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Scenarios

Situation 1
Roslan’s contract of service states that he is to retire upon attaining the age of 55 on 1 September 2013. With the Minimum Retirement Age Act 2012 coming into force, can Roslan continue to work until he reaches 60?

Yes, Roslan is entitled to work until he attains the age of 60 because the Minimum Retirement Age Act 2012 takes effect on 1 July 2013.

Situation 2
Syuhada works in a statutory body. Is she affected by the Minimum Retirement Age Act 2012?

No, Syuhada is an employee of a statutory body exempted from the application of the Minimum Retirement Age Act 2012, as provided by clause (a) of the Schedule under Act 753. This schedule provides that all employees working in Malaysia, notwithstanding the amount of salary they receive, except for the category of employees listed below:

  • person who is employed by the Federal Government, the Government of any State, any statutory body or any local authorities;
  • person who works under a probationary contract;
  • apprentice who is employed under an apprenticeship contract;
  • non‐citizen employee;
  • domestic servant;
  • part‐time employee;
  • student;
  • person who is employed on a fixed term contract of service of not more than twenty‐four months; and
  • person who is subsequently re‐employed after he has retired.
See Full List of Schedule Section 2 in Act 753. Click here to download.

Situation 3
Are employees now forced to retire at 60 as per the Act?

With the coming into force of Minimum Retirement Age Act 2012, an employee may only be made to retire at 60. However, an employee may choose to retire when he attains the said optional retirement age as agreed in the contract of service or collective agreement, without having to extend the retirement age to 60 as provided by the Act.

Situation 4
A company has stipulated that all employees shall retire at the age of 62. Does the company need to make amendments to comply with the retirement age of 60 as provided by the Act?

No. If a company has determined a higher age for retirement of its employees, it is allowed to continue to do so. However, if the retirement age in the existing contract is lower than the age of 60, then it shall be deemed void and substituted by the minimum retirement age of 60.

Situation 5
In compliance with the Act taking effect on 1 July 2013, do employers need to amend its existing retirement age to 60?

Any retirement age in a contract of service or collective agreement made before, or on after the date of coming into operation of this Act which is less than 60 years shall be deemed to be void and substituted by the minimum retirement age of 60. Any term in a contract of service or collective agreement relating to retirement age shall be void if it excludes or limits the operation of any provision of this Act.

Situation 6
The Government has set the minimum retirement age as 60 whereas the existing retirement age in many companies is 55. If a current employee opts into optional retirement, is the employer allowed to reduce the employee’s retirement benefits or gratuity?

While the law does not require employers to offer retirement benefits to its employees, it is improper that an offer in which the calculations have been made and agreed upon by both parties be retracted or renegotiated, with the intention to eliminate or reduce benefits offered.

Situation 7
If the optional retirement age agreed upon by both parties is 55, can the employee now choose to retire at the age of 55 to 59?

Yes, since optional retirement is dependent on the agreement between employer and employee.

Situation 8
An employee wishes to retire early, but the employer denies the employee and informs him that his retirement benefits agreed as per the contract will be revoked since the Government has provided for statutory minimum retirement age at 60. Can the employer do this?

Early retirement, just like retirement benefits, must be agreed upon by both employer and employee. A win win outcome for the good of both parties should be achieved through consultations. Rationally, it is improper for employers to retract an offer already extended to an employee made in a spirit of goodwill. However, an early retirement prior to the optional age is considered as ‘resignation’, and shall negate the employee’s entitlement to his retirement benefits.

Situation 9
Can the employer stipulate an optional retirement age only between 55 and 57?

The optional retirement age is to be agreed upon both by the employer and employee in the contract of service or collective agreement.

Situation 10
An existing retirement and benefit plan had been agreed upon for an employee who retires at 55. With the statutory retirement age at 60, can the employer deny benefits accruing to an employee who works until 60?

It is the sole discretion of an employer to offer retirement benefits and nothing in the law stipulates a particular plan regarding them. As good practise however, the renegotiation or restructure of the retirement plan should be agreed upon by the employee.

Situation 11
After retirement at 55, the employee is offered a contract of service. Is the employee bound by Act 753?

If the employee retired before 1 July 2013, he is not affected by Act 753, based on paragraph (1) of Section 2 under the Schedule.

Situation 12
Can employers come up with modifications to the employees’ existing jobs scopes in the company, when they are approaching 55, but continue to employ them on the same employment terms?

Such modifications do not constitute an offence, but a written consent should be obtained from the employee to avoid a claim that the employer was creating a situation of “constructive dismissal”.

Situation 13
What about contract workers employed on contract-based projects who must work until the project ends, e.g. 5 years?

The employee is encompassed within the application of the Act since the duration of the contract is more than 24 months. Nevertheless, the company concerned may seek an exemption for this type of employment through Section 18 of Act 753.

Situation 14
With the statutory retirement age of 60, will an employee who chooses to retire early still be eligible for tax exemption, since the current practise under Schedule 6 Section 127 paragraph 25 (c) Income Tax Act 1967 provides for exemption only if the retirement takes place “on reaching age 50 but before 55”?

Retirement between the ages of 55 to 60 is still eligible for tax exemption under paragraph 25(b) of Schedule 6. Explanatory Note Sums received by way of gratuity or benefit plan by an employee on retirement is fully exempted from tax if-

  • the Director General is satisfied that the retirement was due to ill-health; or
  • the retirement takes place on or after reaching the age of 55, or on reaching the compulsory age of retirement from an employment which has lasted ten years with the same employer or with companies in the same group; or
  • the retirement takes place on reaching the compulsory age of retirement pursuant to a contract of employment or collective agreement at the age of 50 but before 55 and that employment has lasted for ten years with the same employer or with companies in the same group.

Situation 15
What consequences await an employer who fails to comply with the Act and prematurely retire an employee before the employee attains the age of 60?

An employer who fails to comply with the Act commits an offence and shall, on conviction, be liable to a fine not exceeding ten thousand ringgit.

Situation 16
What action can an employee take if he has been prematurely retired by his employer before attaining the age of 60?

The employee affected may complain in writing to the Director General of the Department of Labour within sixty (60) days from the date of retirement. The same employee may also lodge a complaint to the Director General of the Industrial Relations Department and file a representation under Section 20 of the Industrial Relations Act 1967.

Situation 17
Who has responsibility for enforcement of this statutory provision (Act 753)?

The Department of Labour has responsibility for enforcement of the Act. An employer or employee who has a problem regarding minimum retirement age should contact a personnel from the Department of Labour at the nearest office to seek advice and help. The Department of Labour has offices nationwide. You can find out the telephone number and address of your nearest office on the website: jtksm.mohr.gov.my (for Peninsular Malaysia and Federal Territory of Labuan), or jtkswk.mohr.gov.my (for Sabah) or jtkswk.mohr.gov.my (for Sarawak).

Situation 18
How can I get more information on the implementation of minimum retirement age in Malaysia?

Apart from contacting personnel of Department of Labour directly, additional information is provided by the Guidelines on the Implementation of the Minimum Retirement Age (versions available in Bahasa Melayu or English) which may be accessed from the website www.mohr.gov.my. Anyone seeking further information may consult the Secretariat at this following address: Secretariat for the Implementation of the Minimum Retirement Age Ministry of Human Resources Level 5, Block D3, Complex D Federal Government Administrative Centre 62530 PUTRAJAYA Tel No: 03-8000 8000 Call Centre: 03-8871 1245 / 03-8871 1246 Fax No: 03-8889 2368

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