Drafting employment contract
Rising Global Consultants
Drafting employment contracts
An employment contract, also known as a service contract, is an agreement agreed upon by the employer and the employee, and the terms and conditions of the contract must be clearly defined at all times.
The terms and conditions of the employment contract can typically be negotiated by the employer and employee, as long as both parties are aware that the employment terms are governed by labor laws
Contract effective date
A proper employment contract should include a clause specifying the date on which the employee will begin working with the employer. The date specified may vary depending on the circumstances, such as whether you are changing the terms for an existing employee and offering new terms, or if the employee is being transferred within the group, seconded to another company, or renewing a fixed-term employment contract
Full-time employment
If you require employees to fulfill their duties full-time during normal working hours and not engage in any activities conflicting with their current position or the company’s business interests, this should be stated in the employment contract. However, if you do not object to employees working for another employer simultaneously, this should be clarified, and the employee should be required to disclose this to ensure that your business is not adversely affected.
Salary
Salary is one of the key elements and must be clearly stated to ensure accurate handling of all statutory deductions and contributions. Ensure that the salary structure and related deductions are detailed in the contract to comply with legal requirements and avoid potential disputes later on.
Public holidays and temporary public holiday
Statutory Public Holidays: It is advisable to specify statutory public holidays in the contract to avoid confusion.
Temporary Public Holidays: For temporary public holidays, if these holidays affect business operations, employers can reserve the right to make flexible arrangements in the contract.
Termination Clause
Employment contracts typically include termination clauses, but it is important to note that these clauses must comply with Section 20 of the Industrial Relations Act 1967, which requires employers to provide "just cause or excuse" for termination. This means that any conditions for terminating employment must be legally substantiated.
Discipline and grievance rules and procedures
When drafting an employment contract, it's essential to make employees aware of and comply with the company's disciplinary and grievance rules and procedures. These rules and procedures should be clearly outlined in the contract to ensure employees are informed of their rights and responsibilities and understand how to handle any disciplinary issues or grievances.
Position and job description
Retain flexibility in the role to assign additional responsibilities to the employee, ultimately to meet the organization's business needs. Finally, consider assigning each employee a specific reporting supervisor to achieve effective delegation and management of the business.
Probation period
This outlines the company's standard working hours/days, rest periods or overtime pay (if applicable), and overtime hours.
Work location and mobility
Although the contract may specify an initial work location, it should clearly state that employees may be required to work at other locations. Ensure the contract includes a flexibility clause to accommodate changes in company business needs. This will ensure employees understand and accept potential changes in work locations.
Annual leave, sick leave, emergency leave, or maternity leave
It is advisable to establish separate policies to cover annual leave, sick leave, emergency leave, and maternity leave. This ensures clear handling of leave accumulation, the management of unused leave, as well as salary payments and other related benefits during leave periods. This approach helps balance company needs with employee rights
Force Majeure Clause
Although many employment contracts include a force majeure clause to address potential future situations, it is important to be aware of potential risks, including the possibility of employees making claims due to perceived unfairness or constructive dismissal.
For example, during the Movement Control Order (MCO) in Malaysia, if business operations are disrupted and employers are legally prohibited from providing work, and employees are prohibited from working due to health and safety reasons, the employer may retain the right to implement unpaid temporary layoffs or adjust employees' working hours based on the amount of wages paid. Such arrangements should be clearly stipulated to balance business needs with employee rights.
Personal Data Protection
Employee personal data protection during employment is governed by the **Personal Data Protection Act 2010** of Malaysia. This important regulation ensures that employees' personal information is handled legally and securely. Additionally, if there are any agreements or changes to terms during employment, they must be documented through change agreements. This is crucial to ensure that all changes are formally recorded in writing.
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