# Who the Employment Act covers, and what RM4,000 actually switches off

> Everyone under a contract of service is covered; six named provisions stop applying above RM4,000 a month.

- Category: employment
- Language: en
- Status: published
- Updated: 2026-07-20
- Canonical: https://negaraku.md/en/employment/employment-act-coverage

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If you searched this question in the last year you were probably told that the Employment
Act covers employees earning **RM2,000 or less**. That rule was superseded on
**1 January 2023**, when the Employment (Amendment) Act 2022 came into force. It is still
being published — ajobthing among others — and it is wrong in a way that costs money in
both directions: employers deny entitlements to people who have them, and pay premiums to
people who do not.

Here is the current position, which has two layers.

## Layer one: who is an employee?

**First Schedule, paragraph 1**, in full: *any person who has entered into a contract of
service.*

That is the entire coverage test. No wage ceiling, no job-category filter, no headcount
condition. A RM25,000-a-month regional director in Kuala Lumpur is an employee under Act
265, and always has been since the amendment took effect.

## Layer two: what stops applying above RM4,000?

**Paragraph 1A** disapplies six provisions for a person *whose wages exceeds four
thousand ringgit a month*:

| Provision | Effect above RM4,000 |
| --- | --- |
| s.60(3) | No statutory rest-day pay rates |
| s.60A(3) | No statutory 1.5× overtime rate |
| s.60C(2A) | Shift-allowance regulations do not apply |
| s.60D(3) | No statutory public-holiday work pay or 3× holiday overtime |
| s.60D(4) | Half-day holiday not deemed a full day |
| s.60J | Termination, lay-off and retirement benefit regulations do not apply |

Notice the shape of the list: it is entirely about **premium pay and termination
benefits**. It says nothing about annual leave, sick leave, maternity leave and the s.41A
pregnancy protection, paternity leave, the s.60Q flexible-working clock, the Part XVA
sexual harassment duties, the s.81H notice, the s.19 wage-payment deadlines, the s.90B
forced-labour offence, or the s.10 requirement of a written contract. All of those apply
at every salary level.

## How is the RM4,000 measured?

**Paragraph 3** defines wages for this test as wages under s.2 **excluding commissions,
subsistence allowance and overtime payment**.

So a salesperson on a RM3,300 basic with RM3,000 of monthly commission is *below* the
threshold and keeps the overtime and rest-day provisions. Employers who test against
gross earnings on the payslip get this backwards routinely.

## The exception most guides omit entirely

**Paragraph 2** covers, *irrespective of the amount of wages he earns in a month*, a
person whose contract of service involves:

1. manual labour, including as an artisan or apprentice — with a proviso that where the
   work is partly manual and partly otherwise, it counts as manual only if manual work
   exceeds half the time in the wage period;
2. operating or maintaining a mechanically propelled vehicle used to transport passengers
   or goods, for reward or commercially;
3. supervising or overseeing other employees engaged in manual labour for the same
   employer, throughout the performance of their work;
4. certain uncertificated work on a Malaysian-registered vessel;
5. work as a domestic employee.

A site foreman on RM6,500 who supervises manual labourers throughout their work is in
category 3, and the RM4,000 carve-out does not reach him. The test is what the person
does, not what the person earns.

## Common mistakes

**Quoting RM2,000.** It is pre-amendment. If a page still says it, treat everything else
on that page as suspect too.

**Treating RM4,000 as an exit from the Act.** It removes six provisions. It does not
remove the employee from the statute, and it does not remove your obligations on leave,
harassment, flexible working or wage-payment timing.

**Testing the threshold on gross pay.** Strip out commission, subsistence allowance and
overtime first.

**Ignoring paragraph 2.** Drivers, supervisors of manual labour and domestic employees
keep the premium-pay provisions at any salary.

**Assuming the same list applies in East Malaysia.** Sarawak's amended First Schedule
disapplies a differently drafted set of sections above RM4,000. The threshold figure
matches; the consequences do not line up section for section.

## What's next

Run your payroll master against two columns: wages excluding commission and allowances,
and job category under First Schedule paragraph 2. Anyone below RM4,000, or in a
paragraph 2 category at any salary, is entitled to the premium-pay provisions. Then check
the [full section-by-section guide](/en/employment/employment-act-1955-guide) for what applies to
everyone regardless.

## Sources

- Employment Act 1955 (Act 265), updated text as at 1 January 2023 — First Schedule — https://jtksm.mohr.gov.my/sites/default/files/2023-11/Akta%20Kerja%201955%20(Akta%20265)_0.pdf (Jabatan Tenaga Kerja Semenanjung Malaysia)

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