Code of Conduct for Industrial Harmony and

Areas for Co-operation and Agreed Industrial

Relations Practices - Document I - Malaysia
(Under Clause 7 of the Code of Conduct for Industrial Harmony)
Source: Ministry of Human Resources

Forword
o Code of Conduct for Industrial Harmony
o Areas for Co-operation and Agreed Industrial Relations Practices Document I
Responsibilities
At the level of the Establishment or Undertaking
At National or Industry Level
Employment Policy
Recruitment
Training
Payment System
Security of Employment
Redundancy and Retrenchment
Working Conditions
Collective Bargaining
Recognition of Trade Unions
Where Recognition Has Been Accorded
Negotiating Procedures
Collective Agreements
Procedure For Resolving Collective Dispute
Procedure For Resolving Individual Grievance
Procedure For Disciplinary Action
Communication and Consultation
Communication
Joint Consultation and Works Committee

FORWORD
CODE OF COUNDUCT FOR INDUSTRIAL HARMONY
AIM
1. To lay down principles and guidelines to employers and workers on the practice
of industrial relations for achieving greater industrial harmony.

COMMITMENT
2. The Malayan Council of Employers' Organisation as representatives of employers
generally and the Malaysian Trades Union Congress as representatives of workers
generally.
3. AFFIRMING their belief in the concept and principles as enshrined in the
RUKUNEGARA;
4. BEING CONSCIOUS of the responsibilities towards those whom they represent
as well as the society of which they are an integral part;
5. RECOGNISING that industrial peace is essential for a sound and stable economy,
especially at a time of stagflation, and that a sound and stable economy is of
paramount importance for achieving the objectives of the national development
plans which are committed to the task of creating a united, socially just,
economically equitable and progressive Malaysian nation;
6. HEREBY ENDORSE, with the collaboration and approval of the Ministry of
Labour and Manpower, this CODE OF CONDUCT FOR INDUSTRIAL
HARMONY and commend both employers and workers in Malaysia to observe
and comply with its Provisions, viz;
i. to refrain from taking unilateral action with regard to any industrial
dispute;
ii.

to resolve all differences, grievances and disputes strictly in accordance

with the grievance procedures of collective agreements, or, where there are
no agreements, by negotiation, conciliation and arbitration;

iii.

to ensure that at all times all matters in dispute are dealt with by the proper
machinery established for that purpose;

iv.

to promote constructive and positive cooperation at all levels in industry

and to abide faithfully by the spirit of agreements mutually entered into;

v.

to establish, where none exists, a procedure which will ensure a complete

and speedy investigation of grievances leading to a joint settlement;

vi.

to comply with the various steps in the procedure for disposal of

grievances and to avoid any arbitrary action which ignores these
procedures;

vii.

to refrain from resorting to coercion, intimidation, victimisation and to

avoid go-slow, sit-down and stay-in-strikes; and

viii.

to educate managements and workers of their obligations to each other.

7. HEREBY FURTHER ENDORSE AND COMMEND the observance and

compliance by both employers and workers, of such industrial relations practices
as may be agreed, from time to time, between the Malayan Council of Employers'

Organisation as representatives of employers generally and the Malaysian Trades

Union Congress as representatives of workers generally and accepted by the
Ministry of Labour and Manpower.
8. EMPLOYERS FURTHER AGREE not to support or encourage any unfair labour
practices such as:
a. interference with the affairs of a trade union and the rights of workers to
organise;
b. discrimination, restraint or coercion against any worker because of
legitimate trade union activities; and
c. abuse of authority in any form.
3. UNIONS FURTHER AGREE not to support or to encourage unfair labour
practices such as:
a. negligence of duty;
b. damage to property;
c. insubordination; and
d. interference with or disturbance to normal work.
Dated at Kuala Lumpur, this 9th day af February, 1975.
(SGD)

(SGD)

------------------------

------------------------

Tan Sri Senator Gan Teck Yeow

(SGD)

Dr P. P. Narayanan
(SGD)

------------------------

------------------------

Tan Sri Senator S. O. K. Ubaidulla

(SGD)

Encik T. Narendran
(SGD)

------------------------

------------------------

Encik J. F. Philips
(SGD)

Encik S. J. H. Zaidi
(SGD)

------------------------

------------------------

Encik W. Fernando

Encik Yahaya b. Mohd. Ali

(SGD)
-----------------------Puan John Gurusamy
(SGD)
-----------------------Encik Zainal b. Rampak

Malayan Council of Employers' Organisation

(SGD)

Malayan Trade Union Congress

-----------------------(DATUK LEE SAN CHOON, S.P.M.J., K.M.N)

Menteri Buruh dan Tenaga Rakyat,
Malaysia
AREAS FOR CO-OPERATION AND AGREED INDUSTRIAL RELATIONS
PRACTICES
(Under Clause 7 of the Code of Conduct for Industrial Harmony)
AREAS FOR CO-OPERATION AND AGREED INDUSTRIAL RELATIONS
PRACTICES
RESPONSIBILITIES
At the level of the Establishment or Undertaking:
1. As employers and workers and trade unions representing them are jointly and
severally responsible for good industrial relations, the first need is for both
managements and trade unions to accept, at the highest level, the same degree of
responsibility for industrial relations as for other functions within their respective
organisations. Good industrial relations need to be developed within the
framework of efficiency of the establishment or undertaking, and, as such, a major
objective of management must be to develop just and effective personnel and
industrial relations policies which engender the confidence of all employees,
subject to the purpose for which the establishment or undertaking was established
and its social obligation to the nation. Equally, trade unions should ensure that the
policies and practices which they adopt are not only fair in relation to the function

and purpose for which they have been formed but also take into consideration
national interests.
2. Good industrial relations depend upon good organisation of work. Management
should therefore take all reasonable steps to ensure that:
a. all management personnel understand their responsibilities and what is
required of them, and have the training and authority necessary to
discharge such duties and responsibilities efficiently;
b. duties and responsibilities for each group of employees are stated with
clarity and simplicity in the organisational structure;
c. individual employees or work-groups know what their objectives are and
are regularly kept informed of progress made towards achieving them;
d. where possible, work is organised in such manner so that the individual
employee has the chance to achieve a sense of job satisfaction.
3. Where a trade union has been recognised:
a. management should take the initiative in seeking to establish, jointly with
the trade union concerned, effective procedures for negotiation,
consultation and the settlement of grievances and disputes;
b. management and the trade union should take all reasonable steps to ensure
that both management's and union's personnel observe agreements reached
and use agreed procedures; and
c. management should not discourage employees from joining the recognised
union and from taking an active part in its legitimate activities.
4. The Supervisor is management's first "contact" man with the employees and
special attention should be given to his appointment and his needs on the job. The
employer should ensure that he:
a. is technically proficient and adequately trained and possesses the personal
qualities required to exercise supervision;
b. has charge of a work-group of a size that he can supervise effectively;
c. is an effective link in the interchange of information and views between
senior management and members of his work-group;
d. is briefed about innovations and changes before they occur so that he can
explain management's policies and intentions to his work-group.
At National or Industry Level:
5. Employers' association should, inter alia:

a. co-operate with the trade unions in establishing effective procedures at

industry or national level for the negotiation of terms and conditions of
employment and for the settlement of disputes;
b. encourage the establishment of effective procedures among member
organisations for the settlement of grievances and disputes at the level of
the establishment or undertaking;
c. take all reasonable steps to ensure that member organisations observe
agreements and agreed procedures;
d. collect, analyse and distribute information to its members concerning
industrial relations matters;
e. identify trends and new developments in industrial relations and help its
members to anticipate and keep abreast of change; and
f. provide an efficient and realistic advisory service to its members on all
matters of industrial relations.
6. A trade union can promote the interests of its members effectively only if it
accepts, that, in common with management, it has an interest in and a
responsibility for the success of the undertaking and for the national, economic
and social well-being of the country as a whole. This involves co-operation with
employers in promoting efficiency and good industrial relations.
7. To secure these aims, a trade union should:
a. co-operate with employers' association in establishing effective procedures
at industry level for the negotiation of terms and conditions of
employment and for the settlement of disputes that arise;
b. co-operate with individual management in establishing effective
procedures for negotiation, consultation, communication and the
settlement of grievances and disputes;
c. take all reasonable steps to ensure that their officials, and members
observe agreements and use agreed procedures; and
d. make full use of the established procedures for the settlement of disputes.
8. To ensure that its organisation is effective, a trade union should also:
a. have enough officials, full-time or otherwise, to maintain regular contacts
not only with union members but also with managements of
establishments or undertakings where the union has been recognised;
b. maintain a communications system which secures the interchange of
information and views between different levels in the union and ensures

that members are systematically and regularly kept informed, factually and
objectively, of the progress of negotiations for a collective agreement;
c. encourage its members to attend union meetings and to participate fully in
union activities by holding branch meetings at times and places convenient
to the majority; and, where there is a large enough membership, consider
forming the branch organisation on the establishment; and
d. establish effective procedures for the settlement of disputes among
members of the union.
9. The trade union should also ensure that all its officials:
a. clearly know and understand the nature and extent of their responsibilities
and authority;
b. are adequately trained to look after members' interests in a responsible and
efficient way;
c. wherever possible and practicable regular dialogue is held with officials of
employers' association and its members.
10. As the basic relationship between an employer and the individual employee is
defined in the individual contract of employment, it should be expressed in clear
and precise language. It is the employee's responsibility to satisfy himself that he
understands the terms of his contract and to abide by them.
11. The employer and the trade union concerned, if applicable, should ensure that
procedures for dealing with questions that arise on the individual contract of
employment are clearly laid down. But it is the responsibility of the employee
himself to:
a. familiarise himself with these procedures; and
b. make use of them when the need arises.
EMPLOYMENT POLICY
12. A sound employment policy is a prerequisite to good employer-employee
relations. It should also reflect Government's policy requirements as are
announced from time to time. Good planning and efficient use of manpower are
important both for the success of the establishment or undertaking and for the
security of those employed in it. The employer should, therefore, inter alia,
i. keep fluctuations in manpower requirements to a minimum by means of
advance planning;
ii. make changes, wherever necessary, with as little disruption as is
necessary; and
iii.
where practicable, maintain, in consultation with the employees or their
representatives or trade union, as appropriate, a scheme for transferring

employees from one job to another within the establishment or

undertaking so that unavoidable changes in manpower requirements can
be handled smoothly.
Recruitment
13. Recruitment and selection policy can help good industrial relations by ensuring
that workers are engaged for jobs suited to their abilities. The employer should,
therefore:
a. define the qualifications and experience needed for the vacant job;
b. ensure that selection is based on suitability for the job;
c. consider filling the vacancy by transfer or promotion before trying to
recruit from outside;
d. explain the terms and conditions of employment to applicants before they
are engaged; and
e. ensure that those who carry out recruitment and selection are competent to
do so and that the recruitment and selection methods are regularly checked
to be effective.
Training
14. Adequately trained employees are essential for the success of the undertaking.
Training appropriate to his work also helps the individual to develop his potential,
to increase the satisfaction he finds in his work and to improve his earning
capacity.
15. Newly recruited employees should be given initial instruction covering:
a. the organisation, its employment policy and welfare and social facilities
that are available; and
b. specific training in the job to supplement previous training and experience.
16. Younger persons entering employment for the first time should be given broader
basic instructions covering a general introduction to working life.
17. In appropriate cases, further training should he provided when there is a
significant change in the content of the job or in the level of the job being
performed.
Payment System
18. Although payment systems vary according to the nature and organisation of the
work, local conditions and other factors, the following principles should be
observed so as to ensure that the system of payment is soundly based and thereby
reduces the incidence of disputes arising there from:
a. payment systems should be as simple as possible;
b. differences in rates should be related to the requirements of the job which
should, wherever possible, be assessed by agreed or well established
methods;

c. piece-work rates, incentive bonuses, etc. should be determined by agreed

or well established methods; and
d. rates of payment should be jointly negotiated where a recognised trade
union exists.
Security of Employment
19. Insecurity of employment and fear of the consequences of redundancy and
retirement have a major influence on attitudes to work and good industrial
relations. Consistent with the efficiency and success of the undertaking, the
employer should provide greatest possible stability in terms of job tenure. The
employer should also, where practicable:
a. offer prospects for advancement and promotion within the undertaking
with opportunities for any necessary training; and
b. provide retirement, retrenchment and sick pay schemes to supplement
statutory provisions.
Redundancy and Retrenchment
20. In circumstances where redundancy is likely an employer should, in consultation
with his employees' representatives or their trade union, as appropriate, and in
consultation with the Ministry of Labour and Manpower, take positive steps to
avert minimise reductions of workforce by the adoption of appropriate measures
such as:
i. limitation on recruitment;
ii. restriction of overtime work;
iii.
restriction of work on weekly day of rest;
iv. reduction in number of shifts or days worked a week;
v. reduction in the number of hours of work; and
vi. re-training and/ or transfer to other department/work.
21. The ultimate responsibility for deciding on the size of the workforce must rest
with the employer, but, before any decision on reduction is taken there should be
consultation with the workers or their trade union representatives on the
reduction.
22.
a. If retrenchment becomes necessary, despite having taken appropriate
measures, the employer should take the following measures:
i.
ii.
iii.
iv.
v.

giving as early a warning, as practicable, to the workers concerned;

introducing schemes for voluntary retrenchment and retirement
and for payment of redundancy and retirement benefits;
retiring workers who are beyond their normal retiring age;
assisting in co-operation with the Ministry of Labour and
Manpower, the workers to find work outside the undertaking;
spreading termination of employment over a longer period;

vi.

ensuring that no such announcement is made before the workers

and their representatives or trade union have been informed.
b. The employer should select employees to be retrenched in accordance
with an objective criteria. Such criteria, which should have been worked
out in advance with the employees' representatives or trade union, as
appropriate, may include:
i. need for the efficient operation of the establishment or
undertaking;
ii. ability, experience, skill and occupational qualifications of
individual workers required by the establishment or undertaking
under (i);
iii.
consideration for length of service and status (non-citizens, casual,
temporary, permanent);
iv. age;
v. family situation; and
vi. such other criteria as may be formulated in the context of national
policies.
21. Employees who are retrenched should be given priority of engagement/reengagement, as far as is possible, by the employer when he engages workers.
22. The appropriate measures and objective criteria should comprise part of the
establishments or undertaking's employment policy.
Working Conditions
25. Good physical working conditions help to achieve good industrial relations. The
first need is for the employer to ensure that the standards laid down by law are
fully complied with. But this is not enough by itself, for most work-places could
be made safer, healthier and more pleasant to work in if more care were taken
about the working environment-like improving the cleanliness, tidiness and
general appearance of the work-place; like reducing strain and monotony involved
in the work; like encouraging workers and their representatives to co-operate in
improving working conditions and providing for consultation with workers or
their representatives on these matters. Workers or their trade union representatives
should co-operate with employers in making the best use of the arrangements for
consultation in this field.
COLLECTIVE BARGAINING
Recognition of Trade Unions
26. Claims for recognition should, as far as possible, be settled voluntarily between
the parties. Where there is doubt whether the union concerned is the proper union
under the law to represent the employees or about its representative position the
services of the Ministry of Labour and Manpower should be sought to resolve the
matter without delay.

27. Where a trade union has not secured recognition from the employer for
negotiating rights, the employer should nevertheless be prepared to consider
receiving representations from the union on behalf of its members about
grievances or other matters, which can be settled on an individual basis.
Where Recognition has been accorded
28. Where a trade union has secured recognition the employer and the union should
establish effective procedures for negotiation. To enhance the smooth and efficient
functioning of such procedures the employer should make available to the union,
where possible, reasonable facilities to enable the union to keep in touch with its
members and to represent them effectively.
29. Senior management personnel should also maintain regular contacts with officials
of the trade union. Similarly, the principal officials of the trade union should also
keep in touch with members of the senior management of the undertaking or
establishment. Contact should not be left until trouble occurs. Management should
ensure that there is a close rapport and a continuing dialogue with the trade union
and its officials.
Negotiating Procedures
30. Negotiation of collective agreement should be as simple as possible and, with this
in mind, the employer and the union should establish agreed procedures which
may be formal.
31. It is desirable that respective employers' associations and trade unions negotiate
certain matters at industry level, including:
a. those conditions of employment which can be effectively applied
throughout the industry uniformly;
b. general guidelines for the negotiation of matters which cannot be decided
satisfactorily at industry level; and
c. a procedure for settling disputes, either for the industry as a whole or as a
model for adoption at the level of the undertaking or establishment.
Collective Agreements
32. Collective agreements deal with matters of procedures and matters of substance,
and may cover both in a single document or deal with them separately. In either
case there should be provision for regular review for ensuring that the procedural
provisions have not become out of date.
33. The procedural provisions should set out the formal constitution of joint
negotiating bodies and should also cover:
a. the matters to be negotiated and the level at which bargaining should take
place;
b. the arrangements for negotiating substantive agreements on terms and
conditions of employment, including the period for which the agreements

are to run and the arrangements under which either party can terminate
and re-negotiate an agreement;
c. the procedures for settling collective disputes and individual grievances;
d. the procedures regarding redundancy and temporary lay-offs, discipline
and dismissal.
34. The substantive provisions should cover:
a. wages and salaries, overtime rates, bonuses where applicable, piece-work
and other systems of calculating earnings in relation to performance; and
b. hours of work; provisions for overtime work and shift working; holiday
entitlement and pay.
35. The agreements may also cover such matters as:
a. fringe benefits such as sick pay, pensions and guaranteed pay schemes;
b. work study and other techniques for determining levels of performance
and productivity and job grading such as method study, work
measurement and job evaluation;
c. the deduction by management of trade union subscriptions etc. from
employees' wages; and
d. the facilities for trade union activities in the establishment.
Procedure for Resolving Collective Dispute
36. A procedure for settling collective dispute should:
a. be in writing and agreed between the employer and the trade union
concerned;
b. define the appropriate levels for raising and settling different types of
issues; and
c. prescribe time limits within which issues should normally be settled or
else taken to the next stage of the procedure.
37. The procedure should incorporate the following:
a. workers' representatives should raise the issue in dispute with employer at
the level directly concerned;
b. Failing settlement it should be referred to a higher level within the
establishment;
c. if still unresolved the issue should, where appropriate, be referred to the
employers' association and the trade union concerned and dealt with in
accordance with the industry-wide dispute-procedure agreed between
them; and
d. if still unresolved, it should be referred to the Ministry of Labour and
Manpower for conciliation/ arbitration.
Procedure for Resolving Individual Grievance
38. Effective procedure should exist for a worker to seek redress for his grievance.
Such procedure shall be established in consultation with the worker's
representatives or trade union, as appropriate.

39. The aim of the procedure should be to settle the grievance as near as possible to
the point of origin and should, therefore, operate as follows:
a. the employee should first discuss the grievance with his immediate
superior, accompanied if he so wishes by his union representatives; and
b. if he fails to get satisfaction, he should make use of the agreed appeals
procedure.
40. The appeals procedure should:
a. be in writing;
b. be made known to each employee;
c. be as simple and rapid as possible, with prescribed time limits for each
stage:
d. set out a procedure for appeal at more than one level wherever practicable;
e. require a recording of the outcome of each stage of the procedure, for
reference to the next stage and where possible this should be in the form of
an agreed statement in writing; and
f. give the worker the right to be represented by his representative trade
union official.
Procedure for Disciplinary Action
41. An employer should ensure that a fair, effective and expeditious procedure exists
for dealing with disciplinary matters. Such procedure may be established in
consultation with the employees' representatives or trade union as appropriate.
The employer should define and make known to each employee the rules of work
and the disciplinary action which may follow if they are broken. Penalties should
be graduated according to the seriousness of the offence. An employee should not,
except in cases of gross misconduct, be dismissed for a first offence.
42. The disciplinary procedure should be in writing and be made known to each
employee. The proceedings should be conducted in accordance with the rules of
natural justice and should:
a. provide for the employee to be informed, in writing, of the misconduct;
b. specify who has the authority to take what forms of disciplinary action;
c. provide for full and speedy consideration by employer of all the relevant
facts;
d. give the worker the opportunity to state his case and the right to be
represented by his workers' representative or trade union official;
e. in the case of less serious offences, provide, in the first instance, for a
warning by the employee's immediate superior;
f. in the case of more serious offences, provide for a formal warning in
writing, setting out the circumstances and the disciplinary action to which
an employee will be liable if he commits a further offence and require a
copy of this record to be given to the employee and if he so wishes to his
employees' representative or trade union official; and
g. provide for a right of appeal against disciplinary action to a higher level of
management not previously involved.

COMMUNICATION AND CONSULTATION

Communication
43. Good employer-employee relations are dependent upon efficiency. Employees'
efficiency may be enhanced if:
a. they are kept informed on matters which concern them; and
b. their views are sought on existing practices and on proposed changes,
which would affect them.
44. The employer has an important role in this and, in particular, he should:
a. ensure that management personnel regard it as one of their principal duties
to explain to those responsible to them plans and intentions which will
affect them (It is of great importance that this chain of communication
should be effective down to each supervisor and through him to each
individual employee);
b. encourage management personnel to give employees a sense of personal
involvement by providing adequate opportunities for them to discuss
matters affecting their job and work environment; and
c. ensure that arrangements for consultation with workers or their
representatives are adequate and are fully used.
45. Management should ensure that each employee is given full information about his
rights and obligations. This should include information on:
a. his terms and conditions of employment;
b. agreements with trade unions which affect him;
c. what is required of him in his job and to whom he is directly responsible;
d. procedures for making suggestions or taking up grievances and to whom
he can go for help or advice on personnel problems;
e. opportunities for promotion and ar training which is necessary to achieve
it; and
f. safety rules.
46. The employer should regularly provide employees with as much information as
possible o matters affecting them. This should include information on:
a. the performance and prospects of tb undertaking;
b. organisational and management change which affect employees; and
c. organisational and management change which affect employees; and
47. Methods of communication and consultation should suit the particular
circumstances within th undertaking. The most important method is b word of
mouth through regular personal contac between managers and employees at all
levels. This could be supplemented by:
a. written information provided through notice board, house journals,
handbooks, etc;
b. training, particularly induction courses for newly recruited employees;
c. regular consultation between managers and other means established for
the purpose; and
d. meetings arranged for special purposes.

Joint Consultation and Works Committee

48. Consultation between employer and employees or their trade union
representatives at the floor level would be useful in all establishments or
undertakings, whatever their size.
49. The employer should take the initiative in setting up and maintaining regular
consultative arrangements best suited to the circumstances of the establishment in
co-operation with employees' representatives and the trade union concerned.
50. As far as is practicable every establishment or undertaking should have a
recognised machinery for consultation through the establishment of a works
committee comprising employer's and employees' representatives at floor-level.
The employer's and the employees' representatives or trade union should agree to:
a. a formal constitution which sets out the Committee's aims and functions,
its composition and that of sub-committees, if any, arrangements for the
election of representatives and rules of procedure;
b. enable the committee to discuss the widest possible range of subjects of
concern to employees, paying particular attention to matters closely
associated with the work situation;
c. ensure that all members of the committee have enough information to
enable them to participate effectively in committee business, and that the
committee is used as a medium for a genuine exchange of views and not
merely as a channel for passing information on decisions already taken;
and
d. make arrangements to keep all employees informed about the committee's
discussions.
Dated at Kuala Lumpur, this 9th day af February, 1975.
(SGD)

(SGD)

------------------------

------------------------

Tan Sri Senator Gan Teck Yeow

(SGD)

Dr P. P. Narayanan
(SGD)

------------------------

------------------------

Tan Sri Senator S. O. K. Ubaidulla

(SGD)

Encik T. Narendran
(SGD)

------------------------

------------------------

Encik J. F. Philips
(SGD)

Encik S. J. H. Zaidi
(SGD)

------------------------

------------------------

Encik W. Fernando

Encik Yahaya b. Mohd. Ali

(SGD)
-----------------------Puan John Gurusamy
(SGD)
-----------------------Encik Zainal b. Rampak

Malayan Council of Employers' Organisation

Malayan Trade Union Congress

(SGD)
-----------------------(DATUK LEE SAN CHOON, S.P.M.J., K.M.N)
Menteri Buruh dan Tenaga Rakyat,
Malaysia
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