Private employment agencies (informally, but commonly referred to here as “headhunters” or “recruitment agencies”) are regulated by the Private Employment Agencies Act 1981 (“Act”).
The Private Employment Agencies (Amendment) Act 2017 (“Amendments”) came into force on 1 February 2018 and has introduced many new changes and provisions, with the aims of better regulating the activities of private employment agencies and protecting job seekers from being exploited by such agencies.
Here are some notable changes:
- Under the Amendments, a private employment agency must now be a company incorporated under the Companies Act 2016, with a minimum paid up capital (depending on the category of license), and whereby 51% of the total shares in the company must be held by Malaysian citizens. Previously, private employment agencies can be run by an individual or in the form of a partnership.
- Private employment agencies must now have the words “Agensi Pekerjaan” (Translation: “Employment Agency”) preceding the name of their company.
- Private employment agencies operating in Malaysia must have a license under the Act (“License”) before they can carry out any recruiting activity in Malaysia, and the penalties for non-compliance has ben increased to a fine not exceeding RM200,000.00 or imprisonment for a term not exceeding 3 years or both.
- Licenses under the Act are now classified into 3 categories with different paid-up capital and money guarantee requirements:
|Category of Licence||Paid-up capital||Money Guarantee||Money Guarantee to establish a new branch|
|Licence A – Job placement for a job seeker within Malaysia||RM50,000||RM5,000||RM5,000|
|Licence B – Job placement for a job seeker within and outside Malaysia, and foreign domestic servant within Malaysia||RM100,000||RM100,000||RM30,000|
|Licence C – Job placement for a job seeker within and outside Malaysia, and non-citizen employee within Malaysia||RM250,000||RM250,000||RM100,000|
- Licenses if granted can be valid for 24 months, twice the duration of the old Act.
- Certain legally ambiguous conditions imposed on licence application in the old Act that have been removed by the Amendments, eg: the requirement of “good character” of the person in charge of the agency and his employees, and the requirement that the owner of the business undertakes that such business will be carried on in a “morally and irreproachable” manner. Instead, such conditions were replaced by conditions stipulating that the director of the company must be a Malaysian citizen, not an undischarged bankrupt, and has not been convicted of any offence under any written law in relation to anti-trafficking in persons and forced labour.
- While private employment agencies were previously required to prepare, maintain and keep proper records, the Amendments now expressly provide that such records will be kept for at least six years, and are obligated to submit those records to the Director General if he so requests. There is now a penalty imposed for non-compliance with this requirement (a fine not exceeding RM20,000.00).
- License fees have been increased. Unlike previously, those who wish to establish a private employment agency will be subject to additional processing fees such as an application fee (RM300.00).
- While most private employment agencies will impose fees on the employer (not the job seeker), the Act provides certain limits for fees that can be charged to the job seeker. These limits have been increased by the Amendments. The placement fees imposed on job seekers used to depend on whether the placement was local or overseas, whereby it would be a maximum of 20% of initial month’s pay for the former and 25% for the latter. After the Amendments, the difference in fees charged would depend on the nationality of the job seeker, whereby Malaysian job seekers may be charged up to a maximum of 25% of the basic wages for the first monthly wages, whereas non-citizen employees employed within Malaysia would be charged not more than one month of their basic wages for the first monthly wages.
What should an existing private employment agency do now?
To allow private employment agencies time to adapt to the new Amendments, there is a six month transition period which ended on 30 July 2018.
Any license granted under the Act continues to remain in full force until the license expires or is amended, suspended or revoked, upon which the requirements of the Amendments shall be in force.
Existing private employment agencies must therefore apply for a new license and fulfil all the conditions in the Amendments (Ref: Arahan Ketua Pengarah Tenaga Kerja Berhubung Tempoh Peralihan di bawah Seksyen 23 Akta Pekerjaan Swasta 1981 Bil 1/2018).
Some of these new conditions for licensing may have “knock on” effects for the company – for example, since private employment agency must now be a company that has the words “Agensi Pekerjaan” preceding their company name, the agency must take necessary steps to change its company name if it currently does not comply. Under the Companies Act 2016, the company has to resolve to change its name by special resolution, notify the Registrar of Companies accordingly and obtain a notice of registration of the new name. The “old” name of the Company must appear under the new name for a period of not less than 12 months from the date of the change, on all its business letters, notices, and other official publications, its websites, bills of exchange, invoices, cheques and other business correspondence.
This article was written by Donovan Cheah (Partner) with assistance from Denise Tia (Intern). Donovan leads the firm’s employment and dispute resolution practice, and has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific 2017 and 2018. He has written for publications such as the The Edge and the Star, as well as for the Malaysian-German Chamber of Commerce and Industry. Have a question? Please contact us.