Current Labour situation in Malaysia Malaysia - 2010

1. Current Labour situation in Malaysia Malaysia - 2010 Bruno Periera

2. “place of employment” means any place where work is carried on for an employer by an employee; • “employee” means any person or class of persons— • included in any category in the First Schedule to the extent specified therein; or (b) in respect of whom the Minister makes an order under subsection (3) or section 2A; EMPLOYMENT ACT 1955 Bruno Periera

3. EMPLOYMENT SENARIO Place of employment • Types ofEMPLOYERS • Types of WORKERS • Types ofCONTRACTS Bruno Periera

4. Types of EMPLOYERS • “employer” means any person who has entered into a contract of service to employ any other person as an employeeand includes the agent, manager or factor of such first mentioned person, and the word “employ”, with its grammatical variations and cognate expressions, shall be construed accordingly; EMPLOYMENT ACT 1955 Bruno Periera

5. “Principal” means any person who in the course of or for the purposes of his trade or business contracts with a contractorfor the execution by or under the contractor of the whole or any part of any work undertaken by the principal; • “Contractor” means any person who contracts with a principal to carry out the whole or any part of any work undertaken by the principal in the course of or for the purposes of the principal’s trade or business; EMPLOYMENT ACT 1955 Bruno Periera

6. “Sub-contractor” means any person who contracts with a contractorfor the execution by or under the sub-contractor of the whole or any part of any work undertaken by the contractor for his principal, and includes any person who contracts with a sub-contractor to carry out the whole or any part of any work undertaken by the subcontractorfor a contractor; • “Sub-contractor for labour” means any person who contracts with a contractor or sub-contractorto supply the labour required for the execution of the whole or any part of any work which a contractor or sub-contractor has contracted to carry out for a principal or contractor, as the case may be; EMPLOYMENT ACT 1955 Bruno Periera

7. LOCAL Workers seeking employment Local WORKERS Direct Application (orwalk-in) Job Malaysia MOHR JTK Private Employment Agency PRIVATE EMPLOYMENT AGENCY ACT 1981 20% commission of 1st Month’s wage charged on placement. Paid either by employer or the worker. PLACEMENT FACTORY (Principle Employer) Temporary (FIX TERM) contract PROBATION followed by PERMANENT Contract Bruno Periera

8. Migrant WORKERS MIGRANT Workers employment EMPLOYMENT (RESTRICTION) ACT 1968 Non-citizen shall not be employed unless there has been issued valid employment permit. Contract of Service/ Temporary (FIX TERM) contract FACTORY (Principle Employer) Bruno Periera

9. NOW….LOCAL Workers also follow the same flow! MIGRANT Workers employment Migrant WORKERS Contract of Service/ Contract for Service Temporary (FIX TERM) contract No Law to regulate? Outsourcing License No., Recruitment No. KHEDN. Labour Contractors (Outsource Company) Labour Contractors (Outsource Company) TODAY Labour Contractors (Outsource Company) FACTORY (Principle Employer) TOMORROW FACTORY (Principle Employer) FACTORY (Principle Employer) THE DAY AFTER Bruno Periera

10. Workers seeking employment in Malaysia Workers seeking employment Migrant WORKERS Local WORKERS Contract of Service/ Contract for Service Temporary (FIX TERM) contract “NEW” EMPLOYER RM $ wages Direct application Job Malaysia MOHR JTR Private Employment Agency Placement CONTRACTOR (Outsource Company) FACTORY (Principle Employer) RM $ wages FACTORY (Principle Employer) TODAY FACTORY (Principle Employer) TOMORROW PROBATION followed by PERMANENT Contract Temporary (FIX TERM) contract FACTORY (Principle Employer) THE DAY AFTER

11. Types of WORKERS Employed directly by Employer or Principal : • Permanent workers • Local contract workers (Fix-term) • Foreign contract workers (Fix-term) ------------------------------------------------------------------------------------------------------------------------------ Supplied by Labour Contractorsbut work for Principal employer PAID BY Labour Contractor: • Local contract workers (Fix-term) • Foreign contract workers (Fix-term) Bruno Periera

12. Types of CONTRACTS 1.Employment Contract is a CONTRACT OF SERVICE (Kontrak Perkhidmatan) 2.Service Contract is a CONTRACT FOR SERVICE (Kontrak untuk Perkhidmatan) (not an employment contract) Bruno Periera

13. Contract OF Service(Kontrak Perkhidmatan) • Any agreement between two parties – an employer and an employee, where by: • The employer agrees to employ another as an employee; and the employee • agrees to undertake certain duties under the direction and control of the employer. • agrees, in return for a specified wage or salary and benefits under a terms & conditions of employment from employer. Bruno Periera

14. Terms and Conditions of Employment • The employer cannot change the terms and conditions of employment unless employee agrees to it. • Any terms and conditions, in a contract of service, that is less favourable than the relevant provision under the Employment Act (1955) is illegal, null and void. • Provision in the Act will take precedence over a particular contractual term that is less favourable. Bruno Periera

15. An apprenticeship contract or agreement is also considered a contract of service • Agreement, whether oralor in writing and whether express or implied. Oral contract in writing? How? Bruno Periera

16. Employment Act in 1955 • With the introduction of the EA, the then British Administration effectively abolished the indenture labour, bonded labour and the “kanggani” system in Malaya, as it was known then. • The totality of the Employment Act 1955 established two very important principles of law. • They are: • Security of tenure– ensuring permanence of job and • Proprietary right to the job– where termination of worker, shall be with just cause and excuse & by due process. • These principles are trite law and are considered sacrosanct. • MUST be protected at all cost! Bruno Periera

17. Types ofContract OF Service(Kontrak Perkhidmatan) • Permanent Contract (permanent workers) Direct hire (Company workers) - local workers • Fixed Term Contract - (temporary orcontract workers) Direct hire   (Company workers) - Locals & Foreign workers Bruno Periera

18. contract FOR service(not an employment contract)(Kontrak untuk Perkhidmatan) • engaged as an independent contractor (such as a self-employed person or vendor) . • engaged for a fee to carry out an assignment, duty or a project for the company. • there is no employer- employee relationship, therefore, NOT covered by the Employment Act Bruno Periera

19. TERMS & CONDITIONS of work for CONTRACT workers • Hours of Work: 1 Shift – 12Hours • Wages: basic RM 400 – RM 450 • Overtime: fixed amount, does not follow rates for normal days, rest days & public holidays OR none. • Annual leave, Public holidays pay, Sick leave, Maternity leave - Not mandatory. • No payment for legally mandated breaks. • Pay cut for absent or late for work or on sick leave or on annual leave. • Toilet breaks monitored – 2x for 12 hour shift • Accommodation & Transport provided FoC. Bruno Periera

20. Types of contract FOR service(Kontrak untuk Perkhidmatan) • Fixed Term Contract - (temporary orcontract workers) workers hired by Outsourced Company to work in the principle company.  - Locals & Foreign workers Bruno Periera

21. There is no single conclusive test to distinguish a contract of employment from a contract for services.  Some of the factors to be considered in identifying a contract of employment include: i) Control • Who decides on the recruitment and dismissal of employees? • Who pays for the employees' wages and in what ways? • Who determines the production process, timing and method of production? • Who is responsible for the provision of work? • ii) Ownership of Factors of Production • Who provides the tools and equipment? • Who provides the working place and materials? • iii) Economic Considerations • Does he carry on business on his own account or carry on the business for the employer? • Does he involve in any prospect of profit or is he liable to any risk of loss? • How are his earnings calculated and profits derived? Bruno Periera

22. Essential Clauses of Contract of Service : • Commencement of employment; • Appointment – job title and job scope; • Hours of work; • Probation period, if any; • Remuneration; • Employee's benefits (e.g. sick leave, annual leave, maternity leave); • Termination of contract – notice period; and • Code of conduct (e.g. punctuality, no fighting at work). Bruno Periera

23. LAWS ON PROTECTION OF RIGHTS OF WORKERS STATUTE • Employment Act 1955 • Industrial Relations Act 1969 • Trade Unions Act 1959 • Workmen’s Compensation Act 1952 • Occupational Safety and Health Act 1994 • Social Security Act 1969 • Immigration Act 1959/63 Contract of Employment The contract of employment stipulates terms and conditions on duration, wages, work shift, days off, sick leave, medical fees, payment of levy, visa, medical and travel. Bruno Periera

24. Modus operandi in getting permit for foreign workers. • Companies advertise job vacancies in front of their factory gates. • Company’s own Human Resource officer – interviews and identify potential candidates. • Identified candidates - sent to sign a contract with an outsource company, usually without receiving a copy. • Is the contract a contract for service or contract of service? Bruno Periera

25. The “successful” candidate – • Handed over to company Human • Resource officer. • Provided with the company badge with a unique Number to denote “contract workers”. • One week orientation and work • process training. • Successful candidates sent to the Assembly line supervisor to start work ascontract labour. • Workers not aware of the type of contract! Bruno Periera

26. Not wanting to be exploited.. Locals QUIT…in PROTEST! (albeit SILENTLY !) Applying for PERMIT • Due to the high attrition of contract labour. company applies to the government agencies (MOHR & KDN) for permit to bring in foreign workers. The reasons often cited • local workers are not keen on menial jobs, • that they are pampered and like to “lepak”. • TREATEN to relocate operation to third country Bruno Periera

27. Sikap Pekerja Tempatan • Tidak berminat berkerja lebih masa dan syif • Terlalu memilih kerja • Minat ganjaran yang tidak setimpal dengan produktiviti • Tidak bersedia belajar kemahiran baru dan kerja pelbagai tugas • Sukar menerima sistem kerja baru • Mementingkan masa untuk riadah dan keluarga Bruno Periera

28. Facts not mentioned are: • that the wages and benefits are intentional made unattractive, • with unfair and archaic terms and conditions of service (Pre-Employment Act era). • The silent protest. Bruno Periera

29. Breakdown of types of Employment contract in an American Semiconductor Assembly Plant of semi-skilled workers and Production Operators in Dec 2007 Breakdown of types of Employment contract in an American Semiconductor Assembly Plant of semi-skilled workers and Production Operators in Dec 2007 Bruno Periera

30. Cost Comparison - Local vs Migrant worker/per month (RM) Bruno Periera

31. PURPOSE OF COMPANY • to make profit. • Corporate headquarters sets target – that labour cost should not exceed 6% of the manufacturing cost. • Hiring foreign workers will escalate cost of labour by 30%. Bruno Periera

32. Local Management to achieve the target – Wages & benefits are controlled : • to subsidise the 30% additional labour cost in hiring foreign labour. • maintain the 6% labour cost. • without affecting the company’s bottom line profit. Bruno Periera

33. Race to the Bottom…unabated Leading to current reality….. • wages & benefits of the local workers are depressed artificially. • type of employment contracts have deteriorated progressively replace local permanent contract with foreign contract labour. substitute with local contract labour • Standard of living deteriorates while cost of living escalates. Bruno Periera

34. Company achieves: • Low wage cost. • Disposable labour - hire & fire. • Flexi-labour – Multi-skilling/Multi-tasking. • Plug & play workers. (minimal training) • No union (No negotiation powers) • Subservient workforce. • Convert workers wages into profits. • Huge wages & bonus payout- Top Mgmt Perlumbaan menuju ke dasar ……. Bruno Periera

35. High contract labour % improvesNAV (Net Asset Value) of company. • by transferring labour cost to overhead / operation cost putting Company’s stock price looking good to shareholders. • Creative accounting. Bruno Periera

36. Q&ADiscussion Bruno Periera

37. Problem solving technique. INVESTIGATE (Past): • How did the problem start? • Who started the problem? • When did the problem start? • Why did the problem start? • Where did the problem start? ------------------------------------------------------------- PLAN OF ACTION (Future): • How to overcome the problem? • Who overcome the problem? • When to overcome the problem? • Why should we overcome the problem? • Where to begin the change? Bruno Periera

38. HOW IT ALL STARTED? It always starts small……. and grows ….. and grows……… finally accepted as NORMAL Bruno Periera

39. PEKERJA ASING (PA) LATAR BELAKANG 1992- Kerajaan meluluskan PA daripada ASEAN, Bangladesh, India dan Sri Lanka untuk sektor pembinaan dan perladangan. • 2000 - Diperluaskan kepada sektor perkilangan dan perkhidmatan (hotel dan restoran). • 2002 - Meliputi semua sector Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

40. OUTSOURCING(MEMBEKAL & MENGURUS) • 2005 – Mesyuarat Jawatankuasa Kabinet mengenai Pekerja Asing (JKK-PA) ke-33 Bil. 2/2005 pada 5 Julai 2005 telah BERSETUJU untuk menggaji PA melalui konsepOUTSOURCING. Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

41. Outsourcing concept: Outsourcing is a concept where the management and supply services are undertaken by companies selected by the government. The government shall select and supervise these companies who are reliable to be responsible to recruit, supervise and manage foreign workers and present the workers to customers who need them under the outsourcing concept. • Aim: The implementation of outsourcing aims to assist to overcome the problems of shortage of workers and small companies who do not have the resources to manage foreign workers full time will save cost. It will also help companies/management who needs large workforce from time to time especially to fulfill additional increase in contractual obligations, for peak seasonal collection of harvest and so on. • Management: The management of foreign workers shall be managed in an orderly and systematic manner. Accommodation, transportation, payment of wages of RM400, medical examination including insurance coverage shall be under the outsourcing company. Sumber:Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

42. 2006 – Terdapat jumlah 1,800,000PA Negara sumber utama: • Indonesia 1,174,000 (63%) • Nepal 214,000 (11%) • India 138,000 ( 7%) • Myanmar 109,000 ( 6%) • Vietnam 106,000 ( 6%) • Bangladesh 63,000 ( 3%) • Lain-lain 64,000 ( 4%) Bruno Periera

43. Pembahagian PA mengikut sektor • Pembuatan - 646,000 (35%) • Perladangan - 354,000 (19%) • Pembantu Rumah - 311,000 (17%) • Pembinaan - 268,000 (14%) • Perkhidmatan - 167,000 ( 9%) • Pertanian - 123,000 ( 7%) Jumlah PA = 1,800,000 (100%) Bruno Periera

44. IMPAK Pekeja Asing • Dari Segi Ekonomi: Kesan Positif: • Menyumbang RM 17b (5.1%) kepada KDNK • RM 8.3b (5.2%) kepada perbelanjaan persendirian • RM 1.2b levi kepada hasil kerajaan (2004) Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

45. Kesan Negatif: • Remit RM 5-7b setahun ke negara asal • Kos perkhidmatan kesihatan RM117j • Kemunculan semula penyakit tibi, malaria dan untut serta membawa penyakit baru seperti kala azar (Leishmaniasis). • Mengurangkan tekanan kepada majikan bagi memperkenalkan automasi dan mekanisasi • Mengurangkan tekanan ke atas kenaikan gaji Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

46. Dari Segi Sosial: • Kesatuan sekerja terancam • Mengekang kadar upah dan jejas peningkatan taraf hidup rakyat • Menjejaskan kerukunan sosial Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

47. Keselamatan Negara: • Peningkatan kes jenayah dari 1333 (1992) kepada 3113 (2002) – 133% • Kos menjaga PA di penjara dan pusat tahanan • Kos menghantar pulang PA Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

48. Demographics (Dept. of Statistics, 2006) • POPULATION 26.63m - Women 13.07m - Men 13.56m • EMPLOYMENT 10.9m - Private sector 5.2m - Public sector 1.1m - Informal sector 4.6m • Labour Participation rate: - Women 46% 4.0m - Men 86% 6.9m • UNEMPLOYMENT 3.5% Bruno Periera

49. Percentage of Foreign Workers against Private sector employees: 1.8m/5.2m = 34.6% Sumber: Laporan Pesidangan Meja Bulat Mengenai Penggajian PA Di M’sia - 5-Apr 2007 ISMK - KSM Bruno Periera

50. NOW it grows… to take over… employment from locals! Bruno Periera