Current Labo

ur
situation
in Malaysia
Malaysia - 2010

Bruno Periera 1
• “place of employment” means
any place where work is carried on for an
employer by an employee;

• “employee” means
any person or class of persons—
(a) included in any category in the First Schedule to
the extent specified therein; or
(b) in respect of whom the Minister makes an order
under subsection (3) or section 2A;
EMPLOYMENT ACT 1955

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EMPLOYMENT SENARIO Place
of employment

• Types of EMPLOYERS
• Types of WORKERS
• Types of CONTRACTS
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 Types of EMPLOYERS
• “employer” means any person who has entered
into a contract of service to employ any other
person as an employee and includes the agent,
manager or factor of such first mentioned person,
and the word “employ”, with its grammatical
variations and cognate expressions, shall be
construed accordingly;
EMPLOYMENT ACT 1955

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• “Principal” means any person who in the course
of or for the purposes of his trade or business
contracts with a contractor for the execution by or
under the contractor of the whole or any part of
any work undertaken by the principal;
• “Contractor” means any person who contracts
with a principal to carry out the whole or any part
of any work undertaken by the principal in the
course of or for the purposes of the principal’s
trade or business;
EMPLOYMENT ACT 1955

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• “Sub-contractor” means any person who contracts with a
contractor for the execution by or under the sub-contractor
of the whole or any part of any work undertaken by the
contractor for his principal, and includes any person who
contracts with a sub-contractor to carry out the whole or any
part of any work undertaken by the subcontractor for a
contractor;
• “Sub-contractor for labour” means any person who contracts
with a contractor or sub-contractor to supply the labour
required for the execution of the whole or any part of any
work which a contractor or sub-contractor has contracted to
carry out for a principal or contractor, as the case may be;
EMPLOYMENT ACT 1955

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LOCAL Workers seeking employment

Local
WORKERS

Direct Job Malaysia Private

Application MOHR JTK Employment
(or walk-in) Agency

PRIVATE EMPLOYMENT AGENCY ACT 1981

20% commission of 1st Month’s
PLACEMENT
wage charged on placement. Paid
either by employer or the worker.

FACTORY
(Principle Employer)

PROBATION Temporary
followed by (FIX TERM)
PERMANENT contract
Contract
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 Migrant
MIGRANT Workers employment WORKERS

EMPLOYMENT (RESTRICTION) ACT 1968

Non-citizen shall not be
employed unless there has Contract of Service/
been issued valid Temporary
(FIX TERM)
employment permit. contract

FACTORY
(Principle Employer)
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 MIGRANT Workers employment
Migrant
WORKERS
NOW….LOCAL Workers
also follow the same flow!
Contract of Service/
Contract for Service
Temporary
No Law to regulate? (FIX TERM)
Outsourcing License No., contract
Recruitment No. KHEDN.
Labour Contractors
TODAY (Outsource Labour
Company)
Contractors
(Outsource
LabourCompany)
Contractors
(Outsource Company)

TOMORROW
FACTORY
(Principle Employer)
FACTORY
(Principle Employer)
FACTORY
(Principle Employer)
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THE DAY AFTER9
Workers seeking employment in Malaysia
Migrant
Local WORKERS
WORKERS

“N
EW
Contract of Service/

”
Contract for Service

EM

RM $ wages
Temporary

PL
Direct Job Malaysia Private (FIX TERM)

OY
application MOHR JTR Employment contract

ER
Agency

Placement
CONTRACTOR
RM $ wages

(Outsource Company)

FACTORY
(Principle Employer)
TODAY
FACTORY
(Principle
TOMORROW Employer)
PROBATION Temporary
followed by (FIX TERM)
PERMANENT contract FACTORY
Contract (Principle Employer)
FACTORY
(Principle Employer) THE DAY AFTER
 Types of WORKERS
Employed directly by Employer or Principal :

1. Permanent workers
2. Local contract workers (Fix-term)
3. Foreign contract workers  (Fix-term)
------------------------------------------------------------------------------------------------------------------------------

Supplied by Labour Contractors but work for Principal

employer PAID BY Labour Contractor:

4. Local contract workers (Fix-term)

5. Foreign contract workers (Fix-term)
Bruno Periera 11
 Types of CONTRACTS
1. Employment Contract is a CONTRACT OF
SERVICE
(Kontrak Perkhidmatan)

2. Service Contract is a
CONTRACT FOR SERVICE
(Kontrak untuk Perkhidmatan)
(not an employment contract)
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 Contract OF Service
(Kontrak Perkhidmatan)
• Any agreement between two parties – an employer and
an employee, where by:

• The employer agrees to employ another as an

employee; and the employee

– agrees to undertake certain duties under the

direction and control of the employer.

– agrees, in return for a specified wage or salary and

benefits under a terms & conditions of employment
from employer. Bruno Periera 13
 Terms and Conditions of Employment
• The employer cannot change the terms and
conditions of employment unless employee agrees
to it.
• Any terms and conditions, in a contract of service,
that is less favourable than the relevant provision
under the Employment Act (1955) is illegal, null and
void.
• Provision in the Act will take precedence over a
particular contractual term that is less favourable.
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• An apprenticeship contract or agreement is also
considered a contract of service

• Agreement, whether oral or in writing and

whether express or implied.

Oral contract in writing? How?

Bruno Periera 15
 Employment Act in 1955
• With the introduction of the EA, the then British Administration
effectively abolished the indenture labour, bonded labour and the
“kanggani” system in Malaya, as it was known then.

• The totality of the Employment Act 1955 established two very

important principles of law.
• They are:

– Security of tenure – ensuring permanence of job and

– Proprietary right to the job – where termination of worker, shall

be with just cause and excuse & by due process.

• These principles are trite law and are considered sacrosanct.

• MUST be protected at all cost!
Bruno Periera 16
 Types of
Contract OF Service
(Kontrak Perkhidmatan)
• Permanent Contract (permanent workers)
Direct hire (Company workers)
- local workers
• Fixed Term Contract -
(temporary or contract workers)
Direct hire   (Company workers)
- Locals & Foreign workers
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 contract FOR service
(not an employment contract)
(Kontrak untuk Perkhidmatan)
• engaged as an independent contractor
(such as a self-employed person or vendor) .
• engaged for a fee to carry out an assignment, duty or a
project for the company.

• there is no employer- employee relationship, therefore,

NOT covered by the Employment Act

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 TERMS & CONDITIONS of work
for CONTRACT workers
• Hours of Work: 1 Shift – 12Hours
• Wages: basic RM 400 – RM 450
• Overtime: fixed amount, does not follow rates for
normal days, rest days & public holidays OR none.
• Annual leave, Public holidays pay, Sick leave, Maternity
leave - Not mandatory.
• No payment for legally mandated breaks.
• Pay cut for absent or late for work or on sick leave or on
annual leave.
• Toilet breaks monitored – 2x for 12 hour shift
• Accommodation & Transport provided FoC.

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 Types of
contract FOR service
(Kontrak untuk Perkhidmatan)
• Fixed Term Contract -
(temporary or contract workers)

workers hired by Outsourced Company to work in

the principle company. 
- Locals & Foreign workers

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 There is no single conclusive test to distinguish a contract of employment from a contract
for services.  Some of the factors to be considered in identifying a contract of
employment include:
i) Control
• Who decides on the recruitment and dismissal of employees?
• Who pays for the employees' wages and in what ways?
• Who determines the production process, timing and method of production?
• Who is responsible for the provision of work?

• ii) Ownership of Factors of Production

• Who provides the tools and equipment?
• Who provides the working place and materials?

• iii) Economic Considerations
• Does he carry on business on his own account or carry on the business for the employer?
• Does he involve in any prospect of profit or is he liable to any risk of loss?
• How are his earnings calculated and profits derived?

Bruno Periera 21
Essential Clauses of Contract of Service :

• Commencement of employment;
• Appointment – job title and job scope;
• Hours of work;
• Probation period, if any;
• Remuneration;
• Employee's benefits (e.g. sick leave, annual leave,
maternity leave);
• Termination of contract – notice period; and
• Code of conduct (e.g. punctuality, no fighting at work).
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 LAWS ON PROTECTION OF
RIGHTS OF WORKERS
STATUTE
• Employment Act 1955
• Industrial Relations Act 1969
• Trade Unions Act 1959
• Workmen’s Compensation Act 1952
• Occupational Safety and Health Act 1994
• Social Security Act 1969
• Immigration Act 1959/63

  Contract of Employment
The contract of employment stipulates terms and conditions on duration,
wages, work shift, days off, sick leave, medical fees, payment of levy, visa,
medical and travel.

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 Modus operandi
in getting permit for foreign workers.

1. Companies advertise job vacancies in front of their

factory gates.
2. Company’s own Human Resource officer – interviews
and identify potential candidates.
3. Identified candidates - sent to sign a contract with an
outsource company, usually without receiving a copy.
• Is the contract a contract for service or
contract of service?

Bruno Periera 24
The “successful” candidate –
4. Handed over to company Human
Resource officer.
5. Provided with the company badge with a
unique Number to denote “contract workers”.
6. One week orientation and work
process training.
7. Successful candidates sent to the Assembly
line supervisor to start work as contract
labour.
Workers not aware of the type of contract!
Bruno Periera 25
Not wanting to be exploited..
Locals QUIT…in PROTEST!
(albeit SILENTLY !)
Applying for PERMIT
• Due to the high attrition of contract labour.
company applies to the government agencies (MOHR &
KDN) for permit to bring in foreign workers.

The reasons often cited

– local workers are not keen on menial jobs,
– that they are pampered and like to “lepak”.
• TREATEN to relocate operation to third country

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 Sikap Pekerja Tempatan
• Tidak berminat berkerja lebih masa dan syif
• Terlalu memilih kerja
• Minat ganjaran yang tidak setimpal dengan produktiviti
• Tidak bersedia belajar kemahiran baru dan kerja pelbagai
tugas
• Sukar menerima sistem kerja baru
• Mementingkan masa untuk riadah dan keluarga

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 Facts not mentioned are:

• that the wages and benefits are intentional made

unattractive,

• with unfair and archaic terms and conditions of

service (Pre-Employment Act era).

• The silent protest.

Bruno Periera 28
 Breakdown
Breakdown of
of types
types of
of Employment
Employment contract
contract in
in an
an American
American Semiconductor
Semiconductor Assembly
Assembly
Plant of semi-skilled workers and Production Operators in Dec 2007

Permanent Contract of Service

for local workers 1028 48 %

Temporary Contract of Service

for local workers 110 5%
Company
(3 to 6 months renewable)

Temporary Contract of Service

for foreign workers 810 38 %
(2 years renewable)

Employment
Local contract workers 210 10 %
Agency
TOTAL   Bruno Periera 2158 100 % 29
Cost Comparison - Local vs Migrant worker/per month (RM)
Cost Components Local worker Migrant worker
Basic Salary (as at end-2007) 503 503
SRA 47 47
Contractual Bonus (1 mth) 42 42
Performance Incentive (1 mth) 42 42
Shift Allowance 76 76
Life Insurance 3 3
Medical coverage 64 64
Transportation 215 193
EPF 89 nil
Levy & Visa nil 110
Recruitment Fee nil 30
Medical (Fomema) nil 16
Hostel accommodation nil 230
Workman Compensation nil 6
Air fare nil 40
Total (RM) 1,081 1,402
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Percentage 100% 130%
 PURPOSE OF COMPANY
• to make profit.

• Corporate headquarters sets target – that

labour cost should not exceed 6% of the
manufacturing cost.
• Hiring foreign workers will escalate cost of
labour by 30%.

Bruno Periera 31
Local Management to achieve the target –

Wages & benefits are controlled :

• to subsidise the 30% additional labour cost in

hiring foreign labour.
• maintain the 6% labour cost.
• without affecting the company’s bottom line
profit.

Bruno Periera 32
Leading to current reality…..

 wages & benefits of the local workers are depressed

artificially.

 type of employment contracts have deteriorated

progressively
replace local permanent contract
with foreign contract labour.
substitute with local contract labour

 Standard of living deteriorates while cost of living

escalates.

Race to the Bottom…unabated

Bruno Periera 33
 Company achieves:
 Low wage cost.
 Disposable labour - hire & fire.
 Flexi-labour – Multi-skilling/Multi-tasking.
 Plug & play workers. (minimal training)
 No union (No negotiation powers)
 Subservient workforce.
 Convert workers wages into profits.
 Huge wages & bonus payout- Top Mgmt
Perlumbaan menuju ke dasar …….
Bruno Periera 34
• High contract labour % improves NAV
(Net Asset Value) of company.
– by transferring labour cost to overhead /
operation cost putting Company’s stock
price looking good to shareholders.
–Creative accounting.

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 Q&A
Discussion

Bruno Periera 36
 Problem solving technique.
INVESTIGATE (Past):
 How did the problem start?
 Who started the problem?
 When did the problem start?
 Why did the problem start?
 Where did the problem start?
-------------------------------------------------------------
PLAN OF ACTION (Future):
 How to overcome the problem?
 Who overcome the problem?
 When to overcome the problem?
 Why should we overcome the problem?
 Where to begin the change?

Bruno Periera 37
HOW IT ALL STARTED?
It always starts small…….

and grows ….. and grows………

finally accepted as NORMAL

Bruno Periera 38
 PEKERJA ASING (PA)
LATAR BELAKANG

1992 - Kerajaan meluluskan PA daripada

ASEAN, Bangladesh, India dan Sri Lanka
untuk sektor pembinaan dan perladangan.

• 2000 - Diperluaskan kepada sektor perkilangan

dan perkhidmatan (hotel dan restoran).

• 2002 - Meliputi semua sector

Sumber: Laporan Pesidangan Meja Bulat Mengenai

Penggajian
Bruno Periera
PA Di M’sia - 5-Apr 2007 ISMK - KSM
39
 OUTSOURCING
(MEMBEKAL & MENGURUS)
• 2005 –
Mesyuarat Jawatankuasa Kabinet mengenai
Pekerja Asing (JKK-PA) ke-33 Bil. 2/2005 pada
5 Julai 2005 telah BERSETUJU untuk
menggaji PA melalui konsep
OUTSOURCING.
Sumber: Laporan Pesidangan Meja Bulat Mengenai
Penggajian
Bruno Periera
PA Di M’sia - 5-Apr 2007 ISMK - KSM
40
• Outsourcing concept:
Outsourcing is a concept where the management and supply services are
undertaken by companies selected by the government. The government
shall select and supervise these companies who are reliable to be
responsible to recruit, supervise and manage foreign workers and present
the workers to customers who need them under the outsourcing concept.
• Aim:
The implementation of outsourcing aims to assist to overcome the problems of
shortage of workers and small companies who do not have the resources to
manage foreign workers full time will save cost. It will also help
companies/management who needs large workforce from time to time
especially to fulfill additional increase in contractual obligations, for peak
seasonal collection of harvest and so on.
• Management:
The management of foreign workers shall be managed in an orderly and
systematic manner. Accommodation, transportation, payment of wages of
RM400, medical examination including insurance coverage shall be under
the outsourcing company.

Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK -41KSM
Bruno Periera
• 2006 – Terdapat jumlah 1,800,000 PA

Negara sumber utama:

• Indonesia 1,174,000 (63%)
• Nepal 214,000 (11%)
• India 138,000 ( 7%)
• Myanmar 109,000 ( 6%)
• Vietnam 106,000 ( 6%)
• Bangladesh 63,000 ( 3%)
• Lain-lain 64,000 ( 4%)
Bruno Periera 42
 Pembahagian PA mengikut sektor

• Pembuatan - 646,000 (35%)

• Perladangan - 354,000 (19%)
• Pembantu Rumah - 311,000 (17%)
• Pembinaan - 268,000 (14%)
• Perkhidmatan - 167,000 ( 9%)
• Pertanian - 123,000 ( 7%)

Jumlah PA = 1,800,000 (100%)

Bruno Periera 43
 IMPAK Pekeja Asing
• Dari Segi Ekonomi:

Kesan Positif:

• Menyumbang RM 17b (5.1%) kepada KDNK

• RM 8.3b (5.2%) kepada perbelanjaan persendirian
• RM 1.2b levi kepada hasil kerajaan (2004)

Sumber: Laporan Pesidangan Meja Bulat Mengenai

Penggajian
Bruno Periera
PA Di M’sia - 5-Apr 2007 ISMK - KSM
44
Kesan Negatif:
• Remit RM 5-7b setahun ke negara asal
• Kos perkhidmatan kesihatan RM117j
• Kemunculan semula penyakit tibi, malaria dan
untut serta membawa penyakit baru seperti kala
azar (Leishmaniasis).
• Mengurangkan tekanan kepada majikan bagi
memperkenalkan automasi dan mekanisasi
• Mengurangkan tekanan ke atas kenaikan gaji
Sumber: Laporan Pesidangan Meja Bulat Mengenai
Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM

Bruno Periera 45
• Dari Segi Sosial:

• Kesatuan sekerja terancam

• Mengekang kadar upah dan jejas peningkatan

taraf hidup rakyat

• Menjejaskan kerukunan sosial

Sumber: Laporan Pesidangan Meja Bulat Mengenai

Penggajian
Bruno Periera
PA Di M’sia - 5-Apr 2007 ISMK - KSM
46
Keselamatan Negara:

• Peningkatan kes jenayah dari 1333 (1992) kepada

3113 (2002) – 133%

• Kos menjaga PA di penjara dan pusat tahanan

• Kos menghantar pulang PA

Sumber: Laporan Pesidangan Meja Bulat Mengenai

Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM

Bruno Periera 47
 Demographics (Dept. of Statistics, 2006)
• POPULATION 26.63m
- Women 13.07m
- Men 13.56m
• EMPLOYMENT 10.9m
- Private sector 5.2m
- Public sector 1.1m
- Informal sector 4.6m
• Labour Participation rate:
- Women 46% 4.0m
- Men 86% 6.9m
• UNEMPLOYMENT 3.5%
Bruno Periera 48
• Percentage of Foreign Workers against
Private sector employees:

1.8m/5.2m = 34.6%

Sumber: Laporan Pesidangan Meja Bulat Mengenai

Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM

Bruno Periera 49
NOW it grows… to
take over…
employment from
locals!
Bruno Periera 50
 Malaysian Trades Union Congress
LABOUR BULLETIN July 2008 New Straits Time - July 20, 2008
interview with Datuk Ishak Mohamed,
Enforcement Director Immigration Department
Q: Should foreign labour outsourcing be banned?
A: Outsourcing is the best solution for the government
to manage foreign workers.
Q: Why?
A: There are two scenarios
• One is that as companies get bigger, they will need more
manpower and with outsourcing they can get workers in a
more organized way.
•Two, outsourcing is good as it will attract foreign direct
investment. Investors will not want unions to be formed in
their establishments.
Through outsourcing, it would be difficult for unions to be
formed as outsourcing company, and not the factory, would be
the employer.
Bruno Periera 51
 Monday, September 21, 2009, 02.03 PM

Labour director-general Datuk Ismail Abdul Rahim

said yesterday.

We have introduced a quota system, where for

• the manufacturing sector dealing in exports it is two

foreigners to one local and

• one local to one foreigner for all other

sectors," he said.

Bruno Periera 52
 Cabinet Committee on Foreign Workers
and Illegal Workers.
Deputy PM: Tan Sri Muhyiddin Yassin.
• “The Laboratory*, had been directed to put
outsourcing companies under the microscope to
ensure that they stick to their role as providers of
workers and NOT as EMPLOYERS”.
• 277 registered outsourcing companies.
• Laboratory – 8 ministries and 15 agencies.
The Star Tue 23-Feb 2010

Bruno Periera 53
 Malaysian Labour Markets
Labour Market :

State
• Regulated by Employment laws.
• Employer to submit returns (S62 EA) – statistics
• Do not include outsource / contract workers
• Transparent.

of ou
Labour Black Market :
• Not sanctioned by law.

r
• Statistics not available.

Natio
• Involves outsource / contract workers.
• Existing parallel to Labour Market
• Underground – illegal?

n
Bruno Periera 54
 Statement by
THE HONOURABLE DATUK DR.S.SUBRAMANIAM
MINISTER OF HUMAN RESOURCES, MALAYSIA
AT THE 98TH SESSION OF
THE INTERNATIONAL LABOUR CONFERENCE GENEVA.
THURSDAY, 11 JUNE 2009.
------------------------------------------------------------------------------
It is imperative that we take this crisis (Global Economic Crisis) as an
opportunity to reaffirm our commitment to the principles of Decent
Work and through such commitment the dignity and the rights of
workers, as enshrined in the principles of Decent Work should continue
to form the basis of the national agenda for our respective
governments.
In Malaysia, we have instituted high ranking tripartite monitoring
mechanisms very much early in the crisis to ensure that the economic
consequences of this crisis does not step on the rights of our workers
as prescribed in the Constitution and in the laws of the country.
Bruno Periera 55
 Principles of Decent Work
Decent work is captured in four strategic objectives:

 fundamental principles and rights at work and

international labour standards;
 employment and income opportunities;
 social protection and social security; and
 social dialogue and tripartism.

• Decent work is central to efforts to reduce poverty, and is

a means for achieving equitable, inclusive and sustainable
development.

Bruno Periera 56
 Principles of Decent Work
• Decent work sums up the aspirations of people in their
working lives. It involves
 opportunities for work that is productive and delivers a
fair income,
 security in the workplace and social protection for
families,
 better prospects for personal development and social
integration,
 freedom for people to express their concerns, organize
and participate in the decisions that affect their lives and
 equality of opportunity and treatment for all women and
men.

Bruno Periera 57
 CONTRACT LABOUR SYSTEM
is AGAINST Decent work agenda.

DOES NOT provide opportunities for work

that is productive.
DOES NOT deliver a fair income.
NO security in the workplace and social
protection for families.
NO prospects for personal development
and social integration.
Bruno Periera 58
 Employment Act in 1955
• With the introduction of the EA, the then British Administration
effectively abolished the indenture labour, bonded labour and the
“kanggani” system in Malaya, as it was known then.

• The totality of the Employment Act 1955 established two very

important principles of law.
• They are:

– Security of tenure – ensuring permanence of job and

– Proprietary right to the job – where termination of worker, shall

be with just cause and excuse & by due process.

• These principles are trite law and are considered sacrosanct.

• MUST be protected at all cost!
Bruno Periera 59
Selamat berjuang

Bruno Periera

Bruno Periera 60