Consequential changes to labour laws from trade agreement

The Malaysian government has stated that it is looking to amend and complete domestic ratification of legal procedures for the Trans-Pacific Partnership Agreement by mid-2017. There will be amendments to labour laws (on eight pieces of legislations), policies and practices as a consequence.


Mandatory social security contributions for all employees

Social security contributions became mandatory for all employees regardless of salary. However, contributions will be capped at the monthly remuneration of RM4,000.

Increase in minimum wage

The Minimum Wages Order 2016 came into effect on 1 July 2016 and affects all private sector employees (except domestic helpers) with rates set at: RM1,000 per month or RM4.81 per hour for Peninsular Malaysia, and RM920 per month or RM4.42 per hour for Sabah, Sarawak, and Labuan.

Exemption of certain employers to minimum retirement age laws

Under the Minimum Retirement Age (Exemption) Order 2016, the Minister of Human Resources has issued several orders to exempt certain employers from legislation which would otherwise provide a minimum retirement age of 60 years. This also excludes those employed on a fixed term service contract for over 24 months and less than 60 months with a basic wage of RM20,000 per month or more.

Reduction in employees’ contribution towards retirement benefit scheme

There has been a reduction in the statutory contribution rate under the Employee Provident Fund (retirement benefit scheme) for employees (i) from 11% to 8% for employees below the age 60, and (ii) from 5.5% to 4% for employees above the age of 60, from March 2016 until December 2017. The contribution rate for employers, however, remains at the current rate.

With thanks to Wong Kah Hui of Kadir & Andri Partners for his invaluable collaboration on this update.