Employment Act 1955: A Complete Guide

Business Management

In this article

The Employment Act 1955 sets out the basic rules for employees and employers to follow at workplaces in Malaysia. It covers common workplace matters such as salary, working hours, leave, overtime and termination. The Act applies mainly to Peninsular Malaysia and Labuan. Sabah and Sarawak have their own labour laws.

What is the Employment Act 1955?

Think of the Employment Act as the basic rulebook for employment. It explains what employees should receive and what employers need to provide at workplaces for the betterment and well-being of the employees. This includes things such as pay, leave, working hours, rest days and certain workplace protections.

Some of the biggest changes took effect in 2023, including shorter weekly working hours, longer maternity leave and wider coverage for employees.

Read also: Employment Act vs Employment Rights Act: Differences Explained

Who Is Covered Under the Employment Act 1955?

The Employment Act now covers employees regardless of their salary.

However, the RM4,000 salary level still matters in a few areas. Employees earning more than RM4,000 a month may not qualify for certain payments, such as overtime, work on rest days and some termination benefits. There are exceptions depending on the type of work the employee does.

What Employment Terms Must Employers Follow?

Employers should make sure employees know the basic terms of their job from the start. This normally includes components such as:
  • salary
  • working hours
  • leave
  • job duties
  • benefits and
  • notice period
Employers must also follow the minimum wage. Malaysia’s minimum wage is currently RM1,700 per month.

Clear employment terms can prevent confusion later, especially when it comes to pay, leave or leaving the company.

Key Employee Rights Under the Employment Act 1955

What Leave Entitlements Do Employees Receive Under the Employment Act 1955?

The Employment Act gives employees a minimum amount of leave.
Leave Minimum
Annual leave 8, 12 or 16 days based on years worked
Sick leave 14, 18 or 22 days based on years worked
Hospitalisation leave Up to 60 days
Maternity leave 98 days
Paternity leave 7 days
Public holidays 11 paid days
Companies can give employees more leave than this, but not less. 
Read also: Annual Leave Malaysia 2026: Rules, Forecasts & HR Practices

How Do Working Hours, Overtime and Flexible Work Arrangements Work?

The normal limit is 45 working hours a week.

Employees who qualify for overtime should be paid extra when they work beyond their normal hours. On a normal working day, overtime usually starts at the rate of 1.5 times the hourly pay

Employees can also ask for changes to their working hours, working days or even work location. The request should be conveyed through writing, and the employer has to reply within 60 days of the request.

Read also: Overtime Calculation Malaysia Rules & Eligibility

What Are the Rules for Termination, Retrenchment and Workplace Protection?

When an employee leaves or is dismissed, the employer should follow the notice period in the employment contract or the period required under the Employment Act.

Employees who lose their job because of retrenchment may also receive a payment based on their years of service, if they qualify.

The Act also covers workplace issues such as:

  • sexual harassment
  • discrimination
  • forced labour
  • dismissal linked to pregnancy

Employers who break the rules can face fines of up to RM50,000 for some of the offences.

What Employment Compliance Updates Should Employers Know in 2026?

There are also a few newer rules employers should be aware of. Some employment contracts may need to be stamped. EPF contributions also now apply to certain foreign employees.

From June 2026, the salary levels for Employment Passes had changed as follows:

  • Category I: RM20,000 and above
  • Category II: RM10,000 to RM19,999
  • Category III: RM5,000 to RM9,999

These updates matter mainly to companies hiring foreign workers or expatriates.

How Can Employers Stay Compliant with the Employment Act?

Employers do not need to make compliance complicated. Start with the basics: keep employment contracts updated, pay employees correctly and on time, track leave properly and keep clear records of the employees’ working hours.

HR and payroll software can help with the record keeping with salary, leave, attendance and employee information in one place. For most businesses, staying compliant simply comes down to knowing the current rules and making sure day-to-day HR practices match with them.

Employment Act 1955 FAQs

What is the Employment Act 1955 Malaysia?

The Employment Act 1955 is a main law in Malaysia (applies to employees in Peninsular Malaysia and Labuan) that covers basic employment rules.

Under Employment Act 1955 of Malaysia, for overtime and the ordinary daily rate, a month’s salary is divided by 26 days; for an incomplete month, salary is calculated using the actual number of days in that month’s wage period.

No, as per JTKSM, the employers cannot simply force employees to use their annual leave; annual leave should be granted and taken in line with Section 60E of the Employment Act 1955.

In Malaysia, overtime for eligible employees is generally calculated as monthly salary ÷ 26 ÷ normal working hours per day × overtime hours. The rates are 1.5× on normal working days, 2× for overtime on rest days, and 3× for overtime on paid public holidays.