Since 1 January 2023 the Employment Act 1955 covers every person in Peninsular Malaysia who has entered into a contract of service, with no wage threshold for coverage. Above RM4,000 a month, six provisions cease to apply: ss.60(3), 60A(3), 60C(2A), 60D(3), 60D(4) and 60J. The widely repeated rule that the Act only covers employees earning RM2,000 or less was superseded on that date.
- First Schedule paragraph 1 covers any person who has entered into a contract of service — no wage floor at all.
- The RM2,000 coverage rule still published by several HR sites is superseded and has been since 1 January 2023.
- RM4,000 disapplies only six provisions, all of them about premium pay or termination benefits.
- Commission, subsistence allowance and overtime pay are excluded when testing the RM4,000 threshold.
- Manual, vehicle-operating, supervisory, vessel and domestic employees stay covered irrespective of wages.
Who this applies to: Employers deciding whether an employee is entitled to overtime, rest-day pay or termination benefits.
On this page
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 That rule was superseded on 1 January 2023, when the Employment (Amendment) Act 2022 came into force.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:
- 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;
- operating or maintaining a mechanically propelled vehicle used to transport passengers or goods, for reward or commercially;
- supervising or overseeing other employees engaged in manual labour for the same employer, throughout the performance of their work;
- certain uncertificated work on a Malaysian-registered vessel;
- 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 for what applies to everyone regardless.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Confirm the RM4,000 First Schedule threshold has not been revised by any amendment later than Act A1651, against lom.agc.gov.my
Sources
- Employment Act 1955 (Act 265), updated text as at 1 January 2023 — First Schedule — Jabatan Tenaga Kerja Semenanjung Malaysia
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 20 Jul 2026 | Approved and published. | — |