Workforce for Industry

1 Malaysia's Workforce

Malaysia offers the investor a diligent, disciplined, educated and trainable labour force. Malaysian youths who enter the labour market would have undergone at least 11 years of school education i.e. up to secondary school level, and are therefore easy to be trained in new skills.

To cater to the manufacturing sector's expanding demand for technically trained workers, the Malaysian government has taken measures to increase the number of engineers, technicians and other skilled personnel graduating each year from local as well as foreign universities, colleges, and technical and industrial training institutions.

In addition, Malaysia enjoys a free and competitive labour market where employer-employee relationship is cordial and harmonious. Labour costs in Malaysia are relatively low while productivity levels remain high in comparison with industrialised countries.

2 Manpower Development

The Department of Skills Development (DSD), under the Ministry of Human Resources, was established in May 1989 which previously known as the National Vocational Training Council (NVTC). Effective 1 September 2006, (NVTC) has changed its name to become the Department of Skills Development (DSD) upon the gazetting of the National Skills Development Act (NASDA) [Act 652] For the purpose of formulating, promoting, and coordinating Malaysia's vocational and industrial training strategy and programme in keeping with the country's technological and economic development needs.

The DSD coordinates the setting up of all public and private training institutions, evaluates the demand for existing and future skills, identifies future vocational and industrial training needs and will continue to develop standards under the National Occupational Skills Standard (NOSS). To-date, there are more than 700 certified standards which cover certificate, diploma and advanced diploma qualifications. Under NOSS, 20 major industry sectors have been identified for future standards development.

Facilities for Training in Industrial Skill

In Malaysia, vocational and technical schools, polytechnics and industrial training institutions prepare youths for employment in various industrial trades. While they are mostly run by government agencies, several private initiatives complement the government's efforts in producing the skilled workers needed by industry.

The main government agencies involved in training are:

  • Ministry of Human Resources currently runs 21 industrial training institutes (ITIs). The ITIs offer industrial skills training programmes at basic, intermediate and advanced levels for pre-employment or job entry level. These include apprenticeship programmes in the mechanical, electrical, building and printing trades as well as programmes to upgrade skills and train instructors. The Ministry also operates the Centre for Instructors and Advanced Skills Training (CIAST), the Japan-Malaysia Technical Institute (JMTI) and four advanced technology training centres (ADTECs).
  • Ministry of Higher Education, established in March 2004, supervises public and private universities, 27 polytechnics and 72 community colleges to prepare skilled manpower for industries. At the post-secondary level, the formal training conducted in polytechnics and community colleges aims to produce trained manpower at the semi-professional level in engineering, commerce and services sectors.
  • Ministry of Education, runs more than 90 technical schools offering technical and vocational courses. School leavers from the technical schools can either seek employment at entry level or pursue their post-secondary education at diploma level in Polytechnics or certificate level in Community Colleges or other training institutions under the supervision of other ministries.
  • Ministry of Youth and Sports, which provides basic, intermediate and advanced levels of industrial skills training through its 16 National Youth Skills Training Centres and Higher National Youth Skills Training Centre. Short-term courses and skills upgrading programmes are also being conducted.
  • Majlis Amanah Rakyat (MARA), or the Council of Trust for the Indigenous People under the purview of the Ministry of Rural and Regional Development. MARA operates more than 20 skills training institutes in different parts of the country which offer programmes at basic, intermediate, advanced and professional levels.
Human Resources Development Fund

The Human Resources Development Fund (HRDF) was established in 1993 and administered by the Human Resources Development Council (HRDC). In line with corporatisation exercise, the HRDC is now known as Pembangunan Sumber Manusia Berhad (PSMB).

The HRDF operates on the basis of a levy/grant system. Employers who have paid the levy will qualify for training grants from the fund to defray or subsidise training costs for their Malaysian employees.

Manufacturing companies contribute as follows:

Companies that employ 50 employees and above 1% of employees' monthly wages
Companies that employ less than 50 to a minimum of 10 employees, with a paid-up capital of RM2.5 million or more 1% of employees' monthly wages
Companies that employ less than 50 to a minimum of 10 employees, with a paid-up capital of less than RM2.5 million are given the option to register with PSMB. 0.5% of employees' monthly wages

Currently, the rate of financial assistance is 100% of the allowable costs incurred for training in Malaysia and up to 50% for costs incurred overseas, subject to the availability of levy in the employers' accounts with PSMB.

To date, PSMB has developed and implemented various schemes to provide highly trained workforce to the industries, namely the apprenticeship scheme, training grant schemes as well as other basic skills training schemes.

Under the apprenticeship scheme, employers are eligible for a 100% rate of financial assistance on the allowable training costs such as apprentices’ monthly allowances, insurance premiums and consumable training materials.

To date, these schemes had cater for, various industries such as mechatronics, hotel and tourism , manufacturing, information technology, tools and dies, and wood based.

To facilitate employers in sourcing for suitable training programmes over the Internet, PSMB has developed the HRD portal at http://www.hrdportal.com.my. This portal acts as a one-stop centre that allows training providers to market their training programmes more effectively and efficiently through the interactive facilities available in the portal.

For more information on HRDF please visit http://www.hrdf.com.my

Management Personnel

Degree and diploma holders graduated from Malaysia's 20 public higher education institutions (IPTA) and other private higher education institutions (IPTS). These graduates are from various disciplines ranging from business management, information technology, engineering, medicine, biotechnology, science and mathematics to art and design.

Besides universities and colleges, agencies like the Malaysia Productivity Corporation, the Malaysian Institute of Management and the Malaysian Institute of Personnel Management also provide training for management personnel. In addition many of Malaysia's management-level personnel have been educated overseas.

3 Labour Costs

Salary and fringe benefits for employees in the manufacturing sector vary according to industry, location and employment size. The common types of leave provided by companies include annual leave, public holiday, sick leave, maternity leave and compassionate leave. Companies also provide free medical treatment and hospitalisation to their employees. In some companies, additional benefits include provision of uniforms, transport, incentives payments, shift allowance and insurance coverage. Bonus payments are given by companies based on the companies’ performance and individual performance. 

The Minimum Wages Order 2012 came into effect on 1 January 2013 for employer which employs more than 5 employees. 

Minimum Wages Rates
Regional Areas Minimum Wages Rates
Monthly Hourly
Peninsular Malaysia RM1000 RM4.81
Sabah, Sarawak and the Federal Territory of Labuan RM920 RM4.42

For more information on salaries and fringe benefits in the manufacturing sector, please visit Malaysia Employers Federation (MEF) at www.mef.org.my

4 Facilities For Recruitment

Besides registered private employment agencies, employers and job seekers can seek assistance from government employment offices located throughout the country. Employers seeking to recruit workers can obtain detailed information on job seekers registered with these employment offices whose functions include:

  • Undertaking publicity campaigns to aid employers' recruitment drive
  • Arranging preparatory work relating to holding interviews and aptitude tests

The polytechnics and the community colleges also provide facilities for prospective employers to conduct interviews for graduating students in their institutions.

5 Labour Standards

The Department of Labour is responsible for the administration of labour laws in order to maintain industrial harmony. The labour laws stipulate the minimum requirements that apply to all types of employment. Flexibility in the operation of businesses is facilitated by application for exemption to the Director of Labour, Department of Labour.

Employment Act 1955

The main legislation, the  Employment Act 1955 applies to all employees in Peninsular Malaysia and the Federal Territory of Labuan whose monthly wages do not exceed RM2,000 and all manual labourers irrespective of their wages. Employers may draw up the contract of service but it should not contravene the minimum benefits stipulated under the law. Employees who earn between RM2,000 and RM5,000 a month can seek redress at the Labour Court on terms and conditions in their individual contracts of service.

Some of the obligations of an employer under the Employment Act 1955 are as follows:

i. Every employee must be given a written contract of service containing the terms and conditions of the employment, including provisions relating to the termination of contract.
ii. Maintaining of labour register pertaining to personal particulars of employees, payment of wages and deduction of wages.
iii. Special provisions for the protection of female employees pertaining to night work and maternity benefits.
iv. Normal hours of work and other provisions relating to numbers of working hours.
v. Entitlement of paid annual leave, sick leave and public holidays.
vi. Rate of payment for overtime and extra work.
vii. Procedure and responsibility of the employer in employment of foreign employees.
viii. Special provision to conduct sexual harassment (male and female) at workplace.
The Labour Ordinance, Sabah and the Labour Ordinance, Sarawak

The  Labour Ordinance (Sabah Cap. 67) and the Labour Ordinance (Sarawak Cap. 76) regulate the administration of Labour Laws in their respective states. The provisions of the Labour Ordinance, Sabah and the Labour Ordinance, Sarawak are similar to the provisions of the Employment Act 1955. However, there are some provisions which are different and pertinent to note:

These provisions are:-

Special Provisions Relating to the Employment of Children and Young Persons

The Ordinance prescribe the conditions under which a "child" and "young person" may be employed. A "child" is a person under the age of 15 years and a "young person" is a person who has attained 15 years of age but below 18 years old.

Employment of Non-Resident Employees

It is mandatory for any employer wishing to employ any "non-resident employee" must first obtain a licence to employ "non-resident employee" from the Director of Labour Sabah / Sarawak. A "non-resident employee" is defined as any person who does not belong Sabah / Sarawak as provided for under Section 71 of the Immigration Act, 1959/1963.

Employees Provident Fund Act 1991

The Employees Provident Fund Act 1991 stipulates a compulsory contribution for employees. Under the Act, all employers and employees (except those who are listed under the First Schedule) of the Employees Provident Fund Act 1991 must contribute to the Employees Provident Fund (EPF). The rate of contributions shall be as follows:

Age Group Below 55 Years

Employer’s share (a) Monthly Wages RM5,000 and below
Minimum of 13% of the employees’ monthly wages.
(b) Monthly Wages Exceed RM5,000
Minimum of 12% of the employees’ monthly wages.
Employee’s share Minimum of 11% of the employees’ monthly wages

[Refer To Third Schedule (Part A) of the EPF Act 1991]

Age Group 55-75 years

Employer’s share (a) Monthly Wages RM5,000 and below
Minimum of 6.5 % of the employees’ monthly wages.
(b) Monthly Wages Exceed RM5,000
Minimum of 6 % of the employees’ monthly wages.
Employee’s share Minimum of 5.5% of the employees’ monthly wages

[Refer To Third Schedule (Part C) of the EPF Act 1991]

All foreign workers and expatriates and their employers are exempted from compulsory contributions. They can, however choose to contribute and the applicable rates are as follows:

Age Group Below 55 Years

Employer’s share RM5.00 per employee per month
Employee’s share 11% of the employees’ monthly wages

[Refer To Third Schedule (Part B) of the EPF Act 1991]

Age Group 55-75 years

Employer’s share RM5.00 per employees per month
Employee’s share 5.5% of the employees’ monthly wages

[Refer To Third Schedule (Part D) of the EPF Act 1991]

All employers must register their employees with EPF immediately upon employment except for those who are exempted under the Act.

Employees’ Social Security Act 1969

The Social Security Organisation (SOCSO) provides two social security schemes to protect the welfare of employees and their dependents under the Employees' Social Security Act 1969. The two social security schemes namely are:

  • Employment Injury Insurance Scheme
  • Invalidity Scheme

Employment Injury Insurance Scheme

Employment Injury Insurance Scheme provides protection to employees who suffer from work related accidents or occupational diseases arising out o and in the course of employment in an industry. The benefits provided under the Employment Injury Insurance Scheme consists of Medical Benefit, Temporary Disablement Benefit, Permanent Disablement Benefit, Constant-attendance Allowance, Dependants’ Benefit, Funeral Benefit, Rehabilitation Benefit and Education Benefit.

Invalidity Scheme

The Invalidity Scheme provides 24-hour coverage to employees against invalidity or death due to any cause not connected with his employment. However, the employee must fulfill the condition to be eligible for invalidity pension. Benefits provided under the Invalidity Scheme are Invalidity Pension, Invalidity Grant, Constant attendance Allowance, Survivors’ Pension, Funeral Benefit, Rehabilitation Benefit and Education Benefit.

Employer Eligibility

Any employer who hires one or more employees as defined under the Act is required to register and make contributions to SOCSO.Contributions to SOCSO are compulsory under the Act for eligible employers and employees. A present contribution rate for employer is 1.75% of the insured person (employees) salaries and 0.5% for employees.

Employee Eligibility

Employees receiving a monthly salary of three thousand ringgit (RM3,000) or less are required to contribute to SOCSO. Employees with a monthly salary of more than RM3,000, who have not registered and contributed to SOCSO, have the option of registering and contributing as long as both employer and employee agree to contribute. However, when an employee is already contributing under the said Act, he will still be eligible to contribute and be covered regardless of his monthly salary thereafter. The principal ‘Once In Always In’ is applicable.

Workmen's Compensation Act 1952

The Act provides for the payment of compensation for injuries sustained in accidents during employment and imposes an obligation on the employers to insure workers. The Foreign Workers’ Compensation Scheme (Insurance) Order 2005 issued under this Act requires every employer employing foreign workers to insure with the panel of insurance companies appointed under this order and to effect payment of compensation for injuries sustained from accidents during and outside working hours.

Occupational Safety and Health Act 1994

The Department of Occupational Safety and Health (DOSH), under the Ministry of Human Resources, is responsible for administrating and enforcing legislation related to occupational safety and health. DOSH ensures that the safety, health and welfare of people at work as well as others are protected from hazards resulting from occupational activities in the various sectors such as:

  • manufacturing;
  • mining and quarrying;
  • construction;
  • agriculture, forestry and fishing;
  • utilities (gas, electricity, water and sanitary services);
  • transport, storage and communication;
  • wholesale and retail trades;
  • hotels and restaurants;
  • finance, insurance, real estate and business services; and
  • public services and statutory authorities.

This enforcement activity is governed by three legislations which are:

  • Occupational Safety and Health Act (OSHA) 1994;
  • Factories and Machinery Act 1967; and
  • Petroleum Act (Safety Measure) 1984

The Occupational Safety and Health Act (OSHA) 1994 provides the legislative framework to promote, stimulate and encourage high standards of health and safe working culture among all Malaysian employers and employees through self-regulation schemes designed to suit the particular industry or organisation.

OSHA 1994 defines the responsibilities of employers, employees, the self-employed, designers, manufacturers, importers and suppliers of plant or substances. Under OSHA 1994, employers must safeguard so far as is practicable, the health, safety and welfare of the people who work for them. This applies in particular to the provision and maintenance of a safe plant and system of work.

Arrangements must be made to ensure safety and health in the use, handling, storage and transport of plant and substances. 'Plant' includes any machinery, equipment, appliance, tool and component, whilst 'substance' means any natural or artificial substance whether in solid, liquid, gas, vapour or combination thereof, form.

Risks to health from the use, storage or transportation of substances must be minimised. Employers must provide necessary information, instruction, training and supervision in safe practices, including information on the legal requirements with particular reference to processes with special hazards.

An employer employing 40 or more persons must establish a safety and health committee at the workplace. The main function of the committee is ensuring the safety and health measures are regularly reviewed as well as investigating any related matters arising.

An employer must notify the nearest occupational safety and health office of any accident, dangerous occurrence, occupational poisoning or disease which has occurred or is likely to occur at the workplace.

Processes that use hazardous chemicals require competent persons to conduct the air quality, personal monitoring and safety while health officer and an occupational health doctor are required to ensure the proper surveillance of the workplace.

There are seven regulations under OSHA 1994 enforced by DOSH which are:

  • Employers' Safety and Health General Policy Statements (Exception) Regulations, 1995
  • Control of Industrial Major Accident Hazards Regulations, 1996
  • Classification, Packaging and Labelling of Hazardous Chemicals Regulations, 1997
  • Safety and Health Committee Regulations, 1996
  • Safety and Health Officer Regulations, 1997
  • Use and Standards of Exposure of Chemicals Hazardous to Health Regulations, 2000
  • Notification of Accident, Dangerous Occurrence, Occupational Poisoning and Occupational Disease Regulations, 2004

Contravention of some of the requirements can lead to prosecution in court.

The objective of the Factories and Machinery Act (FMA) 1967, on the other hand, is to provide for the control of factories on matters relating to the safety, health and welfare of persons, and the registration and inspection of machinery. All certificated machinery such as boilers, unfired pressure vessels, passenger lifts and other lifting equipment such as mobile cranes, tower cranes, passenger hoists, overhead traveling cranes and gondolas, must be approved in term of design requirements, technical specifications, testing, and inspection. The manufacturer can submit the drawing, technical calculation, manufacturer certificate, and other supporting documents on-line through SKUD system (www.dosh.gov.my) for the purpose of acquire design approval from DOSH.

All factories and general machinery must be registered with DOSH before they can be installed and operated in Malaysia. Some operation, installation, maintenance and dismantling of equipment and process need competent persons. Thus, during the installation of machinery and equipment such as cranes, lifts and local exhaust ventilation systems, competent persons are compulsory to ensure safe erection, whilst a boilerman and a steam engineer are required to operate high risk equipment such as boilers.

DOSH enforces 13 regulations under FMA 1967. They are:

  1. Electric Passenger and Goods Lift Regulations, 1970
  2. Fencing of Machinery and Safety Regulations, 1970
  3. Notification, Certificate of Fitness and Inspection Regulations, 1970
  4. Persons-In-Charge Regulations, 1970
  5. Safety, Health and Welfare Regulations, 1970
  6. Steam Boilers and Unfired Pressure Vessel Regulations, 1970
  7. Certificates of Competency-Examinations Regulations, 1970
  8. Administration Regulations, 1970
  9. Lead Regulations, 1984
  10. Asbestos Regulations, 1986
  11. Building Operations and Works of Engineering Construction (Safety) Regulations, 1986
  12. Mineral Dust Regulations, 1989
  13. Noise Exposure Regulations, 1989
  14. Compounding Of Offences Rules, 1978
  15. Compoundable Offences Regulations, 1978

Petroleum Act (Safety Measures) was enforced in the year 1984 and its enforcement is carried out by a few government agencies including DOSH . The department enforced section 16 and 17 under this act, which are provisions relating to transportation of petroleum using pipelines.

6 Industrial Relations
Trade Unions

The Department of Trade Union Affairs generally features guidelines for the formations, functions and activities of trade unions. Trade Union Affairs is governed by Trade Union Act 1959. Functions of the department are as follows:

  • To enforce the Trade Unions Act 1959 and Trade Union Regulations.
  • To supervise, direct and control generally all matters relating to unions.
  • To consider applications for registration established by either employees or employers.
  • To ensure that registered trade unions function in accordance with the trade union legislation and their respective rules and constitution.
  • To advise officers and members of trade unions on administrative, financial and constitutional aspects of trade unions.
  • To advise the Minister of Human Resources on matters relating to trade unions legislation and policies an particular and other labor issues in general.
Industrial Relations Act 1967

The Industrial Relations system in Malaysia operates within the legal framework of the Industrial Relations Act 1967. The Act is administered by the Department of Industrial Relations, Malaysia and it regulates the relations between employers and their workmen’ and their trade unions in the country. The Act, among others, outlines the following:

  1. Provisions outlining the process relating to claims for recognition and scope of representation of trade unions;
  2. Provisions relating to the facilitation of effective collective bargaining between the trade union and the employer and subsequent conclusion of a collective agreement;
  3. Provisions relating to prevention and settlement of trade disputes including referral to the Minister of Human Resources and Industrial Court for a dicision;
  4. Provisions relating to industrial action such as pickets, strikes and lockouts;
  5. Provisions relating to the representations for claims for reinstatement by workmen;
  6. Provisions relating to the operation of the Industrial Court; and
  7. Provisions relating to the investigative powers of the officers of the Department of Industrial Relations, Malaysia

In addition, the Department also provides advisory services on all issues and questions relating to employment relations vide its branch offices located throughout the country.

Relations in Non-Unionised Establishments

In a non-unionised establishment, the normal practice for settling disputes is for the employee to try to obtain redress from his supervisor, foreman or employer directly. An employee can also lodge a complaint with the Ministry of Human Resources which will then conduct an investigation.


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Last Updated : Tuesday 24th March 2020