WAGES AND WAGE PERIODS
1. What is the permissible wage period?
Wage period shall not exceed 1 month. In the case where no wage period is stated, the law deems it to be 1 month.
{ Where to Look : Section 18) }
2. What is the latest time for wages to be paid?
If you are referring to the regular wagers due to an employee who is still in service, then they are to be paid not later than the 7th day after the closing of the pay period. If for any reason an employer wishes to pay later than the 7th day, then he has to obtain special approval by the Director-General of Labor first.
But if you are referring to Wages due to an employee whose services has terminated, then check out the next question below.
{ Where to Look : Section 19) }
3. What if the employer habitually pay wages later than stipulated above?
If an employer fails to pay within the 7 day period once in a long while for reasons beyond his control, I would think that people would understand and therefore won't make too much noise about it.
But if it is habitual, then the employer opens himself to prosecution in court by the Labor Office if employees were to lodge a complaint against him. If found guilty then he will be fined.
He may also open himself to accusations by his employees that he has breached the contract of service as provided by Section 15(1). In which case, the employees can terminate the contract without notice accordingly and proceed to claim for termination and lay-off benefits.
4. An employee resigns by giving the required and proper notice, and serves out the notice period. On his last day of work, his employer finds it inconvenient to pay him, and asks him to return at the end of the month to collect the balance of his wages. Is that in order?
No! No! and No!. That is definitely not in order. The law is very specific that if an employee resigns with proper notice, or if he chooses to indemnify the employer for the any shortfall in the notice period, then he is to be paid the balance of his wages by his last day of service.
In fact, the same provision applies for following situations where the contract of service is terminated,
" due to the contractual expiry of the contract (such as a fixed period contract of service)
" the employee completes a specific job or task for which he has been employed,
" due to retrenchment or termination due to changes in the organization ownership, restructuring,
" the employee is dismissed without notice after having been found guilty of a serious misconduct,
" the employee is terminated due to a breach of contract of service, and if
" the employee resigns without notice or sufficient notice by paying indemnity in lieu of notice to the employer.
Forget about giving excuses like there is not enough time to prepare the last salary, documentation is not complete and so on. They don't hold water.
{ Where to Look : Sections 20 & 21(1) }
5. When should an employee be paid if he resigns without giving notice and without paying indemnity in lieu of notice?
In this case, the employer can tell him to come back within the next 3 days to collect his final wages.
This 3 day grace period also applies if an employee terminates the contract of service on the grounds that the employer has committed willful breach of his contract of service, or has put him or his family in undue danger
{ Where to Look : Section 21(2) }
6. When paying the final wages to an employee who has terminated his services, what about the monies that he may owe the company?
The employer is allowed to make such deductions as are lawful and provided for by laws such as EPF, Income Tax, SOCSO, indemnity in lieu of notice, and even overpayment of wages up to the last 3 months. But the employer cannot deduct any other amounts in respect of payments for such things as cost of uniform and company equipment not yet returned, bus fare, etc.
{ Where to Look : Section 20 & 21 }
7. How much money can an employer make to an employee as an advance of his wages?
Advances of wages is limited generally limited to not more than the amount the employee has earned in the preceding month, or the amount he is likely to earn in a month of work.
{ Where to Look : Section 22 }
8. Is the employer allowed to provide a greater amount under any other circumstance?
The employer can provide more than 1 month's advance if it is for any of these purposes : -
" buy, build or renovate a house
" buy land
" buy livestock
" buy car, motorcycle or bicycle.
" to buy shares in the employer's business, where it is offered by the employer (August 1998 amendment)
For the purposes stated above, the employer does not need to apply for any permission from the Director-General of Labor.
If the employer intends to provide a greater amount of advance for other purposes, then he has to apply to the Director-General Of Labor for approval.
{ Where to Look : Section 22) }
9. What are lawful deductions which can taken directly off the the wages paid to an employee?
The employer is only allowed to make the following deductions from the wages to be paid to an employee without having to apply for any approval from the DG of Labor : -
" subscription, entrance fees, loan installments, interest and other dues payable to registered trade union, co-operative thrift and loan society. There must be a request in writing by the employee before such deductions can be made
" overpayment by employer in respect of mistake in the 3 months immediately preceding.
" Indemnity in lieu of notice of termination (except where the employer terminates an employee due to absence from work for more than 2 consecutive days provided for under Section 15(2) and Section 13(2) )
" recovery of advances made under Section 22 provided that such advances do not carry interest,
" advances authorized by other written law (e.g. EPF, SOCSO, Income Tax)
" recovery of advance made for the purpose of buying shares in the business of the employer
The employer is also allowed to make other deductions from the wages to be paid to an employee after having received prior approval from the DG of Labor. There is also a condition here that the DG can only grant an approval if the application is made at the written request of the employee.
If the employer alone makes an application, the DG has no power to grant an approval. These other deductions are: -
" Payment into superannuation scheme, provident fund, welfare scheme, thrift, insurance schemes
" Payments to a third party on behalf of employee
" Repayment of advances made under Section 22 where interest is charged, as well as the interests payments
" Payment for goods/shares of the business sold by the employer to the employee
" Rental of accommodation (e.g. hostel), cost of services, food and meals provided by the employer at the request of the employee, or under the contract of service
" Deductions made at the written request of the employee to pay to a registered co-operative society in respect of goods, foodstuff and provisions taken on credit. The deduction and repayment must also have the agreement of the co-operative shop.
{ Where to Look : Section 24 }
10. Is there a limit to the monthly deductions that an employer can make?
Under normal circumstances, deductions shall not exceed 50% of the employee's wages earned during the month.
However, under special circumstances, the 50% limit can be exceeded, such as:-
" recovery of indemnity in lieu of notice
" recovery of any monies owing to the employer by the employee from the final payment of wages upon the termination of contract of service
With approval of the DG of Labor for up to a further 25% in respect of repayment of housing loan.
{ Where to Look : Section 24(4) }
11. Is the employer allowed to pay wages by cheque?
The basic provision is that employees covered by the Employment Act, 1955 wages must be paid in legal tender. Any wage paid in non-legal tender form is considered illegal, null and void. Employees after receiving such payment can continue to take action to recover the wages.
However, it can be allowed when the employee agrees to it in writing. An employee is not allowed however, to unreasonably without such agreement.
If the employee decides to withdraw his consent, he can do so by giving the employer 4 week's notice and the employer cannot force him to accept the payment in cheque to his order. Such consent, once given, also cannot unreasonably be withdrawn by the employee.
{ Where to Look : Section 25(1) & (2) }
12. How is it then that payment into bank accounts are so wide-spread?
As stated above, it can be done so long the employee provides his consent in writing. But of course, there are employers who take for granted that it is not necessary to obtain such written consent from the employee.
In fact the payment can also be made into the account of the employee in a registered finance company.
The account can be in the name of the employee or it may be a joint account between the employee and another person.
Remember that if the employee chooses to withdraw his consent, he can do so by giving 4 weeks notice. After that, the employer is compelled to pay him in legal tender. The amendments of August 1998 however, has made it clear that an employee may not unreasonably withhold his consent for payment through such means, and similarly may not withdraw his consent once it is given.
{ Where to Look : Section 25A(1) & (2)}
13. If an employee is unreasonable and demands to be paid by cash when everybody else is being paid by their bank accounts, isn't that very inconvenient for the employer?
Well, the law's the law. Remember that the laws were formulated at such a time when paying by bank and cheque wasn't so fashionable or acceptable. There weren't so many banks with their branches either in those days. However, it does look like the Employment Act, 1955 has not been keeping itself up to date, huh?
14. Can interest be charged on advances made?
An employer may charge interest on advances only where the quantum of the loan exceeds one month's wages. This means that interest is likely to be chargeable on advances for purchase of house, car, livestock and so on, but not for festival advances which do not normally by practice exceed even 2 weeks.
Remember also that if the advance which is greater than one month's wage is intended for any other purpose than for buying house, car, livestock, etc., it can only be given after obtaining the approval from the DG of Labor.
{ Where to Look : Section 27 }
15. Can the employer reduce the salary of an employee?
No. Not unless, the employee agrees to it, as in the case of business downturn where the employer is badly affected. It is for the employer to convince the employer of his circumstances and hope that the employee understands that helping to contribute towards cost reduction, jobs can be preserved, or it is in the form of disciplinary action where the employee has been found guilty of a misconduct after a domestic enquiry. It is a rarely exercised punishment as it can lead to other counter actions by the employee, unless such a punishment has been made known to the employee explicitly in his terms and conditions of employment. As a punishment, it is an option best avoided unless the employer exercises it clearly to avoid otherwise having to dismiss the employee.
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