Labuan: Labour Regulation

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- LABUAN REGULATORY ENVIRONMENT
- LABUAN WORK PERMITS

Labuan Regulatory Environment

Wages in Malaysia are well below levels prevailing in industrialized countries, but substantially higher than any of its neighbors except Singapore. There is no national minimum wage. Minimum wage legislation covers only certain classes of employees: retail clerks, hotel and restaurant employees, cinema workers, and stevedores not employed directly by a port authority.

There is no welfare program or unemployment compensation in Malaysia, although employers are required by law to pay employees termination benefits.

Under the Employment Act, working hours may not exceed 8 hours per day or 48 hours per work week of 6 days. Each work week must include a 24-hour rest period.

An Occupational Safety and Health Act (OSHA) covers all sectors of the economy except the maritime sector and the military, at the time of writing. The act established a national Occupational Safety and Health Council, composed of workers, employers, and government representatives, to set policy and coordinate occupational safety and health measures.

It requires employers to identify risks and take precautions, including providing safety training to workers, and compels companies that have more than 40 workers to establish joint management-employee safety committees. The act requires workers to use safety equipment and to cooperate with employers to create a safe, healthy workplace.

The Social Security Organization (SOCSO) provides cash benefits to insured employees who sustain temporary disability, or to the heirs of victims of fatal industrial accidents. Financial support for SOCSO is shared by employees and employers.

The Employee Provident Fund (EPF) provides old-age benefits for most workers. EPF contributions are (at the time of writing) around 11 percent of wages from the employee and 12 percent from the employer, although many large employers contribute more under their collective agreement or compensation plan. EPF is fully funded with contributions and accrued interest being credited to the individual's account. The amount accumulated becomes available in a lump sum or in installments at retirement, if the contributor becomes disabled, or if he or she permanently leaves Malaysia and Singapore.

Unions are organized among workers in a particular trade, occupation, or industry, or similar trades, occupations, or industries. Unions are not allowed to organize workers in industries outside their primary one. As a result, Malaysian private sector unions are generally organized on industry or company lines. It is not uncommon for more than one union to be represented in a single employer, but the different unions represent quite different classes of employees.

A contentious issue has been that of in-house unions. Most in-house unions are in the public sector, although the privatization of the telecommunications department and other government services has moved a number of in-house unions into the private sector. The Malaysian Government sees in-house unions as creating a better industrial relations climate between employers and workers, in part because one union would represent all workers in a firm. The leaders of the national unions see them as weakening their own unions and reducing the protection union membership affords a worker.

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Labuan Work Permits

NB This section describes national Malaysian employment permit rules; the regime in Labuan is somewhat relaxed by comparison.

Any person who wishes to enter Malaysia to take up employment with a Malaysian company or firm must apply for an employment pass from the Department of Immigration.

Employment passes are issued for a specified period, usually two to three years, and are renewable for an additional two to three years.

Employment passes are granted on a case-by-case basis, generally for positions that require special technical knowledge or expertise not available locally or for positions that cannot be filled by local Malaysian citizens.

To obtain employment passes, expatriates must have a valid passport from their home country, a contract from their employer, a cover letter and three passport-size photos, which may be black and white or color.

The employer of an expatriate must submit an application to the Department of Immigration and await a decision, which may take one month. After the employer receives a letter of approval, it must submit the passport of the employee and pay for the employment pass and the levy. The levy is applicable only to expatriates earning below a designated amount per month or to expatriates holding employment passes valid for less than two years.

Licensed manufacturing companies that wish to hire expatriates must present copies of their manufacturing licenses. Service companies with foreign equity of more than 30% have traditionally been required to seek the approval of the Foreign Investment Committee before hiring expatriates. Companies engaged in construction and project management must register with the Construction Industry Development Board before hiring expatriates. Companies engaged in the retail, trade, wholesale and direct-sales sectors that have foreign equity of more than 30% must seek the approval of the Committee on Wholesale and Retail Trade before hiring expatriates.

It is illegal to work without a valid employment pass; therefore, a foreign national may not work in Malaysia until he or she has received a work permit and all other necessary documents.

In 2003, the Malaysian government decided to make it easier for companies to hire skilled foreigners, allowing for automatic approvals to be granted for the recruitment of highly skilled workers where there is no available local expertise.

From June 2003, the government further relaxed rules on employing expatriates, granting that manufacturing companies with foreign paid-up capital of at least US$2m be automatically permitted ten expatriate positions, with those to include five key posts. Under the amended rules, expatriates could be employed for up to ten years for executive posts and five years for non-executive posts.

Manufacturing companies with foreign paid-up capital of US$200,000–2m, meanwhile, were permitted automatic approval for up to five expatriate posts, including at least one key post.

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