Job Title And Scope of Work
The contract should clearly state the employee’s job title and provide a sufficiently clear or specific description of duties. It is common for employers to include wordings that widen the scope of the employee’s duties to include ad hoc duties and other tasks reasonably assigned by the employer that are consistent with the employee’s role and capabilities.
Remuneration And Other Monetary Benefits (e.g. allowances and bonuses)
Salary details must be clearly set out, including basic salary, payment frequency (e.g. monthly) and any allowances, commissions, profit sharing arrangement or bonuses.
It is important to clarify whether bonuses are discretionary or contractual. Other benefits such as medical coverage, insurance, travelling allowance, or incentives should also be clearly described, together with any eligibility conditions.
Working Hours And Overtime
The contract should specify normal working hours, rest days, and overtime arrangements. Employers must ensure compliance with the Employment Act 1955, particularly for employees covered by the Act. Overtime rates, approval requirements, and eligibility should be clearly addressed to avoid future disputes.
Leave Entitlement
Leave provisions should comply with minimum statutory requirements and clearly outline annual leave, medical leave, public holidays and any additional leave (such as maternity, paternity, compassionate, or study leave).
The employment contract should also state clear procedures for applying for and approving leave.
Commencement Date And Duration of Employment
The contract should specify the commencement date and whether the employment is permanent, fixed‑term, or probationary. For fixed‑term contracts, the duration and expiry date must be clearly stated.
Probationary Period
Any probationary period and its length should be expressly stated. The contract should also address whether the probation may be extended and the notice period applicable during probation. Although probationers are employees under Malaysian law, clearly defining probation terms helps manage performance expectations and termination risks.
Non Compete And Non Solicitation Clauses
Employers often seek to include post‑employment restraints such as non‑compete, non‑solicitation, or non‑dealing clauses. In Malaysia, restraints of trade are generally void under section 28 of the Contracts Act 1950, subject to limited exceptions. As such, these clauses must be carefully worded to be enforceable.
Termination And Notice Period
Termination clauses are among the most critical terms in an employment contract. The contract should clearly set out:
- Notice periods for termination by either party
- Payment in lieu of notice
- Grounds for summary dismissal
Clear termination provisions help reduce exposure to wrongful dismissal claims and provide certainty for both employer and employee.
Disciplinary Procedures
While not always included in detail, the contract may refer to company policies or handbooks governing disciplinary matters. Employers should ensure that disciplinary procedures comply with principles of natural justice, including the employee’s right to be heard before disciplinary action is taken.
Conclusion
A carefully drafted employment contract is essential for protecting an employee’s interests while ensuring compliance with Malaysian employment laws. Ambiguous or poorly drafted terms often become the root of employment disputes.
Employers are strongly encouraged to seek legal advice when reviewing employment contracts to ensure that the terms are clear, enforceable, and aligned with current legal requirements.
If you require assistance in drafting or reviewing employment contracts, our firm advises employers across a wide range of industries on Malaysian employment and labour law matters.
