The minimum retirement age in Malaysia is governed by the Minimum Retirement Age Act 2012 (“MRAA 2012”). The MRAA 2012 sets out certain obligations and prohibitions that employers need to be aware of before retiring their employees.
What is the minimum retirement age in Malaysia?
Under Section 4 of the MRAA 2012, the minimum retirement age of an employee shall be upon the employee attaining the age of 60.
This is a minimum retirement age and not a fixed retirement age. As such, it is possible for employers to set a retirement age that is higher than 60.
Does the minimum retirement age apply to all employees?
No. The minimum retirement age does not apply to the following individuals:
- a person who is employed on a permanent, temporary or contractual basis and is paid emoluments by the Federal Government, the Government of any State, any statutory body or any local authorities;
- a person who works on a probationary term;
- an apprentice who is employed under an apprenticeship contract;
- a non-citizen employee (i.e foreign employees);
- a domestic servant;
- a person who is employed in any employment with average hours of work not exceeding seventy percent of the normal hours of work of a full-time employee (i.e part-timers);
- a student who is employed under any contract for a temporary term of employment but does not include an employee on study leave and an employee who studies on part-time basis;
- a person who is employed on a fixed term contract of service, inclusive of any extension, of not more than twenty four months; and
- a person who, before the date of coming into operation of the MRAA 2012, has retired at the age of fifty five years or above and subsequently is re-employed after he has retired.
What happens if an employer retires an employee before they reach the age of 60?
This is known as premature retirement. Premature retirement is prohibited by the MRAA 2012 and the employer may be liable to a fine not exceeding RM 10,000.00.
Can an employee voluntarily opt to resign before they reach the age of 60?
Yes. Voluntary retirement is not premature retirement. The MRAA 2012 provides that notwithstanding the minimum retirement age, an employee may retire upon attaining the age of optional retirement as agreed in the contract of service or collective agreement.
What happens if the employment contract or employment handbook sets a retirement age that is lower than 60?
Pursuant to Section 7 of MRAA 2012, any retirement age in an employment agreement which is less than the minimum retirement age provided under the MRAA 2012 shall be deemed to be void and substituted with the minimum retirement age provided under the MRAA 2012. It is not legally permissible for parties to agree to have a retirement age that is lower than 60, or for parties to contract out of the MRAA 2012.
What happens if the employment contract does not specify a retirement age?
The MRAA 2012 only fixes the retirement age at 60 in the event an employment contract contains a retirement age that is less than 60. In the event the contract is silent on the retirement age, the MRAA 2012 does not automatically imply or create a retirement age of 60 into the contract.
In such a situation, the employees are entitled to work up to the normal retirement age of employees in their category, which age was to be determined by the Court. The court will determine this based on the reasonable expectation of understanding of the employees at the relevant time, concerning the age at which they can reasonably expect to be compelled to retire. In undertaking this exercise, the Court will consider all relevant facts and circumstances relating to the employment relationship. For example, if there is evidence that the employer continues to employ employees who are older than 65, it may be construed that the normal retirement age for such employees is at least 65.
What remedies does an employee have if their employer doesn’t comply with the MRAA 2012?
An employee who has been prematurely retired by his employer has, within sixty days from the date of the retirement, the option to complain in writing to the Director General.
However, if an employee opts to make a complaint to the Director General for premature retirement under MRAA 2012, he is not allowed to file a representation of unfair dismissal under the Industrial Relations Act 1967 until his complaint to the Director General under the MRAA 2012 has been resolved. In the event the Director General dismisses the employee’s complaint, the employee is given a time period of 30 days after the dismissal of his complaint, to file a representation of unfair dismissal under the Industrial Relations Act 1967.
If an employee has already filed a representation of unfair dismissal under the Industrial Relations Act 1967, the Director General shall not conduct an inquiry on the complaint.
What are the powers of the Director General upon hearing a complaint of premature retirement?
Upon an inquiry, if the Director General is satisfied that the employee has been prematurely retired by his employer, the Director General may direct the employer
- to reinstate the employee in his former employment and to pay the employee any arrears of wages calculated from the date the employee has been prematurely retired to the date of the reinstatement; or
- to pay the employee a compensation in lieu of reinstatement, not exceeding the amount of total wages of the employee calculated from the date the employee has been prematurely retired to the date the employee attains the minimum retirement age.
If such direction is made, the employee will not be entitled to any further relief for unfair dismissal under the Industrial Relations Act 1967.
What happens if the employer ignores the Director General’s directions?
An employer who fails to comply with the direction of the Director General above commits an offence and shall, on conviction, be liable to a fine not exceeding RM 10,000.00.
If an employer has been convicted of an offence as above, the court before which the employer has been convicted may order said employer to pay to the employee the amount directed by the Director General to be paid. If thereafter the employer still fails to comply with such order, the Court may, upon application by the employee, issue a warrant to levy the employer’s property for the amount ordered to be paid.
Are the directions of the Director General appealable?
Yes. A person who is dissatisfied with the decision of the Director General may appeal to the High Court.
This article was written by Donovan Cheah. Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific 2017, 2018 and 2019, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.