Manpower for Industry

Malaysia’s Labour Force

Manpower Development

Labour Costs

Facilities for Recruitment

Labour Standards

Industrial Relations

1. Malaysia’s Labour Force

One of Malaysia’s key assets is her youthful labour force which is diligent, disciplined, educated and trainable. Most Malaysian youths who enter the labour market will have undergone at least 11 years of school education, that is, up to secondary school level. They are therefore easy to train in new techniques and skills.

A large proportion of Malaysia’s labour force also possess the basic skills required by industry. There is an increasing supply of professionals, technologists and skilled workers graduating from both local and foreign universities, colleges and technical and industrial training institutions.

The labour market in Malaysia is free and competitive and the employer-employee relationship is cordial and harmonious. Labour costs in Malaysia are low in comparison to the industrialised countries while labour productivity remains high.

2. Manpower Development

The manufacturing sector in Malaysia requires an increasing number of technically trained workers. The Government is therefore taking measures to increase the number of engineers, technicians and other skilled personnel.

2.1 Facilities for Training in Industrial Skills

There has been an increase in the number of vocational and technical schools, polytechnics and industrial training institutions to prepare youths for employment in various industrial trades. Most of the training institutions are run by government agencies, although a number of private institutions supplement the government’s efforts to produce the skilled workers needed by industry.

The Ministry of Human Resource currently runs nine industrial training institutes (ITIs) and the Centre for Instructors and Advanced Skill Training (CIAST). The ITIs offer industrial skill training programmes at basic, intermediate and advanced levels of pre-employment or job entry level. There are several types of training programmes offered by the ITIs including apprenticeship training in the mechanical, electrical, building and printing trades. These institutions also conduct training programmes for skill upgrading and instructor training.

Majlis Aminah Rakyat (MARA or Council of Trust for the Indigenous People) operates 11 skills training institutes (IKM) in different parts of the country. IKM also offers skill training programmes at basic, intermediate and advanced levels.

The Ministry of Education is responsible for the running of 78 technical schools as well as eight polytechnics. The Ministry of Youth and Sports, through its six Youth Skill Training Centres and Youth Advanced Skill Training Centres, also provides industrial skill training at basic, intermediate and advanced levels. In addition, these institutions also conduct short-term courses as well as skill upgrading programmes.

2.2 National Vocational Training Council

The National Vocational Training Council established under the Ministry of Human Resource coordinates the planning and development of a comprehensive system of vocational and industrial training activities and programmes of all public sector training agencies. It also evaluates the demand for existing and future skills and identify future vocational and industrial training needs as well as develop the National Occupational Skill Standards (NOSS) on a continuous basis. To date, there are more than 390 NOSS covering basic, intermediate and advanced training levels.

2.3 Management Personnel

Annually, the universities and colleges in Malaysia produce about 20,000 degree and diploma holders, half of whom are from the science and technical disciplines. They provide the necessary professional, technical and management personnel needed by industry. This supply of professionally qualified personnel is augmented by Malaysians who study abroad.

The training of management personnel is also provided by a number of agencies like the National Productivity Corporation, the Malaysian Institute of Management and the Malaysian Institute of Personnel Managers.

2.4 Human Resource Development Fund

The Human Resource Development Fund (HRDF) was launched with a grant by the Government in 1993 to encourage direct private sector participation in skills development programmes.

The HRDF operates on the basis of a levy/grant system where employers who have contributed upon registration will be eligible to apply for grants from the fund to defray or subsidise costs incurred in training their Malaysian employees.

Manufacturing companies which employ 50 or more Malaysian workers and companies which employ less than 50 to a minimum of 10 employees and with a paid-up capital of RM2.5 million and above, have to contribute 1% of the monthly wages of their employees to the HRDF.

Manufacturing companies which employ 10 but not more than 50 employees and with paid-up capital of less thatn RM2.5 million will have the option of paying the levy at the rate of 0.5% of the employees' monthly wages. To assist these employers, the Government will contribute RM2.00 for every RM1.00 contributed by them. In other words, if an employer under this category contributes RM5,000 per year, he wil be eligible to apply for training grants up to the maximum of RM15,000.

The rate of financial assistance is between 75% to 95% of allowable cost incurred for training in Malaysia and up to 50% for costs incurred overseas, subject to the maximum amount contributed.

To resolve the shortage of trained workers for specific industries, apprenticeship schemes were developed and implemented by the Human Resources Development Council. A RM15 million Apprenticeship Fund was established by the Council to pay the tuition fees of apprentices sponsored by employers in HRDC-Initiated Apprenticeship Schemes. The allowable training costs, namely, apprentices' monthly allowances, insurance premiums and consumables were allowed to be reimbursed at the rate of 95% of the actual costs incurred from their levy contributions.

To date, apprenticeship schemes that have been implemented are the Mechatronics Scheme, the Hotel Industry Apprenticeship Scheme and the Industrial Machining Apprenticeship Scheme.

3. Labour Costs

There is no national minimum wage law applicable to the manufacturing sector in Malaysia. Basic wage rates vary according to location and industrial sector.

Supplementary benefits which could include bonus, free uniforms, free or subsidised transport, performance incentives and other benefits vary from company to company.

Salary rates and fringe benefits offered for management and executive level personnel also vary according to the industry and employment policy. In addition to salaries, most companies also provide fringe benefits such as free medical treatment, personal accident and life insurance coverage, free or subsidised transport, annual bonus, retirement benefits and enhanced contributions to the Employees Provident Fund.

For details on salaries and benefits for the manufacturing sector, please refer to MIDA's brochure, "The Costs of Doing Business in Malaysia".

4. Facilities for Recruitment

Government employment offices located throughout the country provide free assistance to both employers and job seekers. Potential employers can obtain detailed information on job seekers who are registered with the employment service. The functions of the employment offices include:

• Undertaking publicity campaigns to assist employers in their recruitment drive.
• Arranging preparatory work related to holding interviews and aptitude tests.

There are also registered private employment agencies in Malaysia.

5. Labour Standards

5.1 Employment Act 1955

The Employment Act 1955 is the main legislation on labour matters. The Act covers all employees in Peninsular Malaysia whose wages do not exceed RM1,500. It sets out the minimum conditions of employment which include the following:

(i) Every employee must be given a written contract of employment which states the terms and conditions, including the notice period required to terminate it.

(ii) Wages earned must be paid not later than the seventh day after the last day of any wage period. A pay slip is required for all wages less lawful deductions.

(iii) Female employees are not permitted to work in any industrial or agricultural undertakings between the hours of ten o’clock in the evening and five o’clock in the morning, unless with the prior written approval of the Director-General of the Labour Department.

(iv) Female employees are entitled to 60 days paid maternity leave for up to five surviving children. They shall be paid their ordinary rate of pay, subject to a minimum of RM6.00 per day.

(v) Normal hours of work shall not exceed eight hours in one day or 48 hours in one week.

(vi) Paid holiday on at least ten gazetted public holidays in any one calendar year.

(vii) Eight days of paid annual leave for employees with less than two years of service, 12 days of paid annual leave for employees with two or more years but less than five years of service, and 16 days of paid annual leave for those with over five years of service.

(viii) Fourteen days of paid sick leave for employees with less than two years of service, 18 days of paid sick leave for employees with two years or more years but less than five years of service and 22 days paid sick leave for those with over five years of service per calendar year and where hospitalisation is necessary, up to a maximum of 60 days paid sick leave per calender year.

(ix) Payment for overtime work is at a minimum of one-and-a-half times the hourly rate of pay on normal working days, two times the hourly rate on rest days and three times the hourly rate on public holidays.

(x) Every agricultural or industrial undertaking or any establishment where any commerce, trade/profession or business is carried on that employs or is likely to employ workers, must give written notice to the nearest Labour Department within 90 days of commencing operations.

However, in the 1998 Amendments, employees who earn RM1,500 to RM5,000 a month can also seek redress from the Labour Department in respect of wages and any other payment in cash as stipulated in their contracts of service.

The Labour Department provides advisory services to both employers and employees on all aspects of the labour laws in the country.

5.2 The Labour Ordinance, Sabah and the Labour Ordinance, Sarawak

The Labour Ordinance, Sabah is the principal legislation which regulates the terms and conditions of employment in the State of Sabah and the Federal Territory of Labuan, while the Labour Ordinance, Sarawak covers employment matters in the State of Sarawak.

5.3 Employees Provident Fund Act 1991

The Employees Provident Fund Act 1991 provides for a compulsory contribution for employees within the definition of the Act. All employers and employees are required to contribute to the Employees Provident Fund (EPF) and the rates are approximately 12% and 11% respectively of the employees’ monthly wages. However, employers are encouraged to contribute a rate higher than this mandatory contribution.

Effective from 1 August 1998, all foreign workers earning less than RM2,500 per month are required to contribute 11% of their monthly wages while the employers are required to contribute RM5 per employee per month.

All employers must register their employees with the EPF within seven days of employment.

Self-employed persons, expatriates (with montlhy wages of RM2,500 and above) and domestic servants, that is, persons who are employed to work in or connected with work in a private dwelling house, including a valet and gardener, and who are paid from the private account of the employer, are exempted from compulsory contributions. They can, however, choose to contribute to the Fund.

5.4 Employees’ Social Security Act 1969

The Social Security Organisation (SOCSO) administers the Employment Injury Insurance Scheme and the Invalidity Pension Scheme, as provided for under the Employees’ Social Security Act 1969.

All establishments, including factories, employing workers earning wages not exceeding RM2,000 a month, are required to insure their workers under the two social security schemes.

The Employment Injury Insurance Scheme provides employees with coverage in the event of any disablement or death due to employment injury by way of cash benefits and medical care. The contribution is borne solely by the employer and is about 1.25% of the wages of an employee.

The Invalidity Pension Scheme provides a 24-hour coverage to employees against invalidity and death due to any cause before the age of 55 years. The total contribution is about 1% of the wages of an employee and is shared by the employer and the employee equally.

SOCSO only covers Malaysian workers and permanent residents. Foreign workers are covered by the Workman's Compensation Act 1952.

5.5 Workmen's Compensation Act 1952

This Act which is administered by the Department of Labour and applies throughout Malaysia, provides for payment of compensation to workmen for injury in the course of their employment. It also provides for the payment of compensation to workers' dependents in the event of fatal accident. The Act covers private sector workers whose earnings are not more than RM500 and all manual workers irrespective of the wage. Effective from 1 March 1998 all foreign workers come under the purview of the Act in respect of compensation for employment injury as well as non-employment injury vide Workmen's Compensation (Foreign Workers' Scheme) (Insurance) Order 1993.

5.6 Occupational Safety and Health Act 1994

The Department of Occupational Safety and Health is responsible for the safety and health of persons at workplaces or in the operation of high risk machinery. The Department promotes a self regulatory approach in safeguarding workers’ safety and health which involves the employers, workers and manufacturers, designers and importers of plant and machinery. This main function is backed by the Occupational Safety and Health Act 1994.

6. Industrial Relations

6.1 Trade Unions

In line with the Government’s policy to encourage the growth of responsible trade unions, the following legislations have been enacted:

(i) Trade Union Act 1959

(ii) Trade Union Regulations 1959

Under these legislations:

• Trade unions should confine their membership to employees within a particular trade, occupation or industry.
• All trade unions must be registered.
• No union can organise a strike without first obtaining the consent by secret ballot of at least two-thirds of its total members.
• All unions are inspected regularly to ensure compliance with the laws.

6.2 Industrial Relations Act 1967

The Industrial Relations Act 1967 provides for the regulation of relations between employers and workmen and their trade unions, and the prevention and settlement of trade disputes. Some of the main features of the Act are:

(a) Protection of the legitimate rights of employers and workmen and their trade unions.

(b) Procedure relating to submissions of claims for recognition and scope of representation of trade unions and collective bargaining.

(c) Matters not allowed to be included in the proposals for collective bargaining are those relating to promotion, transfer, recruitment, retrenchment, dismissal, reinstatement and allocation of duties, and prohibition of strikes and lockouts over any of these matters.

(d) Emphasis on direct negotiation between employers and workmen and their trade unions to settle their differences and provision for speedy and just settlement of trade disputes by conciliation or arbitration when direct negotiation fails.

(e) Provision for the Minister of Human Resources to intervene and to refer at any stage any trade dispute to the Industrial Court for Arbitration.

(f) Prohibition of strikes and lockouts after a trade dispute has been referred to the Industrial Court and on any matter covered by a collective agreement or by an award of the Industrial Court.

(g) Protection of pioneer industries during the initial years of their establishment against any unreasonable demands from a trade union. Collective agreement cannot contain better terms of employment than those stipulated under the Employment Act 1955 unless approved by the Minister of Human Resources.

6.3 Relations in Non-unionised Establishments

The normal practice for dispute settlement in a non-unionised establishment is for the employee to try and obtain redress from his supervisor, foreman or employer directly. A complaint can be lodged by the employee with the Ministry of Human Resources which will then conduct an investigation.

For details on industrial relations, please contact the Department of Industrial Relations.