Employment Contracts in Malaysia: What To Include and Avoid

Despite that the Employment Act 1955 does not explicitly require employment contracts to be in writing, it is strongly advisable to document all agreed-upon terms and conditions in writing. This practice helps to prevent evidential burdens in case parties find themselves in a dispute that escalates to court proceedings.

However, do you know what to include and avoid in an employment contract? We have prepared a brief overview of this matter below for your reference:

To Include

Similar to any other contract, it is crucial to ensure that the parties enter into the contract voluntarily and the contract shall consist of terms that reflect (i) offer, (ii) acceptance, (iii) consideration, and (iv) Intention to create legal relations. In essence, the employment contract’s terms shall include and not limited to the following:

• Full names and addresses of both the employer and employee.
• Position/title of the employee and a brief job description.
• Commencement date of employment.
• Working hours and days.
• Duration of employment (if fixed term).
• Probationary period, if applicable.
• Salary, bonuses, and any other benefits.
• Payment manner.
• Overtime rates, if applicable.
• Leave entitlement.
• Notice period for both parties in the event of termination.
• Grounds for termination with cause.
• Severance or termination benefits, if any.
• Confidentiality and non-disclosure.
• Ownership of intellectual property created during employment.
• Code of Conduct.
• Dispute resolution manner.
• Governing law.

To avoid

As the terms and conditions listed in the employment contract might potentially be used as evidence in court one day, the same must be carefully drafted. Below are some of the key items that we shall avoid while preparing an employment contract:

• Vague language.
• Unreasonable restrictive clauses.
• Illegal provisions
• One-sided terms
• Failure to regularly review and update the contract from time to time.
• Incompliances with relevant employment law.
• Inadequate confidentiality clauses.
• Failure to include clear and fair mechanisms for dispute resolution.

It is advisable to seek legal advice from professional employment lawyer in Malaysia when drafting or reviewing employment contracts to ensure compliance with local laws and to protect your interests.

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