Employment Act Retrenchment and Gig Worker Rights in Malaysia

The first decision is whether the work is governed by a contract of service under the Employment Act 1955 (Act 265) or a service agreement within the Gig Workers Act 2025 (Act 872). These routes have different definitions, remedies and forums, so choosing the wrong statutory route wastes time. Before filing anything, establish the legal character of the relationship and, for Act 872, check which provisions have commenced under the Gazette notification.

First establish whether Employment Act coverage applies

The Department of Labour Peninsular Malaysia (JTKSM) retrenchment FAQ states that termination compensation or benefits are claimable if the dismissed employee is covered under the Employment Act 1955 (Act 265) or a Collective Agreement. Being called an employee, contractor or gig worker in ordinary conversation does not itself answer that statutory question.

The official extracts cited here do not reproduce the Employment Act’s full definition of “employee” or an exhaustive list of covered and excluded occupations. They therefore do not support a reliable occupation-by-occupation conclusion, including whether a particular manual-labour role falls inside or outside the Act. Coverage must not be guessed from the job title.

The Gig Workers Act 2025 also draws a statutory boundary. Its definition of “service agreement” excludes a contract of service as defined under the Employment Act 1955, the Labour Ordinance of Sabah [Sabah Cap. 67], the Labour Ordinance of Sarawak [Sarawak Cap. 76] and the Occupational Safety and Health Act 1994 [Act 514]. It also excludes a contract of employment as defined under the Industrial Relations Act 1967 [Act 177]. Those exclusions should be checked before treating an arrangement as gig work.

When a dismissal is attributable to retrenchment

Section 12(3) of the Employment Act 1955 applies where the termination is attributable wholly or mainly to specified business reasons. The listed situations include:

the employer has ceased or intends to cease carrying on the business;
the employer has ceased or intends to cease carrying on the business in the place where the employee was contracted to work;
the business’s requirements for work of a particular kind have ceased, diminished or are expected to cease or diminish;
the employee refuses a transfer to another place of employment, unless the contract of service requires the employee to accept it; or
there is a change in the ownership of the business or part of it, regardless of whether it occurs through a sale, another disposition or operation of law.

A covered employee whose termination is wholly or mainly connected to one of these grounds is entitled to retrenchment notice. Merely describing a dismissal as “retrenchment” does not establish that section 12(3) applies; the reason for termination must fall within its listed grounds.

Retrenchment notice and payment in lieu

Under section 12(2) of the Employment Act 1955, notice is the same for employer and employee. A written contractual provision determines the notice period. If the contract contains no written provision, the minimum periods are:

four weeks where the employee has been employed for less than two years on the date notice is given;
six weeks where the employee has been employed for two years or more but less than five years; and
eight weeks where the employee has been employed for five years or more.

For a termination falling within section 12(3), those periods are a statutory floor. A contractual term cannot reduce the employee’s entitlement below the applicable four, six or eight weeks. Section 12(4) requires the notice to be written, permits it to be given at any time and includes the day on which notice is given in the notice period.

Section 13 of the Employment Act 1955 provides a separate route involving payment in lieu of notice. Either party may terminate without notice by paying the amount of wages that would have accrued during the notice period. If valid notice has already been given, either party may terminate without waiting for the notice to expire by paying an indemnity equal to the wages for the unexpired notice period.

Calculate termination benefits separately

The JTKSM official retrenchment FAQ gives the following termination-benefit scale:

10 days’ salary for each year of service if service is less than two years;
15 days’ salary for each year of service if service is at least two years but less than five years; and
20 days’ salary for each year of service if service is at least five years.

The FAQ expresses the calculation as:

12 Months/365 days’ salary × Length of Service (Number of Years of Service) × Eligibility (10/15/20 Days per Year).

The employee is entitled to receive the termination-benefit amount and its calculation method in writing. Under the JTKSM FAQ, termination benefits must be paid no later than 7 days from the termination date.

The same FAQ separately lists pay in lieu of notice, payment of any annual-leave balance and any salary balance as possible statutory payments following retrenchment. It does not provide a calculation method for those additional balances in the cited material, so they should not be folded into the termination-benefit formula without information from the employer or the relevant JTK office.

What the Gig Workers Act 2025 provides—and when

Section 1(2) of the Gig Workers Act 2025 (Act 872) states that the Act commences on a date appointed by the Minister through notification in the Gazette. The Minister may appoint different dates for different provisions. A BERNAMA report dated 31/12/2025 records the Ministry of Human Resources’ statement that all provisions could not yet be enforced at gazetting because an effective date had not been announced.

The statute therefore cannot be treated as operative merely because its text is available. For any given day, the relevant question is whether a Gazette notification has brought the provision into operation. The statute itself does not print a commencement date, and the cited ministry statement establishes only the position at gazetting—not the position on a later date.

The enacted framework includes several relevant institutions and protections:

A “gig worker” is described in the statutory extract as an individual who is a citizen or permanent resident of Malaysia.
A “contracting entity” may be an individual, an incorporated or registered body of persons, or a platform provider that enters into a service agreement with the gig worker.
A “dispute” includes a dispute between the gig worker and contracting entity concerning the service agreement’s terms and conditions, the gig worker’s rights, or other related matters under Act 872.
Section 24 establishes the Gig Workers Tribunal.
Section 25 provides for a President and Deputy President from the Judicial and Legal Service and not fewer than five other members.
Part VIII is headed Social Security Protection and refers to the Employees’ Social Security Act 1969 [Act 4] and the Self-Employment Social Security Scheme under the Social Security Act 2017 [Act 789].
Part IX is headed Occupational Safety and Health.

These are provisions of the enacted statute. Whether a particular right, remedy or Tribunal procedure is available on a particular day still depends on the applicable commencement notification.

If the employer does not pay

For an Employment Act or Collective Agreement case, the first steps are:

Confirm the coverage route. Check whether the employee was covered under the Employment Act 1955 or a Collective Agreement, as required by the JTKSM retrenchment FAQ.
Identify the calculation inputs. Record the termination date, years of service, applicable salary and the employer’s written termination-benefit calculation. The contract and notice are also relevant to checking the payment-in-lieu amount.
Check the payment date. Under the JTKSM FAQ, termination benefits were due no later than 7 days from the termination date.
Refer the matter to the nearest JTK office. The official FAQ expressly directs employees involved in retrenchment to the nearest JTK office for detailed information.

The cited FAQ does not prescribe a claim form, a mandatory document list, a filing deadline, a fee or a processing time. Those current requirements must be obtained from the relevant office or governing rules rather than assumed.

A worker covered by the Gig Workers Act 2025 should not treat the JTK retrenchment procedure as a substitute for the Gig Workers Tribunal. The Tribunal belongs to the separate statutory framework under Act 872 and can only be approached once the relevant provisions have commenced.

Frequently Asked Questions

Does a job title such as manual labourer settle Employment Act coverage?

No conclusion should be drawn from the title alone. The JTKSM FAQ makes coverage under the Employment Act 1955 or a Collective Agreement the threshold, while the cited official extracts do not enumerate the Act’s complete covered and excluded occupations. The actual employment relationship and applicable instrument must therefore be checked.

Can an employer reduce retrenchment notice to two weeks in the contract?

Not where section 12(3) of the Employment Act 1955 applies, because the statutory notice operates regardless of a contrary contractual term. Depending on the employee’s service on the date notice is given, the floor is four, six or eight weeks.

Does payment in lieu of notice replace the termination benefit?

The cited materials do not say that it does. Section 13 of the Employment Act 1955 concerns wages during the notice period, while the JTKSM FAQ separately lists termination benefits and requires their amount and calculation method to be given in writing.

Does every period without work constitute a lay-off?

Regulation 5(1) of the Employment Regulations (Termination and Lay-Off Benefits) Regulations 1980 provides that temporary lay-off or lay-off occurs when the employer provides no work or pays no wages for at least 12 normal working days within four consecutive weeks. The test concerns both duration and the stated working-day period.

Can the Gig Workers Tribunal be used immediately because the Gig Workers Act 2025 was gazetted?

No. Section 1(2) of Act 872 requires appointment of a commencement date through Gazette notification, and different dates may apply to different provisions. The ministry statement reported on 31/12/2025 confirms only that the Act was not enforceable at gazetting; later availability must be checked against the relevant notification.