The retirement age in Malaysia is governed by the Minimum Retirement Age Act 2012, which came into effect from 1st July 2013. According to the Act, ‘retirement’ is defined as the termination of a contract of service of an employee on the ground of age.
Here are several things you need to know about the retirement age in Malaysia based on the Minimum Retirement Age Act 2012 before making your decision of retiring.
Application of Minimum Retirement Age Act 2012
The Act does not apply to:
- 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
- A domestic servant
- A person who is employed in any employment with average hours of work not exceeding 70% of the normal hours of work of a full-time employee
- 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 24 months.
- A person who is employed on a fixed term contract of service, inclusive of any extension, of more than 24 months but not more than 60 months with basic wages of RM20,000 per month and above
- A person who, before the date of coming into operation of this Act, has retired at the age of 55 years or above and subsequently is reemployed after he has retired
Minimum Retirement Age
Based on Section 4(1) of the Minimum Retirement Age Act 2012, it is stated that ‘the minimum retirement age of an employee shall be upon the employee attaining the age of 60 years’.
Optional Retirement
An employee may choose to voluntarily retire after reaching the age of optional retirement stated in the employment contract or collective agreement.
Premature Retirement
Premature retirement is the termination of contract of service before the stated retirement age.
Based on Section 5(1) of the Minimum Retirement Age Act 2012, an employer is not allowed to prematurely retire an employee, before the employee reaches the minimum retirement age.
It will be an act of offence if an employer contravenes this subsection, and he/she may be liable to a fine of not more than RM10,000.00.
An employee who has been prematurely retired may:
- File a complaint (in writing) to the Director General (DG) of Labor; or
- File a representation of unfair dismissal under Section 20 of the Industrial Relations Act 1967.
Note: Only one action can be taken at a time. If the employee chooses to file a complaint to the DG of Labor, he/she shall not file a representation of unfair dismissal until the inquiry made by the DG is solved.
According to Section 8(5) of the Minimum Retirement Age Act 2012, if the DG is satisfied that the employee has been prematurely retired upon inquiry, he/she 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
- 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 the employer fails to comply with the direction given by the Director General, he/she, if convicted may be liable to a fine of not more than RM10,000.00, under Section 11(1).
However, if the complaint has been dismissed by the Director General, the complainant (employee) may appeal to the High Court or file a representation of unfair dismissal.
