Malaysian Government Initiatives Impacting HR Policies

Human Resource (HR) policies in Malaysia have been significantly influenced by various government initiatives aimed at improving workforce productivity, employee welfare, and labor market adaptability. As Malaysia moves toward its Vision 2030 goals and embraces rapid digital transformation, government policies and programs are shaping HR strategies across industries. From labor laws to workforce upskilling, these initiatives are reshaping how businesses manage and develop their human capital.  

This article explores key Malaysian government initiatives and their impact on HR policies, covering areas such as employment laws, digital transformation, employee well-being, diversity, and upskilling programs. 

1. Employment Laws and Labor Rights Enhancement

Amendments to the Employment Act 1955

The Employment (Amendment) Act 2022, which came into effect in January 2023, introduced several changes that have significantly influenced HR policies. Some of the most impactful amendments include:  

• Flexible Work Arrangements (FWA): Employees now have the right to request flexible working arrangements, including remote work and flexible hours. This has prompted HR departments to develop policies that accommodate these requests while maintaining productivity.
• Increased Maternity Leave: The act increased maternity leave from 60 days to 98 days, aligning Malaysia more closely with international labor standards. Employers must now adjust their workforce planning and benefits policies to accommodate this change.
• Paternity Leave: For the first time, the law mandates 7 days of paid paternity leave for fathers in the private sector, leading companies to incorporate these benefits into their HR policies.
• Reduced Maximum Weekly Working Hours: The reduction from 48 hours to 45 hours per week aims to improve work-life balance, requiring HR teams to review shift schedules and working hour policies. These amendments reflect the government’s push for a more inclusive and employee-friendly work environment, compelling HR professionals to update internal policies accordingly.

Minimum Wage Increase: In 2025, the minimum wage will be increased from RM1,500 per month to RM1,700, a significant step aimed at improving workers’ livelihoods. This policy has affected HR budgeting, payroll structures, and hiring strategies, particularly for small and medium enterprises (SMEs). Companies now need to adjust salary scales, benefits, and workforce cost planning to comply with the regulation. 

2. Digital Transformation and HR Innovation

• HR Digitalisation Incentives: As part of Malaysia’s push towards Industrial Revolution 4.0 (IR 4.0) and MyDIGITAL initiatives, the government has introduced several incentives for businesses to adopt HR digitalisation, including:  
• Malaysia Digital Economy Corporation (MDEC) Grants: These grants support businesses in adopting Human Resource Information Systems (HRIS), automating payroll, and improving workforce analytics.  
• SME Digitalisation Grant: This initiative helps SMEs transition from manual HR processes to digital platforms, improving efficiency in recruitment, employee records, and performance management.  
• HR departments are now leveraging digital tools to enhance workforce management, compliance tracking, and employee engagement, aligning with the government’s vision for a tech-driven economy.

3. Workforce Upskilling and Talent Development

HRD Corp Initiatives: The Human Resource Development Corporation (HRD Corp) plays a crucial role in Malaysia’s talent development strategy. Employers registered under HRD Corp contribute to a mandatory training levy and can access training programs to upskill their employees.  

Key HRD Corp initiatives impacting HR policies include:  

• Penjana HRDF Reskilling Program: Provides subsidies for businesses to retrain employees, ensuring workforce adaptability in an evolving job market.  
• Digital Skills Training Programs: Aimed at equipping employees with essential AI, data analytics, and cybersecurity skills, aligning with Malaysia’s digital transformation agenda.  
• Skills Development Fund (SDF): Offers financial assistance for companies to upskill employees, encouraging businesses to incorporate continuous learning into HR policies. 

HR teams are increasingly integrating learning and development (L&D) strategies into their policies to ensure employees remain competitive in the job market.  

4. Employee Well-being and Work-Life Balance

• Employment Insurance System (EIS) by PERKESO

The EIS scheme, implemented by the Social Security Organization (PERKESO), provides financial assistance and career support to employees who lose their jobs. 

This has led HR departments to:  

• Develop outplacement support programs for employees facing retrenchment.  
• Implement career coaching and internal mobility policies to reduce layoffs.  

Employers are also encouraged to register their employees under EIS, reinforcing job security and workforce stability.  

• Mental Health and Workplace Wellness Initiatives

The Malaysian government has also introduced policies promoting mental health awareness in the workplace. Under the Occupational Safety and Health (OSH) Master Plan, companies are encouraged to: 

• Implement Employee Assistance Programs (EAPs) to provide psychological support.  
• Introduce stress management programs to enhance workplace wellness.  
• Create policies against workplace bullying and harassment to foster a healthier work environment.  

These initiatives have influenced HR teams to prioritize mental health policies, integrating wellness programs into their employee benefits offerings.  

5. Diversity, Equity, and Inclusion (DEI) Policie

• Women in Leadership and Gender Equality Initiatives
  The Malaysian government has been actively promoting gender equality in the workplace. Some initiatives influencing HR policies include:  
• 30% Women in Leadership Target: Public-listed companies are encouraged to ensure that at least 30% of board members are women, influencing HR policies on leadership development. 
• Equal Pay and Anti-Discrimination Laws: The Employment Act prohibits gender-based discrimination, requiring HR teams to review compensation structures and hiring practices.  
• Hiring Incentives for Persons with Disabilities (PwDs)

To promote workplace inclusivity, the government offers wage subsidies for companies hiring PwDs. HR teams are adapting recruitment strategies to create more inclusive workplaces, ensuring facilities and work environments cater to diverse employees.

6. Foreign Workforce Regulations

• Stricter Employment Pass and Foreign Worker Policies

Malaysia has tightened regulations on foreign worker employment to prioritize local talent. Key changes include:  

• Stricter quota systems for hiring foreign workers.  
• Higher levies on work permits to encourage local employment.  
• Mandatory upskilling programs for foreign workers to improve workforce competency.  

These policies require HR teams to rethink talent acquisition strategies, focusing more on local hiring and workforce development.  

Malaysian government initiatives have had a profound impact on HR policies, driving shifts in employment laws, digital transformation, workforce upskilling, and workplace well-being. Businesses must stay updated on these changes to ensure compliance and remain competitive in the evolving labor market.  

HR professionals play a crucial role in implementing policies that align with these governmental reforms, fostering a more inclusive, future-ready, and sustainable workforce in Malaysia. By embracing digitalization, prioritizing employee well-being, and enhancing workforce development, companies can navigate these changes effectively while contributing to Malaysia’s long-term economic goals.

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