Ensuring Minimum Standards: How Section 7 of Malaysia’s Employment Act Impacts Businesses

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The purpose of the Employment Act 1955 is to regulate the terms and conditions of employment in Malaysia. Here is an explanation of Sections 1 to 7 of the Act:

Applicability of the Act:

  • It applies to Peninsular Malaysia and the Federal Territory of Labuan (Section 1(2)).

Section 1 – Short title and application

  • Cites the short title of the Act – Employment Act 1955.
  • States that the Act applies to Peninsular Malaysia and the Federal Territory of Labuan.

Section 2 – Interpretation

  • Provides definitions of terms used in the Act e.g. contract of service, wages, employee, etc.

Section 2A – Minister may prohibit employment other than under contract service

  • Empowers the Minister to prohibit contracting work without an employment contract and deem such workers to be employees.

Section 2B – General power to exempt or exclude

  • Allows the Minister to exempt any person or class of persons from the Act.

Section 3 – Appointment of officers

  • Provides for the appointment of the Director General of Labour and other officers to implement the Act.

Section 4 – Appeals

  • Allows appeals to the Director General against orders of officers appointed under Section 3(2).

Section 5 – Effect on Act of other written laws

  • States that the Act does not exempt employers and employees from obligations under other laws.

Section 6 – Saving of existing contracts

  • Valid employment contracts entered before the commencement of the Act shall continue to be valid.

Section 7 – More favourable conditions to prevail

  • If the Act provides more favourable conditions to an employee than the contract of service, the Act’s provisions shall prevail.

Section 7 of the Employment Act 1955 states that if any term or condition of the employment contract provides less favourable conditions to the employee compared to the provisions under the Employment Act, then those contract terms shall be void and the provisions of the Employment Act shall prevail and be substituted.

In other words, the Employment Act sets the minimum standards and terms of employment that must be provided to employees.

If the employment contract contains lower standards or benefits than what is guaranteed under the Employment Act, then those inferior contract terms are invalid and the employer must provide the employee with the superior benefits and standards in the Act.

Some examples:

Annual leave

  • Employment Act: Provides for paid annual leave of 8-16 days depending on length of service.
  • Contract: States employee is entitled to only 5 days annual leave.
  • Application of Section 7: The contract term is less favourable than the minimum annual leave in the Act.
    • Thus it is void and the employee will be entitled to the statutory leave under the Employment Act.

Overtime pay

  • Employment Act: Requires overtime pay at a minimum of 1.5 times the hourly rate for any overtime work carried out in excess of the normal hours of work, irrespective of the basis on which his rate of pay is fixed.
  • Contract: Says overtime pay will be at 1.2 times the hourly rate.
  • Application of Section 7: The inferior overtime rate in the contract is void.
    • Employees will get overtime pay at 1.5 times the hourly rate as provided in the Act.

Rest day

  • Employment Act: Requires one whole rest day per week.
  • Contract: No provision for a rest day.
  • Application of Section 7: The less favourable contract term is void and the employee shall be entitled to a mandatory weekly rest day.

Keynotes for businesses:

  • Cannot provide lower standards than the Employment Act baseline in employment contracts.
  • Must be aware of and comply with minimum benefits and standards in the Act.
  • If the contract offers less favourable conditions, still needs to provide conditions in the Act.
  • Need to review employment contracts to ensure compliance with the Act.






  • 《雇佣法令》:根据服务年限,雇佣法令阐明雇主必须要提供8-16天带薪年假。
  • 合同:规定员工只有5天年假。
  • 第7条规定的适用:合同条款低于《雇佣法令》的最低年假标准,因此无效,员工将有权获得《雇佣法令》所规定的法定年假。


  • 《雇佣法令》: 要求对超出正常工作时间的任何加班工作,支付至少为小时工资 1.5 倍的加班费,而不论其工资标准是如何确定的。
  • 合同:称加班费将按每小时1.2倍支付。
  • 第7条规定的适用:合同中较低的加班费率(即:1.2)无效。
    • 雇主需要按照《雇佣法令》规定的每小时1.5倍薪资,支付加班费给员工。











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