HR Compliance for Hybrid Workplace in Malaysia

18 Oct 2023

In the modern business landscape with its rapidly evolving workforce structure, mastering HR compliance is important. The rise of remote work and the emergence of hybrid workplace models have added new dimensions to HR compliance in Malaysia.

In this comprehensive guide, we will explore the intricacies of HR compliance in the Malaysian business environment and the challenges and solutions relevant to the remote and hybrid work era.

Understanding the Complexity of HR Compliance in Malaysia

Malaysia is known for its complex HR and payroll practices. Small to medium-sized business owners in the country often find it challenging to stay updated with HR compliance and legislative changes amid their numerous other priorities

This complexity stems from frequent alterations in employment compliance laws, coupled with uncertainty in interpreting these laws and policies.

Locating relevant statute documents and amendment acts can be tedious, as they are not consolidated on a single government website for easy public access. Information on government websites is either limited or nonexistent, and when provided, the terms used can be vague and open to interpretation.

This complexity can pose significant challenges to business owners and HR professionals in Malaysia. However, proactive HR compliance is crucial, as it helps in identifying and addressing HR issues before they escalate, avoiding costly litigation fees, settlements, and negative publicity.

This guide aims to provide clarity and insights into HR compliance, helping businesses thrive by avoiding compliance pitfalls.

The Essentials of HR Compliance

HR compliance involves adhering to the working standards defined by employment laws in a specific city, state, or country. While businesses must comply with local laws, managing a diverse workforce in line with these laws can be complex.

Creating contracts and HR policies that align with legal and regulatory requirements, wage and hour laws, and other applicable regulations is a fundamental part of HR compliance. This ensures that employees understand, acknowledge, and adhere to these laws during their employment.

Staying updated on employment law changes is another facet of HR compliance. HR professionals need to be aware of all relevant laws and industry best practices to ensure their organizations comply.

HR departments play a vital role in ensuring compliance within a company. They are responsible for maintaining fair hiring practices, workplace rules, and ensuring employees receive their contractual and statutory entitlements.

HR departments are also tasked with creating and updating employee handbooks and HR policies to reflect changes in the regulatory landscape or business requirements.

Business owners also share responsibility for HR compliance. They must understand their role in implementing compliance practices and guiding HR teams. Without this awareness, HR leaders may struggle to maintain compliance effectively. 


Key Employment Laws in Malaysia

The Employment Act of 1955 is the primary legislation governing labour matters in Malaysia. It outlines the rights and obligations of both employees and employers. Recent amendments, such as the Employment (Amendment) Act 2022, have been introduced, postponing enforcement to January 1, 2023, due to industry and employer requests.

It is important to note that the Employment Act does not apply to Sabah and Sarawak, as they have their own respective Labour Ordinances. Non-EA employees are governed by the terms of their employment contracts, with specific provisions for benefits.

Apart from the Employment Act, various other laws impact employment in Malaysia, including the Weekly Holidays Act 1950, Contracts Act 1950, Holidays Act 1951, Factories and Machinery Act 1967, Industrial Relations Act 1967, Income Tax Act 1967, Employment (Restriction) Act 1968, Employees Social Security Act 1969, Employment (Termination and Lay-off Benefits) Regulations 1980, Employees Provident Fund Act 1991, Occupational Safety and Health Act 1994, Human Resources Development Act 2001, Employment (Part-time Employees) Regulations 2010, National Wages Consultative Council Act 2011, Minimum Retirement Age Act 2012, Children and Young Persons (Employment) (Amendment) Act 2018, Minimum Wage Order 2022, Employment Insurance System (Amendment) Act 2022, and Employees’ Social Security (Amendment) Act 2022.

Common HR Compliance Issues in Malaysia

HR compliance issues can vary in form and intensity based on an organization's size, industry, and employee behaviour. Unfair dismissals are one of the top issues, often making headlines. Cases of employees awarded compensation for unjust dismissals highlight the significance of fair employment practices.

Underpayment of employees is another prevalent issue, especially among foreign workers. Cases where workers are required to work excessively without fair compensation demonstrate the importance of wage and hour compliance.

Minimum Wage and Hour Laws

Malaysia has established a minimum wage. As of May 1, 2022, the minimum monthly wage for employees is RM1,500. Employers with fewer than five employees were initially exempt from this change, but as of January 1, 2023, all employers must adhere to the minimum wage requirement.

The standard working hours in Malaysia were previously 8 hours per day and 48 hours per week. However, with the Employment (Amendment) Act 2022, the weekly limit for regular working hours has been reduced to 45 hours. Various rules apply to working hours, rest breaks, and overtime, depending on specific circumstances.

Global HR Compliance in Malaysia for Remote and Hybrid Workforces

In the era of post Covid-19, where remote and hybrid work is prevalent, businesses often engage international employees. This global workforce brings its own set of HR compliance challenges in Malaysia. 

Managing a remote or hybrid workforce, particularly when dealing with international employment, requires a thorough understanding of local labor laws, tax regulations, and compliance requirements. Navigating the complexities of cross-border employment, work permits, and visa issues demands a proactive approach to HR compliance in Malaysia. 

In this regard, businesses can streamline their compliance processes with HR software. This type of software can help businesses keep up with global HR compliance challenges by offering tools for employee contract management, policy documentation, performance monitoring, leave management, and payroll.


Hiring and Retrenching Workforce in Malaysia Guide

To ensure HR compliance in Malaysia, businesses must follow specific rules and regulations regarding employment contracts, minimum statutory rights, working hours, probation periods, annual leave, parental leave, sick leave, and overtime. 

These guidelines guarantee that employers uphold the rights of their employees and operate within the boundaries of Malaysian labour laws.

For instance, written employment contracts are mandatory for employees with contracts lasting longer than one month. The contracts must include essential details like job descriptions, hours of work, remuneration, and entitlements. This ensures clarity and transparency between employers and employees.

In a Nutshell

Mastering HR compliance is essential for all businesses in Malaysia, especially in the context of remote and hybrid work arrangements. The complex legal landscape and frequent regulatory changes make it challenging, but businesses can overcome challenges with the right tools and expertise. 

Adhering to HR compliance principles and leveraging technology, like HR cloud software, can streamline processes and reduce compliance risks.