Law on Retirement Age in Malaysia

The Minimum Retirement Age Act 2012 (MRA Act) came into effect on 01.07.2013, stating that the minimum retirement age of an employee shall be the age of 60 years old.

Applicability

The MRA Act applies to all employers and employees in the private sector throughout Malaysia. It is a statutory requirement, making it compulsory to be complied with.

Prior to the coming-into-force of the MRA Act, there was no prescribed age of retirement age under the law, with it being left to contract.

With the MRA Act now being in force, an employee could be retired at the age of 60 or above where there had not been any retirement age stipulated in the contract of employment, subject to such legitimate expectation to carry on working for as long as the employee wanted, if at all. 

However, do note that the MRA Act does not apply to:-

• government servants;
• apprentices or probationary employees;
• non-citizen employees;
• domestic servants;
• part-time employees (with average hours of work less than 70% of the normal hours of work of a full-time employee);
• students employed on a temporary basis;
• employees employed on a fixed term contract of service for not more that 24 months;
• employees employed on a fixed term contract of service with salary of RM20,000 and above, for more than 24 months but not more than 60 months, inclusive of any extension (inserted via Minimum Retirement Age (Amendment of Schedule) Order 2016 made on 23.09.2016); and
• any person who, before the date of coming into operation of this Act, has retired at the age of 55 years or above and subsequently is re-employed after the retirement period.

Non-compliance

Any employer who prematurely retires an employee before the employee attains the minimum retirement age at 60 years old commits an offence and shall, on conviction, be liable to a fine not exceeding RM10,000.

Exceptions and Exemptions

With the advent of the MRA Act, an employer shall not prematurely retire an employee before the employee attains the minimum retirement age unless:-

1. the employee was terminated for any reason other than age; and
2. the employee chose to retire upon attaining certain age of retirement as opted, and agreed in the contract of service or collective agreement. For all intents and purposes, such option of the employer and employee must be explicitly put into writing.

For issues where certain industries may not suitable for employees of old age, creating concerns where the retirement age of employees to be lower than 60 years old, Section 18 of the MRA Act allow applications to be made in order for the Ministry of Human Resource to evaluate, thus exempt, with or without conditions, any employer or class of employers from all or any of the provisions of this Act. The Ministry of Human Resources have since evaluated and considered applications from employers for exemption.

Nothing in the MRA Act prohibit employers to fix a retirement age for their employees which is higher than 60.

Complaint

An employee who has been prematurely retired by their employer may make a complaint to the Director General of Labour under the Ministry of Human Resource in writing within 60 days from the date of retirement.

If dissatisfied with the decision of the of Director General of Labour, the employee may appeal to the High Court within 14 days or make a representation under Section 20 of the Industrial Relations Act (“IRA”) for dismissal “without just cause or excuse” within 30 days of dismissal of the complaint.

Considering that the basic notion of the employment law is to guarantee the right to livelihood of the employee via employment and in the absence of retirement benefit guaranteed by the law, increasing minimum age of retirement is believed to be able to alleviate the issues of insufficient retirement savings due to unexpected rising in the cost of living in Malaysia recently.

About the author:

This article was written by Chia Swee Yik, Partner of this Firm, who provides advice on  employment law in Malaysia. 

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