TOPIC 6

PAYMENT SYSTEMS & WORKING HOURS

(Compensation & Benefits)

BY MISLIYANA MISNAN

Payment & working hours play a major role in attracting employees & retaining
good performers.

Thus, a remuneration or compensation package consists of several

elements ,usually a combination of basic pay ,incentives and benefits.

Benefits
Basic wages

Incentives
The Remuneration
Package

The goals of wage system are to :

1.

Attract employees to work in the organization

2.

Retain efficient employees

3.

Motivate employees to perform effectively

4.

Establish a simple system that easy to administer.

BY MISLIYANA MISNAN

Wage systems
Timerelated

Workers are paid by the

Piecerated

Workers are paid

according to the

day/week/month/or

number of units

even on an annual

produced in a given

basis.

time.

Suitable when there is

no direct relationship
between productivity
and the individuals
performance.

Workers are selfmotivated.

e.g. low salary +
commission.

BY MISLIYANA MISNAN

Time Related System

The time rate system is that system of wage payment in which the workers are paid
on the basis of time spent by them in the factory. Under this system, the workers
and employees are paid wages on the basis of the time they have worked rather
than the volume of output they have produced. Hence, according to this system,
wages are paid on hourly, weekly or monthly basis. Under time rate system, the
wages earned by a worker is determined by using the following formula.

Formula :
Wages Earned = Time spent(Attended) x Wage rate per hour/day/week/month

BY MISLIYANA MISNAN

Time Related System

Advantages
Time rate system is simple to understand and easy to calculate.
Time rate system is quite useful for organizations that use costly inputs
for quality outputs.
Time rate system is beneficial for average and below workers.
Time rate system assures regular income and creates the feeling of
economic security among the workers.
Time rate system does not discriminate the workers and is preferred by
trade unions

BY MISLIYANA MISNAN

Time Related System

Disadvantages
Time rate system does not help in increasing output and improving efficiency
as there is no correlation between effort and reward.
Time rate system is not justifiable between efficient and inefficient workers
and skilled and unskilled workers.
Time rate system pays for idle time, which increases the cost of production.
Time rate system encourages a go-slow tendency among workers during
working hours and encourages them to work overtime.
It is difficult to estimate exact labour cost in advance.
It requires strict supervision to get the required quantity of output.

BY MISLIYANA MISNAN

Piece-rated systems

The worker is paid strictly on the time which he

takes irrespective of the output. He is paid either
on a monthly, weekly or an hourly basis. In the
second piece rate system of pay, it is independent
from the bounds of time and is completely base d
on result produced.
Formula :
The total wages which are earned are calculated simply by finding the
product of the total number of outputs with the wage rate which has been
decided upon per unit produced.

BY MISLIYANA MISNAN

Piece-rated systems

Advantages

Increases the efficiency of all the

employees
It is very easy to calculate the dues of
the worker
Workers do not end up wasting any
time
They are encouraged to think of better
working methods
The number of products produced is
much higher

Disadvantages

Workers pay much more attention to

quantity and not quality.
Planning for the future becomes rather
tough
Finding and fixing on a reasonable
piece cost is a rather tough task
It puts immense pressure on all the
employees
Sometimes even more super vision is
required

The workers set deadlines for

themselves

BY MISLIYANA MISNAN

What Factors Determine

The preceding discussion focuses on the wage levels in
Pay?
a particular organization relative to other organization.
Within in a organization there are variations in wages
between different groups of workers and different
individuals in the same group.
What factor effects individual levels of pay? The factor
include the following:
1. Seniority
2. Increase in the cost of living
3. Performance
4. Degree of skill

BY MISLIYANA MISNAN

Seniority

To encourage workers to be loyal to the organization and to stay

with the same employer.

Pay structures may be organized so that the wage level rises with
the number of years of service the worker has.

The longer he stays with the company ,the more his pay increase
until he reaches a predetermined ceiling or maximum

Thus, workers are given annual increment which partly

compensates them for any increase in the cost of living but also
rewards long services

BY MISLIYANA MISNAN

10

Increase In The Cost Of Living

Employers will generally increase employees pay in line with any

increase in the cost of living.

The consumer price index, issued by the Department Of Statistics in a

Prime Minister's Department, the increase in the cost of basics goods
and can be used as a guideline to employers who wish to provide
employees with increments when the cost of living has risen.

For this reason, when the cost of livings rises rapidly, some employers
do not increase wages but they give their employees a cost of livings
allowances (COLA),sometimes called a subsistence allowance.

BY MISLIYANA MISNAN

11

Performance

An individuals wages are also affected by his

competence, efficiency or performance levels.

Workers who are identified as outstanding may

receive special merit increment or bonuses.

BY MISLIYANA MISNAN

12

Degree Of Skill

The biggest difference in individual wages is

caused by the universally held belief that
workers should be paid according to the skill
level required by their job.

The higher the skills needed, the more

worker will be paid.

BY MISLIYANA MISNAN

13

Legislation Relating To Payment Of Wages

The laws relevant to the payment wages are:
1.The

Employment Act

2.The

Sabah Labour Ordinance

3.The

Sarawak Labour Ordinance

4.The

National Wages Consultative Council Act.

These law give certain rights and protection to employees who are within their scope.

Protection of wages is a major concern of these law.

BY MISLIYANA MISNAN

14

Cont

The Employment Act lays down a number of requirements concerning the payment
wages. Similar sections are found in the Sabah & Sarawak Labour Ordinance.

Different labour law provide different definitions as to what items should be considered
wages.

Example are as follows:

1.

An employer can terminate an employees contract or service without notice providing

he pays the worker a sum equal to the amount of wages he would have received during
the notice period

2.

Maximum monthly deductions from wages must not exceed 50%.

3.

Maternity and overtime allowances ,work on rest day and public holiday are based on
the ordinary rate of pay (ORP).

4.

Retrenchment benefits are based on an employees length of service and his daily
wages

BY MISLIYANA MISNAN

15

The Employment Act 1955

1. The Definition of
"Employees"

7. Working hours

Overtime

Rest day

2.

Contract Of Service

Annual leave

3.

Payment of wages

Public Holidays

4.

Employment of Women

Sick Leave

5.

Maternity Protection

8. Complaints
9. Termination and Lay-off Benefits

6. Other benefits

BY MISLIYANA MISNAN

16

 The definition of employees:

The following types of employees are included:
(a) Any employee as long as his month wages is less than
RM2000.00 and
(b) Any employee employed in manual work including
artisan, apprentice, transport operator, supervisors or
overseers of manual workers, persons employed on
vessels and even domestic servants are classified as
employees even if their wages is more than RM2000.00
per month.

BY MISLIYANA MISNAN

17

 Contract of Services
contract of service means any agreement, whether oral or in writing and
whether express or implied, whereby one person agrees to employ
another as an employee and that the other agrees to serve his employer
as his employee and includes an apprenticeship contract
A contract of service must contain a provision for its termination. In the
absence of any agreement to the contrary, period of notice for termination
of contracts shall be as follows:
(a) 4 weeks notice if the employee employed for less than 2 years;
(b) 6 weeks notice if so employed for over 2 years but less than 5 years;
(c) 8 weeks notice if so employed for 5 years or more.

BY MISLIYANA MISNAN

18

 Payment of Wages
Every employer shall pay to each of his employees not later than the seventh
day. Payment on normal termination of contract shall be paid to such
employee on the same day on which such contract of service terminates.
Advances to employees shall not exceed the aggregate the amount of wages
which the employee earned in the preceding month, unless such advance is
made to the employee to enable him:
(a) to purchase a house or to build or improve a house;
(b) to enable him to purchase land;
(c ) to enable him to purchase livestock;
(d) to enable him to purchase a motorcar, a motorcycle or a bicycle;
(e) to enable him to purchase shares of the employers business offered for sale
by the employer;
BY MISLIYANA MISNAN

19

 Employment of woman
No employer shall require any female employee to work in any
industrial or agricultural undertaking between the hours of ten oclock in
the evening and five oclock in the morning nor commence work for the
day without having had a period of eleven consecutive hours free from
such work
The Director-General may, on application made to him in any particular
case, exempt in writing any female employee or class of female
employees from any restriction in this subsection, subject to any
conditions he may impose.
No female employee shall be employed in any underground working.

BY MISLIYANA MISNAN

20

 Maternity Protection
Confinement means parturition resulting after at least twenty-two
weeks of pregnancy in the issue of a child or children, whether alive or
dead,
Every female employee shall be entitled to maternity leave for a period
of not less than sixty consecutive days
A female employee shall be entitled to receive maternity allowance for
the eligible period from her employer if:
(i) she has been employed by the employer at any time in the four
months immediately before her confinement; and
(ii) she has been employed by the employer for a period of, or periods
amounting in the aggregate to, not less than ninety days during the
nine months immediately before her confinement.
BY MISLIYANA MISNAN

21

 Other Benefits
Working hours
An employee shall not be required under his contract of service to work:
(a) more than five consecutive hours without a period of leisure of not less
than thirty minutes duration;
(b) more than eight hours in one day;
(c ) in excess of a spread over period of ten hours in one day;
(d) more than forty-eight hours in one week
Overtime
For any overtime work carried out in excess of the normal hours of work,
the employee shall be paid at a rate not less than one and half times his
hourly rate of pay
No employer shall require or permit an employee to work overtime
exceeding such limit as may be prescribed by the Minister from time to
time by regulations made under this Act,

BY MISLIYANA MISNAN

22

Rest day

Every employee shall be allowed in each week a rest day of one whole day
Where an employee is allowed more than one rest day in a week (places working on
5-day week) the last of the rest days shall be the rest day:
A daily rated worker who works on a rest day, he shall be paid as follows:
(i) 1 day's wages if the work does not exceed half his normal hours of work; or
(ii) 2 days' wages if the work is more than half but does not exceed his normal
hours of work.
A monthly rated worker who works on a rest day, he shall be paid as follows:
(i) 1/2 day's wages if the work does not exceed half his normal hours of work,
or
(ii) 1 day's wages if the work is more than half but does not exceed his normal
hours of work.
For overtime work on a rest day, an employee shall be paid at a rate which is not
less than two times his hourly rate of pay.
BY MISLIYANA MISNAN

23

 Annual leave
An employee shall be entitled to paid annual leave of :
(a) 8 days for every 12 months of continuous service with the same employer if he has
been employed by that employer for a period of less than 2 years;
(b) 12 days for every twelve months of continuous service with the same employer if he
has been employed by that employer for a period of 2 years or more but less than 5
years; and
(c) 16 days for every twelve months of continuous service with the same employer if he
has been employed by that employer for a period of 5 years or more; and if he has not
completed 12 months of continuous service with the same employer during the year in
which his contract of service terminates, his entitlement to paid annual leave shall be
in direct proportion to the number of completed months of service
BY MISLIYANA MISNAN

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 Public Holidays
Every employee shall be entitled to paid holiday at his ordinary rate of pay on the following
days in any one calendar year:
(a) on ten of the gazetted public holidays, four of which shall be(i) the National Day;
(ii) the Birthday of the Yang di-Pertuan Agong;
(iii) the Birthday of the Ruler or the Yang di-Pertua Negeri of the State or the Federal Territory
Day; and
(iv) the Workers Day; and
(b) on any day declared as a public holiday under section 8 of the Holidays Act 1951;
If a public holidays falls on a rest day the working day following immediately the rest day shall
be a paid holiday in substitution.
Any employee who absents himself from work on the working day immediately preceding or
immediately succeeding a public holiday shall not be entitled to any holiday pay for such
holiday.
For any overtime work carried out by an employee on a paid public holiday, the employee shall
be paid at a rate which is not less than 3 times his hourly rate of pay.
BY MISLIYANA MISNAN

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 Sick Leave
An employee shall, after examination at the expense of the employer:
(a) by a registered medical practitioner duly appointed by the employer; or
(b) if no such medical practitioner is appointed or, if having regard to the
nature or circumstances of the illness, the services of the medical
practitioner so appointed are not obtainable within a reasonable time or
distance, by any other registered medical practitioner or by a medical
officer
If there is no hospitalisation, the number of days of sick leave shall be:
(i) 14 days in each calendar year if the employee has been employed for
less than 2 years;
(ii) 18 days in each calendar year if the employee has been employed for 2
years or more but less than 5 years;
(iii)22 days in each calendar year if the employee has been employed for 5
years or more; or

BY MISLIYANA MISNAN

26

 Sick Leave
if there is hospitalisation:
(i) 60 days in each calendar year if hospitalisation is necessary, as
may be certified by such registered medical practitioner or medical
officer:
An employee who absents himself on sick leave:
(i) (a) which is not certified by a registered medical practitioner or a
medical officer or a dental surgeon; or
(ii)(b) which is certified by such registered medical practitioner or
medical officer or dental surgeon, but without informing or
attempting to inform his employer of such sick leave within fortyeight hours
BY MISLIYANA MISNAN

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The Director-General may inquire into and decide any dispute between an employee and
his employer in respect of wages or any other payments in cash due to such employee

Complaints

under any term of the contract of service or provision under the Employment Act.

However, the Director-General shall not inquire into, hear, decide or make any order in

respect of any claim, dispute that is:

(a)
pending in any inquiry or proceedings under that the Industrial Relations Act;
(b) has been decided upon by the Minister under section 20(3) of that Act; or
(c ) has been referred to, or is pending in any proceedings before, the Industrial
Court.

The power of the Director-General under section 69(1)(a) also extends to employees
whose wages per month exceed 2000.00 ringgit but does not exceed 5000.00 ringgit.

BY MISLIYANA MISNAN

28

Termination and Lay-off

Benefits

In an employee whose contract of service is terminated or he is laid off by his

employer he is entitled to the payment by employers of:

(a) termination benefits;

(b) lay-off benefits;

However an employee shall not be entitled to termination benefits payment under the
following circumstances -

(a) upon the employee attaining the age of retirement if the contract of service contains
a stipulation in that behalf; or
(b) dismissed by the employer, on the grounds of misconduct, or
(c) resigns voluntarily by the employee.

BY MISLIYANA MISNAN

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The
Sabah
Labour
Ordinance
1950

All provisions in this Ordinance are similar

to the Employment Act 1955, except that
the definition of employee" covered under
this ordinance based on this wages
regardless of nature of work i.e, any
employee" earning RM2500 and below.

BY MISLIYANA MISNAN

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The Sarawak Labour Ordinance 1952

All provisions in this Ordinance are similar to the

Employment Act 1955, except that the definition
of employee" covered under this ordinance based
on this wages regardless of nature of work i.e,
any employee" earning RM2500 and below.

Sources: http://www.nhrc.com.my/
BY MISLIYANA MISNAN

31

The National Wages Consultative Council Act.

WHEREAS the National Wages Consultative Council ("Council")

established under section 3 of the National Wages Consultative Council
2011 (Act 732) in exercising the powers provided under section 4(2) of Act
732, hereby decided that apart from the matters contained in in the
Minimum Wages Order 2012 [P.U. (A) 214] ("Order"), the method of
implementing the Order are as follows:

1.

Daily minimum wage of employees

2.

Minimum wages for employees who are paid by piecerated,tonnage, trip or

commissions

3.

method of restructuring of wages

BY MISLIYANA MISNAN

32

Working Hours,the Employment Act,and the

Sabah and Sarawak Labour Ordinance
Maximum working hours shall be required under his contract to work :
1. More than 8 hours per day, or
2. More than 48 hours per week ,or
3. More than hours per day when a spread-over is involved, and
4. More than 5 consecutive hours without a 30-minute break

REST DAYS
At least one rest day per week.

PUBLIC HOLIDAYS
Workers must be granted at least 11
public holidays a year.
Of the 16 public holidays gazzetted by
the government, 5 must be given to all
workers.
National Day
Malaysia Day
Agongs Birthday
Sultans / governors birthday
Labour Day

BY MISLIYANA MISNAN

33

Working Overtime

What is overtime?

The Employment Act states that no worker can be required by his

employer to work more than 8 hours per day, or 48 hours per week.

If this happens OT

Reasons why employers conduct OT

1. A temporary shortage of workers

2. A temporary increase in workload
3. Low productivity of workers
4. Difficulty in recruiting additional workers.

BY MISLIYANA MISNAN

34

How to calculate OT rates?

1.

OT on an ordinary working day = 1.5 times the normal

hourly rate

2.

OT on a rest day = 2 times the normal hourly rate

3.

OT on a public holiday = 3 time the normal hourly rate.

Notes:
OT should be strictly controlled & only permitted when absolutely
necessary.
Excessive OT increases the cost of doing business.

BY MISLIYANA MISNAN

35

Problems of OT?
1. Increased Health Problems
A considerable body of scientific work has explored the health problems
associated with working excessive overtime. Some health problems that have
been linked to long working hours include:
Lower-back injury in jobs with a lot of manual lifting
Higher blood pressure among white-collar workers
Increased mental health issues
Increase in total and lost workday injury rates
Lower birth weight or gestational age in women
Heavy alcohol consumption among men
Higher suicide rates
BY MISLIYANA MISNAN

36

2. Increased Safety Risk

Long work hours have been linked to increased safety risk in several studies
Safety and performance at nuclear plants
Impaired performance and lowered attention
An increase in errors in medical facilities
A threefold increase in accident rates after 16 hours of work
3. Decreased Productivity
Studies and reports suggest that productivity can suffer with increased overtime
hours. In white-collar jobs, performance decreases by as much as 25% when 60
or more hours are worked in a week. 1Any job not governed by a continuous
process can be affected by decreased productivity, and even process-driven work
can suffer if reject rates and customer dissatisfaction increase due to diminished
quality and performance linked to long hours.

BY MISLIYANA MISNAN

37

Steps to reduce Overtime Work

BY MISLIYANA MISNAN

38

Alternative working hours

Flexitime
-also known as flexi-time, flex time, flex scheduling or the implementation of a flexi
system, is where an organisation offers its employees the opportunity of availing
of a flexible working hours arrangement.
A flexitime system is designed to offer employees more flexibility in the workplace by
giving them the flexibility to start and finish work at times that suit their transport
arrangements, family responsibilities
Job-sharing
-job-sharing requires a high of level of trust communication and teamwork between
the employees who share the job.
Part time
- Can be either temporary or permanent ,but must working less than the normal
working hours.
Tele-working
-in an increasing number of jobs it has been recognized that employees do not have
to travel to the employers premises to do their works.

BY MISLIYANA MISNAN

39

Summary:
Wage and payment system are made up of combination of basic
pay, incentives and benefits
A wage system must be designed so as to attract and retain
employees, motivate them to perform well and be simple to
administer.
Wages systems may be time-related or piece-rated.
A number of factors affect the levels of pay provided to employees
including legislation, union the employers selection policy,
employment conditions and company profitability.
An employer cannot reduce an employee wages without his or her
consent
BY MISLIYANA MISNAN

40