MALAYSIA: Annual Update – Expected labour law changes in 2016

Trans-Pacific Partnership Agreement

Possible ratification of the Trans-Pacific Partnership Agreement (“TPPA”): The TPPA is a multi-national trade agreement, which was released on November 5, 2015. If Malaysia decides to sign and ratify the TPPA, Malaysia will have to create and maintain certain laws that respect a number of specific legal rights.

These legal rights are set out in the International Labour Organisation Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998). The rights include the following: (a) freedom of association and recognition of the right to collectively bargain; (b) the elimination of all forms of forced or compulsory labour; (c) the prohibition of child labour; (d) preventing discrimination in employment; and (e) adopting laws that require acceptable working conditions, such as minimum wages, limits on working hours, and occupational safety and health. Whether the TPPA is ratified and when is uncertain.
Action required: Employers will need to keep abreast of any developments in this area. Other than that, no action is required at present.

Employment Provident Fund

Employees Provident Fund (Amendment) Bill 2015: This Bill is being discussed at Parliament. The Bill proposes to amend the existing laws to enable Employment Provident Fund contributors to decide whether they want an account managed and invested in compliance with Shariah principles.
Action required: Employers are advised to take steps to ensure they are able to cope with the changes. If the Bill goes through, and the changes happen, employers may need to revise existing contracts and policies to ensure the options are clearly explained to employees.

2016 Budget Speech

Proposed changes mentioned in the 2016 Budget Speech:
(1) The Budget Speech proposed that the minimum wage should increase from RM900 (for Peninsular Malaysia) and RM800 (for East Malaysia) to RM1,000 and RM920 respectively.
(2) SOCSO (Social Security Organization), which provides social security protections to all employees in Malaysia, was also raised in the Budget Speech. The proposal is to trigger mandatory contributions when someone’s monthly salary exceeds RM 4,000. The current threshold trigger is RM 3,000. If these changes come into force, existing employment contracts and policies will need to be reviewed and amended where necessary.
Action required: Employers should keep an eye on how this develops.