lesser working hours and maternity benefits. The Act does not insist on
equal pay for equal work, nor does it outlaw discrimination against women.
a. Women need not work between the hours of 10.00 pm and 5.00 am
in industries (manufacturing activities) and agricultural sectors. In cases
where the employer can proof that there will be no negative effects on
the employees, and employers will provide these female employees with
transportation and shift allowances, the Director-General of Labour may
allow female employees to work within the restricted hours.
b. The Act provides 60 days of maternity leave (inclusive of rest days and
public holidays) to each female employee who is giving birth. The
duration of maternity leave for female employees in the public service
has increased from 43 to 60 days three years ago.
c. During maternity leave, the employee receives maternity benefits

equivalent to her wages if at the time of confinement, she does not have
more than 5 surviving children and she has served her employer for at
least 90 days.
d. The Act does not require the employer to reimburse employees for any
expenses associated with giving birth, although some employers do
provide generous benefits.
e. An employee on maternity leave may not be terminated for any reason.
f. Paternity leave of up to 5 days for male employees has been made a recent
benefit.
9. Employees are required to work a maximum of 8 hours per day exclusive

of tea and lunch breaks. The daily working hours may be increased to 9 if
employees work 5 days in a week. Some groups of employees especially in
the tourism industry have been exempted from this section of the Act
referring to working hours.
10. The Act allows employers to request their employees to work overtime and
the latter must be paid overtime if they agree to work extra hours. The
employees have the right to reject any request on overtime unless the need to
work overtime is stated in their contract of employment. The current
maximum number of overtime hours allowed is 104 hours per month, and
the rates for monthly rated workers are 1.5 times the hourly rate of pay.
11. The Act provides workers with only 10 public holidays per year. However,
Malaysia declares 16 to 17 such holidays depending on the state. For instance,
Malaysia in year 2007 declared 14 days of public holidays. Four of the 10
public holidays to be offered to employees are fixed. These include Labour
Day, Independence Day, The Birthday of Yang diPertuan Agong and the
Birthday of the State Ruler (or Federal Territory day for Kuala Lumpur and
Labuan).
12. All employees are entitled to annual leave once they have completed a year
of service. Some employers allow employees to take some annual leave in
the first year of service. The worker’s leave entitlement will depend on their
length of service with their employer. The Act specifies that the minimum
annual leave for workers with less than 2 years of service is 8 days; those
with 2 – 5 years of service is 12 days; and those with more than 5 years of
service is 16 days.
13. Although employees are entitled to sick leave, the benefits will depend on
his/her length of service. Employees with less than 2 years of service get 14 days
sick leave per year; those with 2 – 5 years of service are entitled to 18 days’
annual sick leave; and those with more than 5 years service receive 22 days’
annual sick leave.
14. Employees whose services are terminated under certain circumstances

are entitled to receive termination benefits from the employer. Employees
who are dismissed without payment termination benefits can make a
complaint at the Labour Office to claim the benefits. Only workers with
a minimum of 12 months’ service are entitled to the following benefits
quantum:
a. 10 days’ wages for every year of employment for workers who have been
employed for less than 2 years.
UNIT 1 35
b. 15 days’ wages for every year of employment for workers who have been
employed between 2 – 5 years.
c. 20 days’ wages for every year of employment for workers who have been
employed for 5 years or more.
Activity 1.5
1. Can someone be brought to a domestic inquiry without receiving

any written warning letter from the human resource department
prior to that? Use the guidelines on misconduct in the
Employment Act to answer this question.
2. Ang (not his real name) has been working for his current
employer for over 10 years. Last month, Ang received his annual
increment and his basic pay is now RM1,636.63 whereas his
last pay was RM1,415.40. He worked overtime quite frequently
and upon checking his salary, he found that his overtime pay
was calculated based on his old salary. He then checked with
the human resource department and was told that his recent
salary exceeds RM1,500, hence he is not entitled to overtime pay.
However, according to the company’s service manual, he falls
under the D2 group (supervisor) which entitles him to
overtime claim. What advice would you give Ang with regard
to the conflicting situation he finds himself in?
Web Reference
Please visit the homepage: http://www.mef.org.my for more

information on HR matters and employment.
The Wages Councils Ordinance 1947

This Act is administered by the Wages Councils and stipulates minimum wages
for certain industries, although Malaysia does not require a minimum wage for all
workers. Currently, there are four sectors covered by the Wages Councils. These are:
1. Cinema workers (Order 1972)
2. Shop assistants (Order 1970)

3. Hotel and catering industry workers (Order 1967)
4. Port of Penang stevedores (Order 1967)
The question is, should Malaysia legislate a minimum wage for all workers? You
might want to scan newspapers or talk to people in these industries which are
covered by the Wages Councils to see if minimum wages have been upgraded in
the last 3 – 5 years. Maimunah Aminuddin (2006) cited that the last amendment
made by the Catering and Hotel Wages Council was in 1982, when the minimum
wage set for the workers in this sector was RM185 per month (applicable to
workers over 18 years of age). However, most employers, over time, have been
forced to give their workers more than the minimum wage required, given the
general trend of rising wage rates throughout the country and the fact that workers
are, at times, difficult to recruit.
The Act is enforced by the Department of Labour headed by a Director-General

and assisted by the Deputy Director-General. Every state in Malaysia has its own
labour office.
Update on minimum wage for all workers:
Malaysian Prime Minister announced the country’s first minimum wage on

Monday (April 30, 2012). Private sector workers in peninsular Malaysia will receive
minimum monthly pay of 900 ringgit while those in the poorer east Malaysia
states of Sabah and Sarawak will get 800 ringgit. The new wage policy is part of
Malaysia’s plan to achieve rich nation status by 2020. The minimum wage rate
is inclusive of allowances. The Malaysia’s first private sector minimum wage was
gazetted on July 1 of 2012, takes effect in January 2013.
Activity 1.6
Find out the minimum wages for shop assistants in some of the
shops in a shopping complex, like the Bukit Jambul Complex.
Make a comparison among three (3) different retail or wholesale
shops selected. Do these shops pay similar wages to their assistants?
If not, what reasons could explain the differences?
UNIT 1 37
The Employees Provident Fund (EPF) Act 1951 (The Employees Provident
Fund Board)
The Employees Provident Fund Act, since its introduction in 1951, has had several
amendments, but in essence the scheme has not changed significantly. There is a
statutory body under the control of a Board, which makes policy decisions related
to the Fund. The Board consists of a Chairman, Deputy Chairman and 18 members
made up of representatives from the government, employers and employees. Since
the Board controls a very big fund (of money), an investment panel is appointed
separately from the Board to formulate investment policies. This is necessary to
ensure that funds under the management are carefully invested to guarantee fair
returns for its members.
The Employees Provident Fund (EPF) is a scheme to provide workers with

available funds on their retirement. Most of the companies in Malaysia have
retirement policies which follow the practice of the public service sector. Current
retirement age in the public sector is 56 years; however, employees who reached
55 years of age are allowed to withdraw all their contributions from the EPF.
Membership
1. All employers are required to register with the fund. They must contribute
12% of the employee’s monthly wages to the fund, and deduct and forward
another 11% of the employee’s monthly wages to this fund.
2. All employees are required to register with the fund. All workers employed
under a contract of service, including part-time and temporary, must
contribute to the fund. Domestic servants and foreign workers are
exempted from joining the fund. Those above 55 years of age, who have
not withdrawn all their savings from the fund remain as members and can
continue to contribute if they are still working. They can also recontribute
even after they have withdrawn their fund, if they are still employed.
3. Self-employed employees are not required to contribute although they

may opt to do so. This poses a weakness in the current system.
Contributions
1. Currently, employer contribution is 12% of the employee’s monthly wages

and employees contribute 11% of their monthly wages to the fund.
2. Wages in this context include fixed allowances, commissions and bonus

payment but does not include service charge, overtime payment, any
gratuity, any retirement benefits, any retrenchment or termination benefits,
or any travelling allowance.
3. Employers are responsible to deduct the employee’s contribution from the

latter’s wages and remit the money together with his/her own contribution
to the fund. Failure to remit EPF contributions is an offence and employers
are often prosecuted if they fail to execute this obligation.
4. To prove that contributions have been made to the EPF, employers must
provide their employees with pay slips which show their wages and all
deductions including the EPF contributions. Employees also receive
annual statements from the EPF office on their contributions (both from
the employer and the employee himself/herself ) in that particular year and
employees are required to notify the EPF office if there is any irregularity
in the statement (e.g., an incorrect amount).
Withdrawal
1. Currently, member’s savings in the fund consist of three (3) accounts. The
first account, which is the largest, does not allow the member to withdraw
from the account until the employee reaches the age of 55 years. The second
account, which has 30% of the monthly contribution deposited, can be
withdrawn for housing and education purposes once the employee reaches
50 years of age. The third account, the smallest, allows members to withdraw
from it to pay for medical treatment, to buy a computer, and to pay for
other pressing living needs due to accident or serious illness.
2. Upon reaching 55 years of age, members can withdraw the balance from
their accounts. This amount represents the total accumulated sum,
contributed by the employer and is paid by them through the monthly
wage deduction with the annual dividend declared by the EPF Board.
3. If the member dies before the withdrawal is made, his/her dependents or

family members will receive the remaining funds available from his/her
accounts.
Activity 1.7
Read the following incidence on claiming EPF from an ex-employer.
In July 2003, a Mass Communication graduate was hired by a local

public relations firm as a consultant. Being naive and ignorant of her
employment rights, she accepted the job as the employment market
was quite depressed then. In the terms and condition of the offer
letter, there was no mention of the Employee Provident Fund (EPF)
contributions by either the employer or the employee. Only after
her fifth month at the firm, she consulted a friend about her rights.
After searching over the Internet on Malaysian Employment Law,
the friend informed her that EPF contributions are compulsory.
UNIT 1 39
After her probation period of 6 months, she brought up the issue

with her employer who accordingly offered her a new letter of offer.
However, due to some other reasons, she left her job a month after
she was confirmed. When she received her pay for the 6 months she
had worked, she noticed that the EPF deductions were made but
the contributions for the five months were not made. The company
did not even issue the monthly pay slips to her.
If you are an HR manager, what advice would you give the

incumbent to correct this situation? Who is at fault? Employer,
employee, Employment Law or the EPF Board? Spend about 30
minutes on this question.
The Workman’s Compensation Act 1952

In the earlier sections, you have seen how the Employment Act defines employees
and their rights to receive wages, in which a minimum quantum is imposed for
certain industries (the Wages Councils Act) and how employees benefit from the
Employees Provident Fund (EPF) which provides employees with funds upon
retirement or pensions (in the case of public sector employees if they opt for
pension). In this section, you will learn that Workman’s Compensation Act 1952,
administered by the Labour Department, provides compensation to workers who
meet with an accident at work or who contract employment related diseases. This
Act, similar to the Employees Social Security Act (SOCSO), requires employers in
the private sector who employ foreign manual workers or other foreign workers
earning less than RM500 per month, to buy an insurance policy to cover this
liability under the Act. Employers must inform the Labour Department of any
accident within 10 days of its occurrence.
The Employees Social Security Act (SOCSO) 1969

The Employees Social Security Act (SOCSO), first introduced in 1969, has expanded
its coverage in all industries in the Malaysian private sector. The main purpose of the
Act is to set up an insurance system to enable employees involved in an accident at
work or who contracted a work-related disease to receive compensation and financial
assistance. The Act has the following scope and coverage.
Scope
1. All Malaysian employees earning less than RM3,000 per month are
required to register as members with the Social Security Organisation.
Foreign workers covered by the Workmen’s Compensation Act are exempted
from this requirement.
2. Once employees become members, they will continue to contribute to the

SOCSO even though their salary per month is more than RM3,000.
3. Those employees earning more than RM3,000 per month may opt to
become the member of SOCSO, provided that their employers agree to
pay on their behalf.
4. All public sector workers are exempted from being SOCSO members since
1983 because they are covered by the Pensions Act which provides members
with medical benefits.
5. The contribution under SOCSO, like the EPF, is paid both by the employer
and the employee. The current rate required by SOCSO is approximately
2.5% of the employee’s monthly wages with higher contribution from the
employer.
6. Wages under this Act are defined differently from other Acts (Employment
or the EPF). A wage under the SOCSO Act are all remunerations payable
in money by an employer to an employee including any payment in lieu
of leave, holidays, overtime, and extra work on holidays, but excludes:
a. Any contribution paid by the principal employer or the immediate

employer to any pension fund or provident fund under this Act.
b. Any travelling allowance.
c. Any sum paid to the employee to reimburse special expenses incurred as

a result of his/her employment.
d. Any gratuity payable on discharge or retirement.
e. Annual bonus.
f. Any other remuneration.
Schemes
1. There are two schemes in SOCSO: the Employment Injury Insurance

Scheme and the Invalidity Pension Scheme.
2. Under the Employment Injury Insurance Scheme, the worker is entitled to

treatment at a clinic on the SOCSO panel or at any government hospital.
SOCSO pays the bills. If the worker is certified unfit for work for more than
4 days, he/she is entitled to a temporary disablement benefit while on
medical leave. If he/she is certified as permanently disabled, he/she will
UNIT 1 41
either receive a lump sum payment or a monthly pension. If the person is

so severely incapacitated that he/she needs constant care from another
person, he/she can claim an allowance forthis purpose. If the person dies
from this work-related accident, his/her dependents will receive a monthly
benefit for a certain period of time as well as some funds for funeral service.
3. Under the Invalidity Pension Scheme, workers are entitled to a pension or a

grant or other benefits if they are certified unfit for work for whatever
medical reason, as long as they have contributed to SOCSO for a minimum
period of time.
4. SOCSO also pays workers benefits in cases of accidents incurred while

travelling to and from work or on a journey for any reason directly related
to their work. A police report on the accident is required to be provided.
The Occupational Safety and Health Act (OSHA) 1994

This Act was introduced in 1994 by the Department of Occupational Safety and
Health, to ensure employers provide a safe working environment for their workers.
There is an implied term in every contract of employment that employers will provide
a safe workplace environment for their employees. Malaysia has introduced laws that
require employers to establish certain safety measures at the workplace. However,
statistics show that even though the number of industrial accidents has decreased,
the fatality rate remains high. For example, industrial accidents have decreased
21% from 2000 to 2003, but the fatality rate within the same period was 36%.
For many organisations, accidents have been a major problem at the workplace.
For the purpose of understanding the reasons for introducing OSHA, we first
introduced the Factories and Machinery Act which protects only factory workers
who represent 25 – 30% of the workforce. The Act was enforced to ensure
occupational safety and health among factory workers during the 1960s and 1970s
while Malaysia was being transformed into an industrialised country. Due to the
limited scope in coverage and being very prescriptive in nature, the Act failed to
consider the many technological changes that are taking place in the industrial
sectors and the responsibilities for safety seemed to lie with the government rather
than the employers and employees. In this respect, OSHA was introduced to
address the gaps created by the Factories and Machinery Act.
Philosophy and scope
1. OSHA’s philosophy is to emphasise the fact that the responsibility to

ensure safety and health at the workplace lies with those who create the risk
and with those who work with the risk. The Act therefore spells out the
responsibilities of all parties at the workplace.
2. The Act applies to all Malaysian industries and sectors. Only those
employed in the armed forces and the workers under the Merchant
Shipping Laws are exempted.
3. A National Council for Occupational Safety and Health established under

the Act has between 12 and 15 members appointed by the Minister of
Human Resources. The council, in addition to having representatives
from employees, employers, and the Ministry, has at least three members
from professional bodies in the field of safety and health, one of whom
must be a woman.
4. As an advisory body, the council meets periodically to discuss any proposed

amendments affecting the health and safety legislation, to maintain
relevant records of statistics, to establish codes of practice and are expected
to provide ideas and suggestions to improving the administration and
enforcement of occupational safety and health matters.
Employers’ duties under the Act
1. Employers are responsible in providing a workplace of no risk to health.

This includes employer’s obligation to:
a. Ensure proper arrangements in using or operating, handling, storing

and transporting of plant and substances.
b. Provide information, training and supervision that guarantee employees’

safety.
c. Maintain the place of work and its entrances and exits.
d. Provide workers with reasonable welfare facilities.
2. It is an employers’ responsibility to ensure that health and safety provisions

also apply to any independent contractor and his/her employees who work
in the employer’s premise.
Safety policy under the Act
1. An employer with more than 5 employees must prepare a written

statement of his/her workplace safety and health policy. He/she must
make this policy known to his/her employees.
2. Since the Act does not provide guidelines on how to write the policy and
what it should cover, many employers from the small and medium sized
organisations seek help from external consultants to write the policy.
UNIT 1 43
3. The policy once prepared, must be made known to the employees. This
can be done by:
a. Displaying it in a prominent area where workers can see it.
b. Giving each employee a copy.
c. Having the policy printed in the employee handbook.
d. Introducing it as safety and health related matter during orientation or

induction programmes.
4. Employers must also ensure the safety and health of visitors to the plant.
The latter should be required to wear appropriate safety equipment where
necessary.
Safety training required by the Act
1. Employers are required to provide training and appropriate information

to their workers to enable them to work in a safe manner. Employees can
be trained by way of in-house training if the company has a trainer in this
field, otherwise training is done by external trainers.
2. Employers can work with or get assistance from the Federation of Malaysian
Manufacturers (FMM) and the National Institute of Occupational Safety
and Health (NIOSH) in developing and conducting safety and health
programmes. In the year 2000, NIOSH conducted 600 courses for some
13,000 participants.
3. Employees should be given safety training in critical areas such as:
a. Fire prevention and evacuation drills.
b. First aid, including CPR (Cardiopulmonary resuscitation).
c. Electrical faults and hazards.
d. Risks and dangers due to working in a small and confined space.
e. Using forklifts without danger.

Duties of employees under the Act
1. The Act has established equal responsibilities between employers and

employees to ensure safety and health at workplace. Generally, employers
especially those from multinational, large and medium size companies
provide workers with personal protective equipment and adequate
training on health and safety issues. Sometimes, an employee may not be
comfortable complying to the Health and Safety standards established by
the organisation; despite this the employee under their contractual
agreement must meet the health and safety levels. (Put in place by the
company).
2. It is therefore mandatory that employees wear at all times (as required by

the Act), a protective equipment or clothing that the employer provides
for the employees safety and follow up on any directives in regard to safety
which may involve the use of the following equipments:
a. Safety helmets.
b. Eye glasses or goggles.
c. Earplugs or muffs.
d. Face protection.
e. Aprons.
f. Safety shoes.
g. Respirators.
h. Safety harness.
3. Under the contract of employment, employees have the obligation to

comply with the employer’s orders on safety and health. Employers can
exercise their rights to take action against any worker who disobeys a
legitimate order. In this case, courts may fine workers who are found guilty
of safety violations, up to RM1,000 or an equivalent of three months
remuneration.
4. Under the Act, employees in high-risk industries (e.g., manufacturers of

chemicals) are required to undergo regular medical examination.
UNIT 1 45
5. It is mandatory to employ safety and health officers in high-risk industries

which are identified by the Ministry and they must be registered with the
Director-General of Occupational Safety and Health when they commence
employment. Typically, the industries involved are:
a. Building and engineering construction (exceeding more than RM20

million in contract price).
b. Ship building (with more than 100 workers).
c. Cars and petroleum industry (employing more than 100 workers).
d. Chemical and allied industries (>100 workers).
e. Metal industries (> 100 workers).
f. Woodworking (as above in relation to the number of workers).
g. Cement manufacturing (as above).
h. Manufacturing firms as above.
6. Increasing the number of qualified safety officers may help high-risk

industries address safety issues and reduce fatalities.
NIOSH, Bangi offers short courses and certification programmes to

prospective or current employees who need to be qualified and certified
as safety and health officers/administrators/managers.
7. The Act requires that if a company has more than 40 employees, the
organisation must form a safety and health committee. This committee
should address the following functions:
a. Assistance in development of safety and health rules including safe

work practices.
b. Continual review of Occupational Health and Safety (OH&S)

programmes.
c. Implementation of studies on accident patterns or occupational

diseases.
d. Recommendations in regard to improvements in programmes of work

systems and revisions of practices and policies that may lead to work-
related accidents.
e. Inspect the workplace at least once in 3 months and investigate any

accidents.
f. To conduct a review and meet every 3 months.
Notification of accidents and occupational diseases under the Act
1. Employers must notify the Department of Occupational Safety and

Health Department (DOSH) of all accidents, and diseases that workers
have incurred. Any death or serious injury (unfit for work for more than
4 days) as a result of a work-related accident requires the employer to
notify DOSH immediately and submit a written report within 7 days.
The Director-General of DOSH, if necessary, will conduct an inquiry
into the nature and cause of the accident.
2. Employers must keep records of all accidents and work-related illnesses

for at least 5 years and send a summary to the DOSH by January in the
following calendar year.
Activity 1.8
Read or listen to the news on industrial accidents resulting in

serious injuries or death of one or a few employees, or find a notice
of stoppage of operation or sale of some products or service due to
violation of the safety and health rules and regulations.
In some cases, customers complain of unsafe use or consumption

of certain products. Upon finding a notice of closure/termination
of operation, identify 2 or 3 of the main issues relating to these
complaints with respect to safety or health.
What sort of actions or recommendations can be made to prevent

these accidents or unsafe health practices?
(e.g., Cases of industrial accidents during the construction of

high-rise buildings).
A newspaper (The Star) has publicised a fall resulting in the death

of a foreign construction worker from a 42 storey work-in-progress
apartment in Tanjong Bungah.
Why do you think this mishap happened? Who should be responsible

to ensure that workers operate this building site safely?
UNIT 1 47
The Children and Young Persons (Employment) Act 1966

The employment of children and young persons under the Employment Act must
adhere to the following conditions:
1. They may work in “light work suitable to their capacity” in their family’s
business. Children may be employed in public entertainment or in
activities related to his /her studies in school or a training institution. If
he/she works as an apprentice, they need a written apprenticeship contract
and submit it to the Director-General of Labour. Young persons may be
employed in positions where they are able to carry out the requirements
of the job. This does not include family-owned and operated businesses.
2. Children however, are not allowed to work between 8.00 pm and 7.00 am,
unless they work in public entertainment and are entitled to a rest of 30
minutes after every 3 consecutive hours of work. If they work in the public
entertainment or agricultural sectors, restrictions on working at night are
not applicable.
3. The Factories and Machinery Act does not allow young persons to operate
or come into contact with machineries.
4. Parents need to provide consent for their children to work in any of the
permitted work activities.
The Trade Unions Act 1959

You have seen that the employment of children and young persons is restricted to
certain activities and occupational sectors, and the hours and time of work are also
restricted. In this section, you will learn why workers join unions, and what other
objectives unions have that influence members’ loyalty and commitment. Generally,
the trade unions’ role is to work with the government to introduce legislation and
systems that will benefit the workers. In this respect, trade unions serve as a pressure
valve for the government e.g., a counter-balance between government’s objectives
and workers’ objectives.
Workers form and join unions for three major reasons, namely:
1. Economic motive.
2. Protection of rights.
3. Social reasons.
Economic motive
1. Workers seek monetary improvement as well as improved conditions of service

when they join unions.
When an individual accepts a contract of employment, he/she enters into

it and agrees to the terms and conditions attached in the contract, even
though in reality he/she may not be happy with the pay and benefits.
In general, people will accept whatever jobs that are offered, but some of
them are able to negotiate better terms and conditions than others.
2. By joining a union, workers have the strength to bargain with the employer for
better terms and conditions.
They are protected under the law once they have joined a government
accredited trade union. All members have equal status in the union regardless
of race, religion, colour, gender and job status. Joining the union provides
workers with the collective strength to negotiate with their employer and a
voice to express what they need from the government.
3. Through collective bargaining, workers are offered terms of employment and

benefits over a particular period of time.
These collective bargaining benefits are extended to all workers who are
eligible to join the union as well as some who may not be union members.
4. Unions not only negotiate with employers for better terms, but they also give
benefits directly to members.
The potential opportunities provided by joining a union can encourage

greater participation. For instance, the National Union of Bank Employees
not only provides members with a range of services and insurance coverage
but also social and leisure benefits. Members can use the union’s training
centre cum holiday resort in Port Dickson for a small fee. Funeral service
benefits or other emergency benefits (floods, fire) are also extended to its
members by many unions.
Protection of rights
1. Workers who join unions also seek protection against discrimination from
their employer. There are cases where a group of workers, or an individual
are being discriminated by management in some organisations. For
example, salaries could be paid differently to workers of different gender
and origin although they are carrying out the same job.
UNIT 1 49
2. The union, while protecting workers’ rights (from discrimination or

exploitation), acts as a “watch-dog” for its members and will take action to
address instances of discrimination or exploitation, and report any claims
of unfair treatment to the officers of the Department of Labour. This
department will investigate such claims and conduct routine checks at the
workplace to uncover any irregular employment practices.
3. Unions also ensure that their members receive the benefits that they are
entitled to under the Employment Act. These include annual and other
leave entitlement and benefits.
Social reasons
People have needs. The one social need is as philosophised by Maslow in his
hierarchy of needs theory.
Individuals who work seek to satisfy several needs.
1. Money is essential to all human beings in order to survive and have a

family. It is commonly regarded that to live comfortably, an individual
should have an acceptable level of shelter, food, living conditions, the
means to get from one place to another, the opportunity to raise a family,
and provide an adequate level of medical care and access to education.
2. Once these basic needs are met, individuals seek security and safety, which
are fulfilled from benefits that employment provides. Insurance, pensions,
EPF and other forms of security serve to satisfy individuals in this second
hierarchy need.
3. In the third hierarchy, social needs, or the need to belong to a group or an

association, (e.g., a union) is met by employees who choose to join a
union. Peer pressure arising from wanting to belong to a group and sharing
the social norm, may be another reason why individuals join unions.
4. There are some who join unions believing that they have the attributes or
aims to be a leader. They see the opportunities to use their leadership
qualities in the union hierarchy.
5. Some reasons for joining a union may overlap with the union’s objectives.
For example, the following objectives are present in the constitution of one
of Malaysia’s largest unions:
a. Promoting the industrial, social and intellectual interests of its members.
b. Ensuring its members receive just and proper rates of remuneration,

security of employment and reasonable hours and conditions of work.
c. Promoting the material, social and educational welfare of the members.
d. Promoting legislation affecting the interests of the members in

particular, and trade unionists in general.
Legal definition of a trade union and its implication
1. Under the Trade Union Act (Section 2), a trade union is defined as any
association, or a combination of employees within any particular
establishment, trade, occupation or industry or within similar trades,
occupations or industries, whether permanent or temporary having one
or more objectives as stated in trade unions, covering West Malaysia,
Sabah or Sarawak.
2. A trade union may be called a union or an association. Universities have

associations to represent their academic staff, whereas their general and
administrative staff, as well as those from the banks and other service
industries have union representation.
3. Membership of unions is restricted geographically, so that workers in West

Malaysia join a union whose members work in the peninsular (West
Malaysia).
4. Members of a union must work in a particular trade, occupation or

industry and therefore have common interests.
The Industrial Relations Act 1967

The current Industrial Court, established by the Industrial Relations Act 1967,
succeeds the Industrial Arbitration Tribunal and the Arbitration Court established
in 1948. The Industrial Court specialises and deals only with trade disputes. The
Act spells out the powers the Court can exercise.
1. The Court’s main purpose is to arbitrate disputes between employers and

employees to facilitate a peaceful and unbiased outcome. Over the years,
the Court has developed guidelines based on important principles and
precedents for parties practising industrial relations at work.
UNIT 1 51
2. The Court has a major role in hearing employment disputes. It has

currently increased the number of chairpersons who serve under a
President to 20. Also the number of cases heard by the Court is increasing
progressively.
Structure and proceedings of the Court
1. A President appointed by the Yang DiPertuan Agong heads the Court

with a number of chairpersons assisting the President. Under the Act, the
president must have at least 7 years of experience as a lawyer prior to
their appointment; alternatively he/she must be a member of the judicial
service.
2. Cases involving a trade union must be heard by the President or one of

the chairpersons and 2-member panels: comprising a panel representing
employers and another representing employees.
3. The President appoints the panels’ members, and after consulting relevant
organisations, such as the Malaysian Employers Federation (MEF) and
Malaysian Trade Union Council (MTUC), he/she will submit a list of
individuals whom he/she finds suitable to sit on the panels. The panel
members are given a duty roster to attend the hearings.
4. The Court invites the following parties to a dispute resolution:
a. An employer or one of his/her officers to present the employer’s case.

The case can also be represented by an officer or an employee of a
trade union, or an officer from the MEF.
b. A union can appoint an employee or an officer of the union, or an

officer from MTUC to represent them and present the case at the
Court hearing.
c. An employee may appoint an officer or an employee of the MTUC or

a union, or he/she can speak on his/her own behalf.
d. A lawyer may only represent the parties when the Court permits and
the submission must be in writing.
5. The Court has the power to summon, witness, and document if necessary.
In this respect, the parties to a dispute need to submit a written summary
of their arguments (termed as pleading) before the hearing takes place.
During the hearing, each party presents a verbal description of the alleged
events that have caused the dispute.
Awards of the court
These are decisions made by the Court with each award having certain information
on its covering page. The public may read the Industrial Court awards published
in the Industrial Law Report (ILR). The cover page contains the following:
1. The parties to a dispute.
If it is a trade dispute, they are an employer and a trade union; whereas

for claims of dismissal, they are an employer and one or more employees.
2. The award number.
Each Industrial Court’s decision is given a consecutive number annually,

starting from the first case heard.
3. Decision making.
The President of the Court is assisted by two panel members who

adjudicate on a trade dispute case.
4. Venue.
Most of the cases are heard in the headquarters of the Industrial Court
in Kuala Lumpur.
5. Date of reference.
The Minister of Human Resources refers the trade dispute case to the
Court if the Industrial Relations Department is unable to conciliate with
the parties.
6. Date of hearing.
Some cases, depending on the weight of evidence to be presented, may

require more than one more hearing.
7. Representation.
Both the employer and the union have legal representation.
Since the topic on employee relations will be covered in Unit 4, this section
provides an understanding of the general scope and structure of the Industrial
Relations Act.
UNIT 1 53
Code of practice for the Prevention and Handling of Sexual Harassment

at the Workplace (1999)
Sexual harassment is a misconduct that cannot be tolerated by anyone, including
an employer. As sexual harassment is a form of misconduct, an employer needs to
modify disciplinary procedures to prevent these activities, if they take place.
The nature of sexual harassment consists of the following elements:
1. Article 4 of the Code of Practice on the Prevention and Eradication of

Sexual Harassment in the Workplace in Malaysia defines sexual harassment
as, “any unwanted conduct of sexual nature having the effect of verbal, non-
verbal, visual, psychological or physical harassment” that might:
a. On reasonable grounds, the recipient may perceive it as placing a

condition of a sexual nature on his/her employment.
b. On reasonable grounds, the recipient may perceive it as an offence or

humiliation, or a threat to his/her well-being, but has no direct link to
his/her employment (Seah, L G, Advocate & Solicitor, 2001, 11 th
Malaysian Law Conference 8 – 10 Nov 2001, KL, Malaysia in http://
www.mlj.com.my).
2. Further in Article 5, the Code defines sexual harassment as sexual coercion

and sexual annoyance. Sexual coercion is sexual harassment resulting with
respect to an employees position. Sexual annoyance relates to conduct that
may be deemed hostile, intimidating or offensive but does not directly
impact the employee’s job.
3. Most acts of sexual harassment are of the following nature/forms:
a. Gender harassment. Any sexual statement or behaviour such as

insulting or degrading remarks, or attitudes
about either sex. Examples: verbally insulting
remarks, displaying offensive pictures, graffiti,
obscene or lewd jokes, wolf-whistles, making
obscene gestures.
b. Seductive behaviour. Any unwanted, inappropriate or offensive
advances to an employee, repeated sexual
advances, persistent requests to meet socially,
persistent telephone calls, letters, emails, SMS
messages.
c. Sexual bribery, coercion. Abusing a position of authority by soliciting
sexual favours for promises of career
advancement.
d. Sexual imposition. Forceful, imposing behaviour such as kissing,
hugging, fondling, touching, grabbing or
intentional brushing of body parts, sexual
assaults.
4. Sexual harassment is internationally recognised as an act of discrimination

in the workplace. It is a problem of social inter-relationship that needs to
be addressed by education.
5. As most women hold jobs that are traditionally dominated by men, there
is a likelihood that women may be exposed to some form of sexual
harassment. However, this could also be the case for male employees.
6. Employers have an obligation to provide a safe workplace, however they

cannot, nor are they obliged to anticipate potential indiscretions or
transgressions of sexual misconduct.
7. Perhaps the best way to circumvent potential issues in this regard is to

“nip it in the bud”, i.e., put a process in place that enables such activity to
be recognised; establish a reporting process, as well as an educational programme
that enables employees who have been identified as violating these
provisions to understand that their behaviour is unacceptable in the
workplace.
8. Physical or social exclusion allows, or at least facilitates, sexual harassment

in the workplace. Physical seclusion may be constituted by a working area
that is secluded from the view of others by a physical barrier (e.g., an enclosed
area). Social seclusion refers to an environment where people are indifferent
to what is happening in their immediate surroundings. The latter is very
hard to identify.
Combating sexual harassment in Malaysia: The present procedures and approach
The Code, issued by the Ministry of Human Resources in 1999, is instrumental in

increasing awareness of sexual harassment in the workplace.
The Code issuance was made possible due to the collaboration between many
organisations, including the Malaysian Trade Union Congress (MTUC), and the
Malaysian Employers’ Federation (MEF) under the auspices of the Ministry of
Human Resources.
1. When an employee complains that she/he has been sexually harassed, an

employer must take immediate steps to investigate the matter. The Code of
Practice on Preventing and Eradicating Sexual Harassment in the Workplace
recommends that employers set up a complaint procedure and ensure that
every employee is aware of that procedure.
UNIT 1 55
2. Employers are encouraged to appoint a special committee of investigation

consisting of people with knowledge and skills in counselling. They ask
questions or interview both males and females to handle any complaints of
sexual harassment.
3. Investigating a claim of sexual harassment must be carried out in a

confidential manner to facilitate the collection of evidence or proof that
an incident of sexual harassment has occurred. No disciplinary action can
be made against an employee alleged of sexual harassment if, in fact, it has
not occurred.
4. In terms of HRM, employers must train all staff to recognise all behaviour
considered as sexual harassment. Employees, whenever possible, must keep
records or statements construed as sexual harassment and show the
investigating committee these evidences.
5. “A Practical Guide to Grievance Procedure, Misconduct and Domestic

Enquiry,” by Martin N. D’Cruz, provides the following steps that an
employee subject to sexual harassment may take:
a. If the harasser is a colleague, and is told on the first occasion that you
are uncomfortable with his/her behaviour, then a warning should be
issued to him/her not to repeat this behaviour.
b. If the incident reoccurs, warn him/her again but be firm. If you know
of others who have been subjected to the same abuse, gather them together
and advise the employee not to repeat the same behaviour.
c. The best thing is to talk it out and report the incident to your supervisor,
or the investigation committee.
d. Forward a written report to the HR or the Personnel Manager as well

as your union if you still face the same conduct.
6. Employers need to understand what sexual harassment is before they

can take action against alleged harassers. They have to work with NGOs or
government agencies, under the Ministry of Women, Family and Community
Development, to develop and implement the procedures of the Code in
their respective workplace.
7. On the other hand, there are sexual harassment incidents that are not
reported. According to the Ministry of Women, Family and Community
Development, only 1% of the 400,000 registered companies in Malaysia
have adopted the Code. However, only 250,000 are employed in positions
that are covered by the Code.
Although the reported incidences of sexual harassment have increased by up to 50%

between the years 1999 and 2000, there are many more unreported cases that may
be due to the following factors:
1. Fear of public embarrassment, feeling guilty and being depressed.
2. Fear of reprisal or retaliation for the perpetrator, employer or others.
3. Fear of losing their job or potential promotion.
4. Little knowledge of how and where to make a complaint either through the
employee’s employer or an outside party.
5. Perceptions that female employees are “overreacting”. Many fear that

the way they dress or behave in, or outside the workplace, encourages
sexual harassment.
6. Many victims try to ignore the problems and suffer in silence, hoping the
problem will cease by itself.
To meet the anti-discrimination laws especially in the Prevention and Handling

of Sexual Harassment Practices at the Workplace, the Malaysian Industrial Court
has established The Standard of Proof to be applied in the Industrial Court. In
an Industrial Court Award No. 606 of 1996, the Chairman used the standard of
proof on the balance of probabilities, when he/she found that the claimant had
proved that she had been sexually harassed, leading to her claim in constructive
dismissal. The Court reached this decision based on the credibility of the witnesses
and evidence construed as stereotypical mindsets. This approach is consistent with
the decision of the US Supreme Court (Harris V Forklift Systems Inc, 1993), which
found that psychological harm or injury although relevant, may not be applicable
in sexual harassment cases.
Sexual harassment is an offence or misconduct and this must be made aware to

employees and they must be informed on how to lodge a complaint.
In his keynote address, the Minister of Human Resource (1999) summarised

how sexual harassment affects employees’ morale and job performance, reduce
productivity and increase the rate of sick leave and absenteeism amongst affected
employees.
Also, among female employees who face sexual harassment, many have resigned rather
than continue to bear with, or regale against this behaviour. This in turn has caused
employee turnover to rise, increase in the cost of training and loss of production.
He said that in most cases, the victims of sexual harassment have difficulty and
constraints in reporting sexual harassment due to the fact that there is no established
procedure to guide them on how and where to report.
UNIT 1 57
In this respect, the Ministry of Human Resources has distributed a Code of

Practice on the Prevention and Eradication of Sexual Harassment at the Workplace
which defines sexual harassment as any unwanted conduct of a sexual nature
including verbal, non-verbal, visual, psychological or physical harassment.
Summary
This section had discussed and deliberated a number of important

acts and laws regarding employment, wages, EPF, SOCSO,
workmen compensation, employment of children and young
persons, unions, industrial relations, health and safety issues and
sexual harassment at the workplace.
You have learnt:
1. How laws and regulations affect employees and employers at

the workplace. Work is regarded as a central feature of modern
society since people spend much of their time at work which
then determines their standard of living and their lives. As a
HR student, you need to familiarise yourself with the terms and
conditions of work, for e.g., those that will influence the
respective parties and how they may react.
2. The Employment Act 1955 provides a number of minimum

benefits for those workers covered by the Act. It also dictates
certain rights for both employers and employees.
3. As employees, you have been made aware of the Employees

Provident Fund (EPF) Act 1951, covering aspects of employers’
and employees’ monthly contribution towards a pension fund.
Currently, employee pays 11% and the employer pays 12%.
4. The Workman’s Compensation Act 1952, provides you

knowledge and understanding on minimum wages and benefits
for manual workers.
5. The Employees Social Security Act (SOCSO) 1969 establishes

an insurance system which provides employees who are
involved in an accident at work or who contracted a work-
related disease, with financial assistance or compensation.
6. The Occupational Safety and Health Act 1994, outlines the

need to keep the work environment safe and employees should
be made to protect themselves against any forms of hazards.
7. You have learnt the provisions and conditions that allow

young workers to be employed under the Children and Young
Pensions Act 1966. Only certain sectors are allowed to employ
young persons and children who need parent’s or guardian’s
consent to work in some sectors considered unfit and within
certain work hours.
8. The Trade Union Act 1959 and the Industrial Relations Act
1967 provided you an understanding on why employees join
unions and how management with non-unionised workers
motivate workers to stay and become loyal to their employers.
9. The Code of Practice for the Prevention and Handling of

Sexual Harassment at the Workplace (1999) outlines the need
to educate employers and employees on the definition and
procedures in handling sexual harassment incidence at
workplace. They need to make employees aware of the
consequences that misconduct of sexual harassment brings and
to educate employees on the procedures and avenues to report
sexual harassment incidences.
10. All the above Acts originated and are administered by various
departments at the Federal level (centralised in various ministries
in Putrajaya) whose responsibilities are to review, recommend
and implement laws pertaining to its respective employment
provisions.
Self-test 1.2
1. What does a job offer normally mention in the letter of

employment? You can refer to your letter of employment, if
applicable, or any relevant sources. Discuss briefly the elements
in abiding by the Employment Act 1955.
2. What does a ‘wage’ mean in Employment Act 1955, Wages

Councils Act 1947 and Workmen Compensation Act 1952?
What do wages mean in general? Are there differences or
similarities in the elements of wages defined by these Acts?
If there are, then why is it so? State at least two reasons for the
differences.
3. Which categories of employees or jobs are required by the Social

Security Law to register with SOSCO?
UNIT 1 59
4. What are the core benefits that SOCSO provides to its members
who had an accident at work leading to:
a. Injury and medically diagnosed as unfit for work for 1

week?
b. Serious injury which left him/her incapable of doing

physical work (lifting, carrying, moving things) for the rest
of his/her work life?
c. His/her death?
5. How would you term sexual harassment? Can it happen

outside work? How would you react or what would you do if
your best friend happens to be sexually harassed at work?
Outline your action plans as best as you can.
Feedback
Activity 1.5
1. If the ‘misconduct’ the employee has committed is serious, the

employer may charge the employee and conduct a domestic
inquiry even though there is no prior warning given to the
employee. NST Appointments. Dec 13, 2003.
2. An employee who earns more than RM1,500 a month and

is not a manual worker or a driver, neither is he engaged in the
operation or maintenance of any mechanically propelled vehicle
for commercial purposes, or is a supervisor supervising manual
workers in and throughout the performance of their work, is
not entitled to overtime as he does not fall within the scope
of the Employment Act 1955. Based on Clause 8.0 of the
employee’s service manual, it suggests that Ang is entitled to
overtime as he falls within executive category D of the
company’s salary scheme. NST Appointments. Dec 13, 2003.
Activity 1.6
Students may find it difficult to get the exact pay due to

confidentiality and some shops pay their assistants on hourly
wage. Students can expect the wage to be around RM300 – 400
depending on the years of service or seniority, types of activities,
overtime work, bonus, etc. What about shops outside Georgetown,
in Air Itam or Balik Pulau? If these assistants are paid differently,
could location be an influencing factor?
Activity 1.7
Since the incumbent received the letter of offer, she can produce
the letter to the officer in the EPF office. This offer letter should be
sufficient to prove that she was employed by the company and should
be able to prove her case against the company on non-payment of
EPF by her previous employer. Since her previous employer failed
to provide her pay slips, EPF should not insist on the pay slip as a
requirement prior to taking action against the company on non-
payment of EPF. NST Appointments. July 24, 2004, p. 1.
Activity 1.8
Students need to listen to the news or read newspapers on industrial

injury. They need to cite the nature of injury which sometimes lead
to death; identify the company or employee; know from the news the
nature of violations or non-adherence to safety measures (employers
fail to provide safety equipment or employees fail to follow safety
procedures); make an attempt to recommend actions to stop these
violations or educating both employees and employers on safety
issues. Students also need to find a notice of closure/termination
of operation, identify 2 – 3 main violating issues on safety or health
and make recommendations to stop the violations.
UNIT 1 61
1.3 Strategic Human Resource

Management
Objectives
1. Explain a strategic plan.
2. Discuss the challenges the HR manager faces to keep the company

competitive.
3. List the strategic management process.
4. Discuss the roles of the HR functions in strategy formulation.
5. Describe the linkages between HR and strategy formulation.
6. Describe the benefits of a strategy-oriented HR system.
7. Provide examples of high-performance work system in an organisation.
Introduction
In the earlier two sections, you have learnt how employment and related laws have
bound employees and their employer in a work employment relationship.
An understanding of the explicit contract of employment (written terms and

conditions) with core job duties, responsibilities and accountability, as well as
implied rules and obligations with regard to job behaviour is important to all
parties concerned. The employer has to provide employees wages and benefits,
conditions of work in line with health and safety regulations, the right to join
a union and procedures in dealing with sexual harassment while employees
perform the duties at the best of their abilities. In this section, you will learn that
HRM needs to equip himself/herself with strategic management knowledge and
competencies in meeting the various challenges in his advisory and staff capacity.
This section will outline the planning approaches, the various strategic roles and
the implementation of strategic planning the HR manager undertakes to enable
him/her to work as a strategic partner with other functional managers in the
organisation.
HR’s strategic challenges

AirAsia, one of the leading low-cost airlines in Asia, illustrates an example that
business organisations exist in an environment of competition. The goal of
AirAsia’s strategic management is to deploy and allocate resources in ways that
provide a competitive advantage. It provides low cost air travel for short and
medium haul journeys with the motto “Everyone can fly now.” To be optimally
effective, the HRM function of the airline must be integrally involved in the
company’s strategic management process.
What is strategic management process?
Before we go into strategic management, you need to understand the basis and
background of HRM’s duties leading to strategic management. First and foremost,
HRM’s core duties include the provision of services that support the organisation’s
strategic plans.
Let’s take the example of AirAsia. How does it maintain its profits while giving
large discounts and cheap air seats to customers? As one of the leading low-cost
airlines in Asia, what are its strategic plans to capture the low cost carrier market
share?
A strategic plan is defined as the plan the organisation develops to align its internal
strengths and weaknesses with the external opportunities and threats so as to remain
competitive in doing what it sets out to do. AirAsia will normally ask questions and
looks for answers. The process of asking questions such as “Where do we want to
be 5 or 10 years from now or what do we want to be 10 years from now? “ is one
of the important parts in the planning process. Strategies must be formulated to
move the company from the current situation or condition to where the company
wants to be in the future.
To be the number one low-cost airline in Asia, AirAsia’s strategy is to maintain the
quality: flight reliability and comfort at no extra frills. What would HR, sales, and
quality control functions do to support these strategic goals?
HR must provide competent staff through proper selection, staffing, training,

compensation, appraisals, and evaluation. Sales personnel must be able to deliver
the pre and post sales services to guarantee customer satisfaction.
As such, HR is seen to be proactive in handling challenges that include the

following.
1. Corporate productivity and performance improvement efforts. HR needs

to plan and implement strategies to support this important survival
challenge of the organisation.
2. Employee competencies contribute significantly to organisational

performance improvement efforts. Any effort to increase organisational
performance requires high levels of competencies and commitment from
UNIT 1 63
employees. This in turn demands HR to be more competitive in its

recruitment, selection, compensation and appraisals, or managing employee
performance to support the high performance strategies at the corporate
level.
3. HR is expected to participate in developing organisational strategic

planning. The reason is HR specialises in hiring, training and
compensating employees which become an important input in the
formulation of strategy that top management is responsible for. In
essence, HR managers must be able to understand what strategic planning
is and how it is conducted.
The strategic management process
The strategic management process starts with strategic planning. Strategic

planning is a process of analysing an organisation’s external situation that presents
opportunities and threats and its internal situation which presents its strengths
and weaknesses. In the case of AirAsia, its external situation may be the new
market opportunities which can be tapped if the company has the strengths:
financial and plans. The external and internal analysis conducted by AirAsia or
any other organisations would be used to formulate new strategies which help the
organisation to meet the organisation’s mission and goals.
Step 5:
Step 1: Step 2: Step 3:
Step 4: Formulate
Define the Perform Formulate Step 6: Step 7:
Translate strategies to
current external new business Implement Evaluate
the mission achieve the
business and internal and mission the strategy performance
into goals strategic
and mission audits statements
goals
Strategic Strategic
Strategic planning
execution evaluation
Figure 1.4 Strategic management process (Dessler & Tan, 2009).
Strategic management is a process which analyses a company’s competitive

situation, develops the company’s strategic goals, and designs a plan of action and
allocates resources (human, organisational, and physical). The process is helping the
organisation achieve those goals that it aspires.
There are several steps or tasks involved in conducting strategic management.

These steps are:
1. Develop a vision and mission statement: During this phase, strategic

planning groups decide on a strategic direction by defining the company’s
mission given its environment and the kind of background it exists in, such
as the expertise, financial and non-financial assets it has. The top management
which is the strategic planning group asks strategic decision questions such
as “Who are we in this industry and what do we want to be, considering
our competitors and the markets we are trying to capture?”
There is a core question to analyse where the company currently is and

where it wants to be 5 –10 years from now. Then strategies will be developed
as courses of action to move to where the company wants to be. The
difference between a vision from the mission in general is that, the former
is broader or general and future oriented whereas mission is more specific
and current oriented (what the company should be currently).
2. Conduct an external and internal analysis or analyse the external and

internal environments: After developing the vision and mission statements,
the analysts (managers) need to devise strategic plans. Strategic plans start
with some kinds of direction the company is heading to. In order to have
the plans, the company’s external opportunities and threats and internal
strengths and weaknesses must be assessed. Think of AirAsia and see what
are its strengths and weaknesses. Based on these internal analyses, how
does it face the threats of competition and at the same time tap the
opportunities in the airline industry? AirAsia, like any other company
performs the SWOT analysis whereby SWOT stands for STRENGTHS,
WEAKNESSES, OPPORTUNITIES AND THREATS.
3. Convert the mission into strategic goals: If the mission is to be innovative

and creative in education, then the goals set must reflect the mission
statement. These goals must be specific and involve a period of about 5 – 10
years. What are the methods or approaches and types of learning and
educational technologies that help to realise these goals? The goals which
are based on this mission could be:
a. We aspire to introduce online technology in adult education 5 years

from now.
b. We will use mind mapping in social work administration in 2009.
c. We will be a leader in online technology in adult education by 2010.

UNIT 1 65
4. Form a strategy to realise the strategic goals. The company’s planning

group needs to ask themselves, “How do we move the company from the
current state to a desired state or destination?” They probably need to
devise a course of action termed as a strategy. They have to refer to their
vision and mission statements and plan a strategy to get to where they
want be in the future. Strategy is like a bridge that connects the company’s
current state to the future state.
5. Put the strategy into test (implementation). What it means is implementing

the strategy or course of action to get the results. If the company identifies
human resources as important inputs in meeting its goals, the strategy now is
to hire the right people to do the right jobs. Putting strategy into action
involves all functional areas, be it marketing, finance, or production and
employees under these areas will need to understand what strategy means
and how they should use this strategy in their daily job functions.
6. Assess or evaluate performance. To check the progress of any job, managers

must use strategic control. Strategic control is a process of evaluating the
progress that helps to meet the goals and taking corrective action as and
when needed. An example is when you are preparing for an examination; you
have set your goal: to get A’s in the 5 papers you are taking. Your plans
might be to spend 5 hours per day to revise all the 5 papers. Besides that,
you need to spend 1 hour to make important notes and key concept maps
of what you have learnt. How do you assess your progress? You need to
check your progress: did you spend 5 hours revising? Did you remember
the key points of each subject when you are making notes? This is what
strategic control is about.
Activity 1.9
Serve the Internet for www.airasia.com. Find out as much

information about the company as possible. You can find out
AirAsia’s new products in the Internet, television or newpapers.
With the information you have, conduct a SWOT Analysis on
AirAsia. List 5 – 7 main strengths and 5 – 7 main weaknesses. List
2 – 3 external opportunities and 2 – 3 external threats.
Types of strategic planning
Managers are normally involved in three levels of strategic planning. The first level
of strategic planning is corporate strategy; second level of strategic planning is
business strategy, followed by functional strategy.
1. Corporate level strategy establishes the types of products or businesses

that the company offers and how these products relate to one another. Take
for example a commercial bank, CIMB (formerly known as Bumiputra
Commerce and Southern Bank). What are the main products the bank
offers its customers? It has different types of loans (housing, personal, small
business), different types of deposits (savings, current, fixed deposits),
foreign currencies purchases and sales and other related banking products.
A corporate level strategy of CIMB may be diversification, which is to
expand its product lines to tap new markets. This could be in the form of
educational loans for post graduate studies. Parents who have big savings
are offered educational loans for their children’s ongoing studies. The
bank may use a consolidation strategy which is to reduce the size of the
operations by combining certain products or services. Another strategy is
the geographical expansion which is to expand the bank’s operation
elsewhere to tap new markets.
2. Business level strategy is the second level strategy after the corporate level
strategy. Business level strategy is competitive in nature as it helps the
company to defend its position in the market. Bumiputra Commerce merged
with Southern Bank to achieve a stronger market presence in the banking
industry. Competitive advantage allows the companies to survive and
compete in the market or the industry it is operating in, because of its ability
to differentiate its products from those of its competitors and therefore
strengthens its position in the industry through an increase in market share.
How does the company gain this competitive advantage?
Cost leadership: To enable the company such as AirAsia to maintain its

competitive advantage or its unique position, it can use a business strategy
known as cost leadership. How does cost leadership work and what benefits
does it offer to the customers? AirAsia offers low fares and especially cheap
fares on certain dates or a period of time, especially when customers booked
online and 1 –2 months in advance. On top of that, it offers holiday packages
enabling customers to choose from a variety of holiday destinations at
discounted rates. The airline knows that it can achieve bigger sales volume
through the strategy of giving discounts or charging customers with low
rates. The company might have to incur higher operating and maintenance
costs in the short run to achieve the competitive advantage.
Differentiation: To differentiate its products or services from those of its

competitors (ValueAir or even MAS), AirAsia offers low fares within Malaysia
and Asian countries with just a click on www.airasia.com. Additionally, it
offers no-frills flights that cut time and cost by online booking and allows
payments to be made at various payment centres via credit card.
UNIT 1 67
3. Functional level strategy is the third level of strategic planning which takes
place at separate departments within an organisation. Each organisation
consists of departments such as marketing, HR management, production,
operations, etc. Functional strategies identify the basic courses of action
that each department will take to help the company attain its competitive
goals.
Strategic human resource management

Human resource management as discussed above has a strategic role to play in
strategic planning, formulation and execution. In the first instance, HR has to link
all strategic planning and formulation with strategic goals via its own formulation and
execution of HR systems. This is termed as Strategic Human Resource Management.
What are HR systems? HR systems are policies and activities that create a competent
workforce or employees who contribute and support the strategic management
goals. If the strategic goals of Air Asia are to increase market share to be the leading
low cost carrier in the Asian region, its HRM will link policies and activities of
recruitment, staffing, training, compensating and appraisals of employees to ensure
they are competent and capable of moving the company to the desired goal. In this
respect, HR has two major roles to fulfil in linking HR strategy to the company’s
strategic plans and results.
Strategy execution role
Top management formulate strategic plans followed by corporate strategies.

These strategies will be translated into broad functional strategies and policies to
be used as guidelines by functional and HR managers in deciding and assisting
them in policy development and execution in their respective areas. As for HR, its
strategies, policies and activities must support the company’s corporate strategies.
For instance, Dell’s HR strategies include the web-based help desk that receives
and feeds customers’ requests and complaints, and its intranet service bureau
which assists Dell to implement its low-cost strategy.
Strategy formulation role
Top management must formulate the company’s corporate strategies before

executing them or have them executed by HR and other functional areas. For
the corporate strategies to result its goals attainment, inputs from HR and other
functional areas are important to the top management who have the authority to
formulate corporate strategies. These inputs are becoming increasingly necessary
to include the HR manager in the strategy formulation team. There are several
ways HR can help top management in strategy formulation:
1. HR can scan the environment and assess competitors’ strategies that

might pose as threats to his/her own company. Information on a new entry
(new company that offers the same products or services in the industry),
how competitors plan their advertising dollars, and customers’ complaints
about its own product are important to the company while formulating its
strategic management process. HR can help the company to tap new markets
through its analysis of opportunities in the environment. Through opinion
surveys, HR can gather inputs from customers on their new needs: cars or
other necessities. Companies such as Perodua and Proton have come up
with a new line of product: small cars to meet the need to have an economical
second car for the family. Hence, HR management assists top management in
the formulation of corporate strategies, executing these strategies, and
facilitating goal attainment.
2. HR can provide input to top management about the skills, knowledge,

attitude or the competencies of human resources which are available in
the job market as well as in the company’s data bank. HR will assist top
management to formulate corporate strategies when it has inputs on
internal HR competencies versus job requirements that the company
needs to meet its corporate goals. HR can also provide input to the top
management by supplying information about the company’s internal
human resource’s strengths and weaknesses.
3. HR has the vital information on employment laws, health and safety, new
regulations in employing young persons, impaired persons or challenged
individuals, all of which serve as new inputs to the top management in the
formulation of corporate strategies that are non-discriminatory and
ethically right.
The manner HR helps top management in the formulation and execution of

strategies can be demonstrated by the value-added HR activities or systems that
are measurable in terms of its contribution to the company’s overall profits and
market share.
Activity 1.10
Based on your own experience or by observing others in your own

or other organisations, which HR activities would you think serve
as inputs in corporate strategy formulation? Please list them and
relate how they add value to the company’s overall performance.
UNIT 1 69
How HR creates a strategy oriented HR system

This last section of this unit demonstrates the manner in which HR creates a
strategy oriented system that puts the company on the high performance mode. You
may wonder why some organisations are more successful than others, apart from
their size, reputation, financial standing or industry competitiveness. For example,
HP in Penang (now Agilent) in the 1970s through 1990s was well known for its
ability to retain its employees. It was claimed that HP was one of the multinational
manufacturing companies that recruited employees of a certain calibre and standing,
even though they were hired only as production operators.
Before we discuss the manner in which HR creates a strategy-oriented system, there

are components in the HR process that help facilitate the formulation of this strategy.
In essence, the strategy-oriented system results in a high-performance work system.
What are the components responsible in creating the high-performance work system?
As you are aware, the process of HR starts with:
1. The HR manager, who has the skills and competencies to perform the HR
functions and to link strategic HR with other corporate strategic management
process. Examples would be the technical HR competencies in planning,
recruiting, selection, training and developing, compensating or rewarding
and appraisals. In addition, HR’s new competencies in strategic planning,
SWOT analysis and being technology savvy puts HR as a strategic partner
with the top management team.
2. HR’s policies, practices and activities are aligned and integrated to produce a
high performance work system. Companies like Dell, or Intel employ
recruitment policies citing the requirements versus available posts with the
support of intranet and the Internet. This method enables potential applicants
to apply online and read the information written and conveyed in simple
English terms which company recruiters can easily view, save the application,
evaluate and contact the applicants for further screening. This method applies
both to their internal or own employees and external applicants.
3. The behaviours and competencies that have been developed or acquired

(either through training, work experience gained while working in the
company or new staff that comes in with the required competencies) are
needed in the company’s strategic plans. For instance, ASTRO may require
that all service centres are manned by service operators who have good spoken
English or Bahasa Malaysia and have an understanding of the Malaysian
culture with regard to complaints. How to deal with petty/minor and
major complaints and how to inform customers the methods to troubleshoot
minor problems (operating or technical), are skills and competencies that
these service operators need in order to fulfil the requirements of ASTRO’s
strategic plan: how to gain a bigger customer base within a specified time
frame. The HR professionals are expected to design a HR system that will
produce employee behaviour and competencies critically needed to achieve
the company’s strategic goals.
As part of HR component or process, the HR system consisting of HR policies

and practices creates a means for employees to excel in their performance. This
is referred today as a high-performance work system (HPWS). What makes one
company perform better than its competitor? HPWS is considered superior due
to the nature of its policies and practices. How do you compare HR practices
in McDonald’s and that of KFC? Are they the same? Do you see what HR
practices are being employed in both McDonald’s and KFC? Are these practices
considered as HPWS? The HR practices in high-performance companies use a
number of qualified applicants per position, a number of hours of training for new
employees and use experienced employees among others to measure their HPWS.
Compare these numbers and ratios or percentages of HR practices between high
and low-performance companies. You will see that high-performance companies
record a higher number or percentage in all HR systems and practices but a
lower percentage in HR practices on the coverage of union contract on eligible
workforce and employee turnover. The latter two practices in a HPWS must score
a relatively lower percentage.
Activity 1.11
Think of a corporation such as Bina Aman Property which designs

its HR system to enable the company to achieve bigger sales,
increased profits, or higher customers’ satisfaction. What are the HR
practices that enable the company to move into a high-performance
work system? List some of the ways the HR system and practices
are measured so as to create strategy-oriented programmes.
Translating HR strategy into action

Organisations, in executing their strategic plans, need to find ways and means
to put their plans to the test. Simply put, they have to translate the corporate
strategy into action. Likewise, HR strategy will need to be translated into action.
You have learnt earlier on how HR professionals design a HR system that enables
the company to produce employee behaviours and competencies required in the
strategic plan. Moving from here, let us assume that a service company needs to
change its service architecture to include a new market in North America. To enable
the company to provide prompt, reliable and efficient services, the employees
must have these behaviours demonstrated by a high-performance company of the
same industry. These characteristics are identified as “anticipate”, “deliver” and
“review”. The company must now look for competencies, skills and behaviours that
would produce these characteristics. HR professional or manager of the company,
together with other managers would have to identify a set of specific characteristics
representing the three behaviours. They should decide that employees must be
proactive to anticipate problems or challenges, dedicated to deliver what the
company promises, and objective in order to review what has been delivered. How
would HR managers help company produce these competencies and behaviours
(proactive, dedicated and objective)? There are programmes and practices that
UNIT 1 71
HR managers may want to implement to ensure employees have these behaviours

to anticipate customers’ needs, deliver the new services to the new markets, and
review the results, as follows.
1. Education and communication of the new mission and corporate goals

through the vision statement, corporate logo and departmental briefings.
2. Employee involvement enabling employees to contribute ideas on a weekly

basis as to how to improve customer service and customer satisfaction.
These ideas if implemented, could result in work efficiency and effectiveness,
or a reduction in customer complaints. Employees will also be rewarded
for contributing ideas.
Reading
Reading the case “Albert Einstein Hospital (AEH) strategic HR

policies and practices”. This case study is available in WOU’s
MyDigitalLibrary under the E-course reserves section as Reading
1.1.
The AEH model is about a changed effort by the said organisation to address
the intense competition and technological changes within the healthcare
industry. Being a single hospital providing treatment to the seriously ill and
infirm before 1990s, it was adequate to cater to the needs of the majority of
the patients. However, the healthcare industry after the 1990s requires health
care services to cater to the new emerging needs of the public by providing a
comprehensive health care network or a full range of services, not just to the
seriously ill and infirm. To fulfil the new strategic plan, AEH made several changes
in employee behaviours which include:
1. Delivering services with flexibility, adaptability and professionalism. AEH

used “initiate,” “adapt,” and “deliver,” in how things were done. Initiate
refers to new services, adapt is to capitalise on opportunities and deliver is
about offering consistently high quality services. AEH chose four
characteristics: dedicated (to focus on initiate, adapt and deliver;
accountability (employees must be personally accountable for their results);
generative (employees are able and willing to use new knowledge and skills
to obtain new techniques); and resilient (able to move from job to job as
company moves forward).
2. Providing employees the necessary competencies, skills and behaviours

to produce new services, capitalise on opportunities and offer high quality
services. These are done through initiatives such as training and
communications to make employees understand company’s new vision; work
enrichment to pride employees with more challenging and responsible tasks;
personal growth promotion by helping employees to be more responsible

for their own development; and the provision of commensurate returns in
which employees’ rewards are linked to company’s results.
Using HR scorecard approach

HR scorecard is an important measure of HR functions’ effectiveness and efficiency.
In the case of the healthcare organisation (AEH) discussed above, the management
of the hospital used HR scorecard to measure how effective are their initiatives in
producing new employee behaviours. Here, AEH must be able to:
1. Know its new strategy. You have seen that AEH has created a new strategic
plan to face challenges due to intense competition and new technology.
The new strategic plan is to provide a more comprehensive healthcare service.
In order to fulfil the new business plan, AEH must assess its own human
resources and those from competitors to help the organisation conduct HR
and business strategic planning. Secondly, AEH must assess HR practices
that can improve company’s performance. Subsequently, AEH must have
specific and actionable goals to support the broad strategic plan.
2. Understand that HR activities and employee behaviours affect organisational

outcomes which are linked to organisational performance.
3. Create metrics that enable managers to measure all HR and non-HR

activities and results which include the new employee behaviours, the desired
organisational outcomes and performance.
Summary
1. While formulating HR strategies, HR managers must be

able to support corporate productivity and efforts that improve
performance and recognise that employees play an additional role
in initiatives that improve the company’s performance.
2. HR must be able to formulate the company’s strategic plans,

not just execute them.
Strategy formulation  this includes five major components:
a. A mission is a statement of the organisation’s reasons for its

existence.
b. Goals are what the organisation hopes to achieve in the

medium to long term future; they reflect how the mission
will be operationalised.
UNIT 1 73
c. External analysis consists of examining the organisation’s

operating environment to identify strategic opportunities
and threats.
d. Internal analysis attempts to identify the organisation’s

strengths and weaknesses.
e. Strategic choice is the organisation’s strategy which describes

the ways the organisation will attempt to fulfil its mission
and achieve its long term goals.
3. The strategic management process involves six steps: define

the business and its mission, analyse external and internal
situations, convert the mission into strategic goals, establish a
strategy, put the strategy into action, and assess performance.
4. The three main types of strategies are: the corporate level, the
business level and the functional level strategies. The corporate
level strategy defines the direction the company wishes to
follow. The business level strategy tells the company which
markets or product lines should be given attention and for
which customers it should focus on. At the functional level,
it adopts and translates the business level strategy into
operational objectives and implement them to achieve the
company’s goals.
5. HRM has a strategic process and role which is to formulate

and execute HR systems that enable the employees to have the
behaviours and competencies required to achieve strategic goals.
6. The high-performance work system helps the HR manager

of today’s organisation to compare the content, structure,
effectiveness and efficiencies of his/her HR system and
practices.
7. Translating HR strategy into action is exemplified by the

healthcare organisation model (AEH) in which a change in
strategic plan/business strategy requires new employee
competencies and behaviours.
8. The HR scorecard approach is useful to high performance

organisations such as AEH and others who have to change
its business strategy due to pressure from external forces such
as competition, and lifestyles.
Feedback
Activity 1.9
Main strengths: Lean staff (same counter staff handling gate &
boarding), no tickets (save resources), online booking (safe time
and enjoy some discounts), short-haul flights (more trips/sales),
enough planes within Malaysia and Asian countries. Weaknesses:
Same plane used in several trips per day causing delay towards the
end of the trip; lean staff can cause long wait at check-in counter;
seats once purchased cannot be changed or do it with penalties;
no frill airline means no refreshment on board although foods
are sold on board; check-in time 2 hrs in advance; no baggage
continuity from one to another AirAsia flight. Opportunities: New
markets for medium and long-haul flights for AirAsia to consider;
it is still a low cost with no direct competition from MAS or
other airlines. Threats: Other Asian low-cost carriers (such as in
Singapore and Taiwan) might be pursuing their move to service
routes that AirAsia maintains or hopes to capture; overusing
the planes can cause delays and loss of potential and existing
customers especially those with financial support from employers.
Activity 1.10
Students’ inputs might include: Recruitment policies, jobs analysis

and performance management. Measuring recruitment and hiring
effectiveness such as number of applicants hired within a certain
time period as well as numbers that are confirmed earlier than 3
months; the matching of job specification and job description
that influence job satisfaction and employee high performance
versus increased in company’s overall performance.
UNIT 1 75
Activity 1.11
Your response might include the number of times employees have

been trained in a year or the dollar spent on training an employee
per year; % of performance appraisals feedback on employee
training needs analysis used to improve job knowledge and skills;
or attendance and loyalty bonus to retain good calibre employees.
UNIT 1 77
Summary of Unit 1
Summary
The first part of Unit 1 discusses the role of the human resource
management (HRM) function, an effort on the part of the
organisation to gain a competitive advantage. It emphasises the roles
and skills that a human resource management department and/or
managers need for any company to be competitive. Besides that, a
HR manager today needs new proficiencies in business, leadership,
and learning apart from knowing and practising in technical HR:
equal employment laws, occupational safety and health laws, and
labour laws. HR and technology improve HR functioning in various
ways: productivity improvement, and outsourcing.
As such, more firms are installing Internet and computer-based

systems. Technology also makes it easier to outsource HR activities
to specialist service providers by allowing them to have real-time
Internet-based access to the employer’s HR database.
The second part of Unit 1 has discussed and deliberated on

important acts and laws regarding employment, wages, EPF,
SOCSO, workmen compensation, employment of children and
young persons, unions, industrial relations, health and safety issues
and sexual harassment at workplace. These are as follows.
1. Laws and regulations have affected employees and employers at

the workplace. Work has been regarded as a central feature of
modern society since people spend much of their time at work
which then determines their standard of living and their lives.
As a HR student, you need to understand the terms and
conditions of work, and also the basic human provisions which
will influence the behaviours of affected parties.
2. The Employment Act 1955 aims to provide a number of

minimum benefits for those workers covered by the Act. It also
dictates certain rights for both employers and employees.
3. As employees, you have been made aware of the Employees

Provident Fund (EPF) Act 1951, covering aspects of employers’
and employees’ monthly contribution towards a pension fund.
Currently, employee pays 11% and employer pays 12%.
4. The Workman’s Compensation Act 1952 provides you with

an understanding of minimum wages and benefits for manual
workers.
5. The Employees Social Security Act (SOCSO) 1969 establishes

an insurance system to provide employees with financial
assistance or compensation, if they are involved in an accident
at work or contracted a work-related disease.
6. The Occupational Safety and Health Act 1994 outlines the

need to keep the work environment safe and how employees
should protect themselves from any form of hazards.
7. You have learnt the provisions and conditions that allow

young workers to be employed under the Children and Young
Pensions Act 1966. Only certain sectors are allowed to employ
young persons and children who need parents’ or guardian’s
consent to work in some sectors considered unfit and within
certain work hours.
8. The presentation of the Trade Union Act 1959 and the Industrial
Relations Act 1967 provided you with an understanding of
why employees join unions and how management with non-
unionised workers motivate workers to stay and become loyal
to their employers.
9. The Code of Practice for the Prevention and Handling of

Sexual Harassment at the Workplace (1999) outlines the need
to educate employers and employees on its definition and
procedures in handling sexual harassment incidence at
workplace.
10. All the above Acts originated and are administered by various
departments at a Federal level (centralised in various ministries
in Putrajaya) whose responsibilities are to review, recommend
and implement laws pertaining to its respective employment
provisions.
The last part of Unit 1 discussed HR strategies in which HR

managers are involved in supporting corporate productivity. HR
strategy formulation recognises that employees play an additional
role in initiatives that improve company’s performance.
HR must be able to formulate company’s strategic plans and not

just executing them.
Strategy formulation includes five major components:
1. A mission is a statement of the organisation’s reasons for its

existence.
UNIT 1 79
2. Goals are what the organisation hopes to achieve in the

medium to long term future; they reflect how the mission will
be operationalised.
3. External analysis consists of examining the organisation’s

operating environment to identify strategic opportunities and
threats.
4. Internal analysis attempts to identify the organisation’s strengths

and weaknesses.
5. Strategic choice is the organisation’s strategy, which describes

the ways the organisation will attempt to fulfil its mission and
achieve its long term goals.
The strategic management process involves six steps:
1. Define the business and its mission.
2. Analyse external and internal situations.
3. Convert the mission into strategic goals.
4. Establish a strategy.
5. Put the strategy into action.
6. Assess performance.
Three main types of strategies are: The corporate level, the business
level and the functional level.
The corporate level defines the direction the company wishes to

follow. The business level tells the company which markets or
product lines, or which customers it should focus on. The functional
level adopts and translates the business level strategy into operational
objectives and implement them to achieve the company goals.
HRM has a strategic process and role which are to formulate and
execute HR systems that enable the employees to have behaviours
and competencies required to achieve strategic goals.
The high performance work system helps HR manager of today’s

organisation to compare the content, structure, effectiveness and
efficiencies of his/her HR system and practices.
UNIT 1 81
Unit Practice Exercise
Case Study 1.1
Application case: Jack Nelson’s Problem. This article is available

in WOU’s MyDigitalLibrary under the E-course reserves section
as Reading 1.2.
Please review and answer the three questions from the case.
UNIT 1 83
Suggested Answers to Self-tests
Feedback
Self-test 1.1
1. Students may want to refresh their understanding of the

definitions of management, managerial functions, etc. They
can then compare and contrast with HRM as a manager and
as a specialist in:
• Conducting job analyses.
• Planning HR needs and recruit candidates.
• Selecting candidates.
• Orientating and training new employees.
• Managing wages and salaries.
• Providing incentives and benefits.
• Appraising performance.
• Communicating (interview, counsel, discipline).
• Training and developing managers.
• Building employee commitment.
2. HRM needs to provide inputs on HR (employees) skills and

competencies required in the strategic plan. HRM is expected
to help top management team or the strategic planners in the
formulation, and not just the execution of strategic goals.
3. Students might identify strategic planning, modern

technologies (spreadsheet, database, SPSS), negotiation
skills, technical HR (interpreting Employment Act and Laws,
Discrimination Laws, the prevention and practices of sexual
harassment at workplace). This knowledge can be obtained
from books, articles, write-ups, training, seminars, discussions,
experience, networking/associations, and Internet.
Self-test 1.2
1. Students may wish to cite the following:
a. Job title.
b. Wages and details of other monetary payments such as

allowances and bonus.
c. Normal working hours, any requirement for the employee

to work overtime.
d. Holiday and leave entitlements.
e. Other benefits.
f. Probationary periods, if applicable.
g. Notice of termination (employee and employer).
h. Retirement age, if applicable.
i. Confidentiality, complying with company rules requirements.
j. Mobility or transfer.
k. Penalties imposed in cases of misconduct.
l. Some of the terms such as, employees are required to keep

company secrets.
2. Students may refer to the definition of wages from the

Employment Act, Wages Council Act and Workmen
Compensation Act sections. Wage generally can be referred to as
any monetary income including overtime and other payments
in lieu of the services provided by the job holder. Students are
cautioned that pay is used in most of the text rather than wage.
They can summarise in their own words the similarities and
the differences found in the definitions. It is assumed that
students may be able to state reasons for the differences after
reading the sections.
3. All Malaysian employees earning less than RM3,000 per

month are required to register as members with the Social
Security Organisation.
UNIT 1 85
4. a. They receive treatment paid by SOCSO & medical leave.
b. Apart from getting compensation for the injury, he/she

should be given jobs that do not require lifting, carrying
or moving things, the jobs that he/she can perform after
some training. Or he/she can be boarded out with lifetime
compensation if there is no job that fits his/her condition.
c. His/her family will get the insurance or compensation from

SOCSO.
5. Students may want to refer to other textbooks for the

definition of sexual harassment apart from the definition given
in this unit. Sexual harassment can happen anywhere: at work,
outside work or even at home.
UNIT 1 87
Suggested Answers to Unit Practice

Exercise
Feedback
Application case: Jack Nelson’s problem
1. This is a communication problem that affects an employee‘s

commitment. Also, there seems to be inconsistencies in the
policies and procedures at various locations. Staffing activities
lack cohesiveness.
2. It would help. The setting up of HR or Personnel Office would

address the coordination of HR activities in the branches.
3. Students may have several answers or responses to these

questions; these may include:
a. Having a HR unit that performs jobs analyses, planning

labour needs or requirements and recruiting, providing advise
and training in the selection process, orienting new employees,
managing wage and salary administration, managing
incentives and benefits, managing organisation wide
communication, etc.
b. Supervisors and other line managers are expected to

interview and select job candidates, train new employees,
appraise performance, manage departmental and personal
communications, etc.
UNIT 1 89
Terminology
Appraising performance Menilai prestasi
Authority Autoriti
Code of Practice for the Kod Amalan Menghalang dan Menangani

Prevention and Handling Gangguan Seksual Di Tempat Kerja
of Sexual Harassment at
the Workplace (1999)
Competencies Kepakaran
Competitive advantage Kelebihan berkompetitive
Contingent or contract Pekerja kontrak/bukan tetap

workers
Employee commitment Komitmen pekerja
Enforcement Pelaksanaan
Ethics Etika
Execution role Peranan pelaksanaan
Formulation role Peranan pembentukan
Functional control Kawalan fungsian
Globalisation Globalisasi
High-performance Sistem kerja berprestasi tinggi

work systems
HR scorecard Pengukuran kecekapan sumber manusia
Human capital Modal insan
Human resource Pengurusan sumber manusia

management (HRM)
Implied authority Autoriti tersirat
Incentives and benefits Insentif dan kemudahan
Intellectual capital Modal intelek

Job analysis Analisa tugas
Labour laws Perundangan buruh
Line authority Autoriti lini
Line manager Pengurus lini
Management process Proses pengurusan
Manpower needs Keperluan tenaga kerja
Market growth Pertumbuhan pasaran
Metrics Metrik
Mission Misi
Networking Rangkaian
New proficiencies Kecekapan baru
Orientation and training Orientasi dan latihan
Recruiting and selecting Perekrutan dan pemilihan
Staff manager Pengurus staf
Strategic challenges Cabaran strategik
Strategic HR management Pengurusan strategik sumber manusia
Strategic management Pengurusan strategik
Strategic plan Rancangan strategik
Strategic planning Perancangan strategik
Strategy Strategi
Strategy Oriented HR system Sistem strategi berorientasi sumber manusia
SWOT analysis Analisa kekuatan, kelemahan, peluang dan

ancaman
UNIT 1 91
The Children and Akta Kanak-Kanak dan Orang Muda

Young Persons (Pekerjaan) 1966
(Employment ) Act 1966
The Employees Provident Akta Kumpulan Wang Simpanan

Fund (EPF) Act 1951 Pekerja, 1951
The Employees Akta Keselamatan Sosial Pekerja

Social Security Act (Perkeso) 1969
(SOCSO) 1969
The Employment Act 1955 Akta Pekerjaan 1955
The Industrial Relations Akta Perhubungan Industri 1967

Act 1967
The Occupational Safety Akta Keselamatan dan Kesihatan

and Health Act 1994 Pekerja 1994
The Trade Unions Act 1959 Akta Kesatuan Perdagangan 1959
The Wages Council Akta Majlis Penetapan Gaji 1947

Ordinance 1947
The Workman’s Akta Pampasan Pekerjaan Buruh 1952

Compensation Act 1952
Value chain Rantaian nilai
Vision Wawasan
Wages and salaries Upah dan gaji

UNIT 1 93
References
Dessler, G and Tan, C H (2009) Human Resource Management, An Asian Perspective,
2nd edn, Singapore: Pearson Prentice Hall.
Noe, R A, Hollenback, J R, Gerhart, B and Wright, P M (2006) Human Resource

Management, Gaining Competitive Advantage, 5th edn, Boston, Mass: McGraw-Hill
Irwin.
Maimunah Aminuddin (2006) Malaysian Industrial Relations and Employment

Law, 5th edn, Kuala Lumpur: McGrawHill Education.
Saee, J (2005) Managing Organisations in a Global Economy, USA: Thomson

South-Western.

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UNIT 1 i

Introduction to HRM and associated Acts in Malaysia

EXTERNAL COURSE ASSESSOR

© 2008 Wawasan Open University

First revision 2011

Wawasan Open University

1.1 The strategic role of human resource 7

The manager’s human resource management 8

Suggested answers to activities 26

1.2 Malaysian labour laws and their enforcement 29

The Employment Act 1955 (latest amendments 30

The Wages Councils Ordinance 1947 35

The Employees Provident Fund (EPF) Act 1951 37

The Workman’s Compensation Act 1952 39

The Employees Social Security Act (SOCSO) 1969 39

The Occupational Safety and Health Act (OSHA) 1994 41

The Children and Young Persons (Employment) 47

The Trade Unions Act 1959 47

The Industrial Relations Act 1967 50

Code of practice for the Prevention and Handling of 53

Suggested answers to activities 59

1.3 Strategic human resource management 61

HR’s strategic challenges 62

Strategic human resource management 67

How HR creates a strategy oriented HR system 69

Translating HR strategy into action 70

Using HR scorecard approach 72

Suggested answers to activities 74

Unit practice exercise 81

Suggested answers to self-tests 83

Suggested answers to unit practice exercise 87

B BM 207/05 Human Resource Management (HRM) is a five-credit middle-level

By the end of this course, you should be able to:

5. Discuss and review performance appraisal techniques and identify problems

6. Define and elaborate on the importance and types of compensation and

7. Identify and implement policies and practices of employee relations that

8. Recognise the roles of union, collective bargaining and negotiations in

9. Identify and implement programmes at organisational and individual levels

W elcome to Unit 1 of BBM 207/05 Human Resource Management. This unit

In the execution of HRM’s strategic roles, technical understanding and practices of

However, HR managers are responsible for staffing or managing human resources

1. Explain what human resource (HR) management is and how it relates to

3. Discuss line, coordination and staff authorities of HR management and

4. Provide some examples of how HR’s roles are changing in relation to a

5. Discuss various employment and labour laws currently in place to encourage

6. Identify instances of behaviours that may be seen as practices of sexual

7. Identify instances of employment practices such as hiring and transfer that

1.1 The Strategic Role of Human

2. Differentiate the core activities performed by the HR manager.

4. Demonstrate examples or instances in which the HR manager not only needs

5. Explain how HR addresses challenges at the local, regional and global

developers, course coordinators, tutors, publication editors, graphic artists, or

In future, organisations will require HR applicants to have attributes such as maturity,

The manager’s human resource management (HRM) activities

Management refers to the five basic functions of a manager: planning organising,

Staffing & Leading

Figure 1.1 Functions of management

These functions are also topics that will be covered in order to