Employment agreements in Malaysia can vary depending on the nature of the work and the needs of both the employer and employee. Here's a breakdown of the common types of employment agreements used in Malaysia:

Permanent Employment Contract

A permanent employment contract is the most common type of employment agreement in Malaysia. It offers an indefinite term of employment, providing job security for the employee. There's no specific end date to the contract, and termination usually requires following proper procedures outlined in the Employment Act 1955.

Fixed-Term Employment Contract

Fixed-term employment contracts, also known as "limited" or "temporary" contracts, are used for specific projects or situations where a permanent employee isn't necessary. These contracts outline a predetermined duration of employment, and the contract automatically ends on the specified date. However, Malaysian courts may consider an employee on a repeatedly renewed fixed-term contract as a permanent staff member if dismissed.

Part-Time Employment Contract

Part-time employment contracts are ideal for employees seeking flexible work arrangements. These contracts typically specify shorter working hours compared to a full-time position. The terms and conditions, including benefits and salary, are usually pro-rated based on the reduced working hours.

Internship Agreement

Internship agreements are designed for students seeking practical work experience in a specific field. These agreements outline the internship duration, responsibilities, and supervision provided by the employer. Internship agreements often differ from employment contracts as they may not offer formal compensation or employee benefits.

While these are the common types of employment agreements, there can be variations and specific details depending on the industry and employment type. It's crucial for both employers and employees to ensure their contracts comply with Malaysian labor laws as outlined in the Employment Act 1955.

An employment agreement is a crucial document that safeguards the interests of both employers and employees by clearly defining expectations and rights. In the context of Malaysian employment agreements, there are several key clauses that should be considered.

Basic Employment Details

• Parties to the Agreement: This section identifies the employer and employee by name and designation.
• Position and Job Description: A clear description of the employee's job title, duties, and responsibilities is provided.
• Commencement Date and Term: The start date of employment and the nature of the contract (permanent, fixed-term, or part-time) are specified.

Compensation and Benefits

• Salary and Allowances: The basic salary amount, payment frequency, and any allowances provided (e.g., housing, transportation) are outlined.
• Bonus Structure (if applicable): Details on eligibility criteria and calculation methods for any performance-based bonuses are provided.
• Leave Entitlements: The employee's annual leave entitlement, sick leave provisions, and any other forms of leave (e.g., maternity leave) are specified as per the Employment Act 1955 [Act 342].

Working Hours and Conditions

• Working Hours and Overtime: The standard working hours per day and week, and the calculation of overtime pay (if applicable) are defined.
• Place of Work: The primary work location is specified, with details on remote work arrangements if offered.

Termination of Employment

• Termination Clauses: The grounds and procedures for termination by both employer and employee, following due process as stipulated in the Employment Act 1955 [Act 342], are outlined. This includes the required notice periods for termination.
• Severance Pay: Any severance pay entitlement as per the Employment Act 1955 [Act 342] depending on the reason and circumstances of termination is specified.

Confidentiality and Intellectual Property

• Confidentiality Clause: This clause protects the employer's confidential information and trade secrets by restricting employee disclosure.
• Intellectual Property Rights: The ownership of any intellectual property created by the employee during their employment is clarified, following relevant intellectual property laws in Malaysia.

Additional Considerations

While these are the core clauses, other relevant sections can be included depending on the specific needs of the employment relationship. Examples include:

• Non-Solicitation Clause: This clause restricts the employee from soliciting the employer's clients or employees after leaving the company. However, enforceability of such clauses may be limited.
• Dispute Resolution: The process for resolving any disagreements arising from the employment contract is outlined.

It's important to remember that Malaysian employment law is governed by the Employment Act 1955 [Act 342]. Employers and employees should ensure their agreements comply with these regulations.

Probationary periods are a common feature in Malaysian employment agreements, offering a trial period for both employers and employees to assess suitability before confirming permanent employment. However, unlike some countries, probationary periods in Malaysia are not mandated by law.

Key Aspects of Probation in Malaysia

Probationary periods in Malaysian employment contracts have several key aspects:

• No Legal Requirement: The Employment Act 1955 (Act 342) doesn't impose a mandatory probationary period. It's entirely up to the employer's discretion to include it in the contract.
• Typical Duration: If a probationary period is included, it typically ranges from 3 to 6 months. The specific duration should be clearly stated in the employment agreement.
• Purpose: The probation period allows employers to evaluate an employee's performance, skills, and fit within the company culture. Conversely, employees can assess if the role and work environment meet their expectations.

Rights of Employees During Probation

Even while on probation, employees still enjoy certain rights:

• Security of Tenure: Even during probation, probationers are generally entitled to similar security of tenure as permanent employees. Termination during probation must be based on just cause and follow proper procedures outlined in the Employment Act.
• Entitlements: Probationers are entitled to most employment benefits provided by law, including minimum wage, basic leave entitlements, and social security contributions.

End of Probation Period

The end of the probation period is typically marked by a performance review or confirmation discussion. Here are the possible outcomes:

• Confirmation: If the employee's performance meets expectations, they are confirmed as a permanent employee, likely with revised terms and conditions (excluding probationary clauses).
• Termination: If the employer decides the employee isn't suitable, they can terminate the employment with proper notice, as outlined in the contract and adhering to the Employment Act. Just cause for termination is crucial during probation.
• Extension: In some cases, the employer may extend the probation period if they require more time to assess the employee's performance. This extension should be mutually agreed upon and documented.

In Malaysia, employment agreements often include confidentiality and non-compete clauses to protect the employer's competitive advantage. However, these clauses carry different legal implications.

Confidentiality Clauses

Confidentiality clauses are generally enforceable in Malaysia. They obligate employees to safeguard the employer's confidential information both during and after their employment. This includes trade secrets, client lists, and other sensitive data.

Key considerations for these clauses include:

• The agreement should clearly define what constitutes "confidential information."
• The clause should not unreasonably limit the employee's ability to pursue their profession.

Non-Compete Clauses

Contrary to confidentiality clauses, non-compete clauses in Malaysia are typically considered void and unenforceable. These clauses aim to prevent employees from working for competitors after leaving the company.

The legal basis for this is Section 28 of the Contracts Act 1950, which restricts agreements that restrain someone from exercising a lawful trade or business. This provision upholds an employee's right to earn a living.

However, there are limited exceptions where non-compete clauses might be enforceable:

• Sale of Goodwill: In cases where a business's goodwill is being sold, a non-compete clause might be valid. This would prevent the seller from competing within a specific area for a reasonable period.

Emphasizing Confidentiality

Given the unenforceability of non-compete clauses, a well-drafted confidentiality clause becomes essential for Malaysian employers.

• A clear and specific confidentiality clause can deter employees from disclosing sensitive information.
• In the event of a breach, a robust confidentiality clause can provide the basis for legal action against the employee.