We use cookies to personalise the website and offer you the greatest added value. They are, among other purposes, used to analyse visitor usage in order to improve the website for you. By using this website, you agree to their use. Further information can be found in our data privacy statement.



Covid-19 and the current situation in Malaysia

PrintMailRate-it

last updated on 18 March 2020 | reading time approx. 6 minutes

 

The Covid-19 outbreak poses for companies active in Malaysia not just an operational challenge, but also raises questions in the legal, regulatory and tax context. This article will provide a high-level overview of the questions companies active in Malaysia may face.

 

 

Restriction of movement

On 16 March 2020, the Malaysian Prime Minister announced that the country will undergo a two weeks period of restrictive movement effective from 18 March 2020 to 31 March 2020 under the Prevention and Control of Infectious Diseases Act 1988 and the Police Act 1967. The period of restrictive movement has now been extended to 14 April 2020. The Prevention and Control of Infectious Diseases (Measures Within the Infected Local Areas) Regulations 2020 gazetted on 18 March 2020 (Order) include the following:
 

  1. Prohibition of the movement of persons and mass gatherings which includes religious, sports, social and cultural events; 
  2. Prohibition of non-essential journeys with interstate travel being subject to a permit issued by police authorities; 
  3. All business premises except supermarkets, public markets, sundry and convenience shops must close;
  4. All schools and educational institutions at all levels in the private and government sectors are to be closed. This includes nurseries, elementary schools, secondary schools, pre-university institutions, higher education institutions and skill training centres;
  5. Malaysians are prevented from going overseas, i.e. leaving the country. Those returning to Malaysia must undergo a medical examination and self-quarantine for 14 days;
  6. All tourist and foreign visitors are barred from entering Malaysia;
  7. All non-essential public and private premises are to be closed. Essential public and private services as defined in the order are allowed to remain open;
  8. Public transport only to operate during rush hours; no taxi services at night.
     

Please note that currently there is no general exemptions for factories and other manufacturing operations. Manufacturing companies can contact the Ministry for International Trade and Industry in order to seek an exemption from the order.

  

Employment

The Ministry of Human Resources (MHR) has issued a guideline titled “Guidelines on Handling Issues Relating to Contagious Outbreaks Including Novel Coronavirus” (MHR Guidelines). Although the MHR Guideline does not prescribe any statutory obligations, employers are encouraged to adhere to the same by the government.
 

Paid sick leave

For employees who have been declared unfit to work by a medical practitioner, the employer should provide paid sick or hospitalisation leave to that employee as specified in the respective Employment Contract or the Employment Act 1955.
 

Full pay on quarantined period

Employers to provide full pay to employees who receive quarantine orders from a registered medical practitioner, upon return from countries with COVID-19 cases (if the employee was there following an official duty or instructions from his employer).
 

No prohibition from attending work if no quarantine order received

Employers should not prevent employees from attending work if no quarantine orders have been issued by any registered medical practitioner. However, an employer may instruct an unwell employee to not attend the workplace by providing paid sick leave to the employee.
 

Annual leave or unpaid leave

Employers should not instruct employees to utilise annual leave entitlement or take unpaid leave during the quarantine period if a quarantine order has been issued. From the legal standpoint, an employer ought to bear in mind that he may not unilaterally place employees under unpaid leave solely based on the assumption that the employee is suspected to have contracted Covid-19. Leave on such basis should be treated as paid medical leave.
 

Closure of company premises due to the Order

Where possible, employers should permit and encourage working from home. Employees working from home should not have their annual leave entitlement deducted or salary reduced. However, the nature of the business of many employers compelled to close their premises or facilities will not permit for employees to work from home. In these cases, the MHR Guidelines provide that salaries have to be paid in full in accordance with the employment contract or the Employment Act 1955. Certain allowances (e.g. travel allowance) may be cut. Employees should not be placed on unpaid leave or asked to utilise their annual holiday.
 

Retrenchment

None of the above restricts the employer whose business is subject to a surplus of labour to terminate employees by following the retrenchment procedures. Employees may also be placed on temporary limited unpaid leave or their salaries reduced in order to avoid retrenchment. Appropriate procedures have to be followed. Employers and employees may always re-negotiate the terms of individual employment contracts to reduce salaries or place employees on temporary unpaid leave. Depending on the business of the employer, the participation of the trade unions may be required.
 

Health and Safety

Employers should also be cautious upon sending employees abroad for work to countries affected by Covid-19. An employer’s duty is to provide a safe system of work, and if sending employees to affected countries would expose them to health risks, employers will potentially be in breach of such a duty. All employers are obliged under Common law and the Occupational Safety and Healthy Act 1994 to provide a safe working environment. This includes the implementation of a Health and Safety Policy and practical measures depending on the industry requirements such as increased hygiene procedures.
 

Employers are required to update their health and safety procedures and to comply with any directives issued by the Ministry of Health. The following guidelines are to be complied with:

  • Conduct ongoing risk assessments;
  • Promote Covid-19 awareness and steps to prevent infection;
  • Limit, defer or cancel travel to areas affected by Covid-19;
  • Ensure that employees displaying flu-like symptoms do attend a medical professional;
  • Identify employees who visited high-risk areas or got in contact with an infected person in order to facilitate contact tracing by health authorities.

 

Contract Law

Commercial Common Law contracts (including contracts subject to Malaysian Law) frequently contain "force majeure" clauses to define what is to happen to contractual obligations if these cannot be fulfilled due to an “Act of God” or other circumstances not foreseeable by the parties. It depends entirely on the drafting of the specific clause, whether a pandemic such as Covid-19 will be covered or not. It should be noted that contracts related to finance and banking commonly do not contain such clauses, i.e. a company will still be under the duty to fulfil its obligations towards the bank.
 

Additionally, there may be the possibility of a contract being frustrated under Section 57 (2) of the Malaysian Contracts Act 1950. This applies to scenarios in which it became impossible for a party to a contract to fulfil its obligations without this party being able to prevent it, after the contract was signed. The party relying on this provision needs to prove that it is not simply more difficult to fulfil its obligations, but impossible. Whether a pandemic can make an obligation impossible to fulfil will depend on the specific facts of the case. The remedy for frustration is the contract to be considered void, and for each party to return the benefit already received under such contract.
 

These concepts do, generally speaking, also apply to employment contracts.

 

Personal data protection

While all employers are obliged to create and maintain a safe working environment for their employees, and therefore to protect the employees from Covid-19 infections in the work place, they also have to consider the rights of employees under the Personal Data Protection Act 2020 (PDPA). Personal data related to health conditions is defined by the PDPA as sensitive personal data. The disclosure of such data is only permitted with the consent of the employee and under some very limited circumstances. Therefore, care should be taken while disclosing Covid-19 infections to employees and/or third parties.

 

Telecommunication Law: Fake News

Spreading of so called “fake news” in connection with the Covid-19 outbreak on social media or through other channels may constitute a criminal offence under the Malaysian Penal Code and/or the Communications and Multimedia Act 1998. Examples of fake news include wrong and/or defamatory statements which lead to public order offences being committed.
 

Immigration: Entry restrictions

As of 18 March 2020, all Malaysian citizens are barred from leaving Malaysia, and all foreign tourists and visitors are barred from entering Malaysia. This includes foreign nationals holding long-term Malaysian visas or employment permits, unless they are employed in an essential service. Everyone entering Malaysia will be subject to a medical examination and will have to self-quarantine for 14 days. The restrictions will apply until 14 April 2020.
 

All foreign nationals (other than permanent residents and certain long-term visa holders) will be denied entry into Malaysia if during 14 days preceding their entry, they visited one of the following locations or countries:

  • Wuhan City, Hubei, Zhejiang or Jiangsu provinces of China
  • Republic of Korea
  • Italy
  • Iran
  • Hokkaido Island, Japan
     

Further, entry will be denied (all new visa and entry applications) to

  • Chinese nationals whose passport has been issued in Hubei, Zhejiang or Jiangsu provinces
  • Republic of Korea citizens
  • Italian citizens
  • Iranian citizens
     

These restrictions will apply until further notice.

Additional restrictions apply to East Malaysia (Sabah and Sarawak). All foreign nationals and Malaysians not resident in the relevant state will be denied entry if they travelled to China or South Korea within 14 days prior to entry. Long-term visa holders are required to self-quarantine at home for 14 days.

 

Tax

All Inland Revenue Board (“IRB”) offices nationwide will be closed throughout the Movement Control Order (“Order”) period, i.e. 18 March to 14 April 2020. However, the following services will continue to be available:

  • Online services throughout the ezHASiL platform
  • Hasil Care Line and HASiL Live Chat
  • Feedback form on the IRB website
  • Filing and payment of income tax through the ezHASiL platform
     

In addition, the filing of tax returns (both corporate and individual) as well as the submission of Form E (Return Form of Employer) falling within the period of March 2020 and June 2020, will be granted a grace period of two months. This means that companies with accounting periods ending 31 July 2019, 31 August 2019, 30 September 2019, 31 October 2019 and 30 November 2019 will be granted a two months extension of time to file their tax returns.

 

All Kumpulan Wang Simpanan Pekerja (“KWSP” or EPF) branches are closed around Malaysia, but online transactions may still be done as usual. Forms to be submitted by employees wishing to retain the 11 percent contribution rate (to avoid an automatic reduction to 7 percent, as introduced by the Stimulus Package in February 2020) may be submitted via E-Mail and do not require a signature. PERKESO, the body in charge of SOCSO and EIS, is still operational and will be servicing all related benefits under the essential services list, especially its benefit assistance to people during the period of the Control Order. All employers are still expected to pay the EPF on time, i.e. EPF relating to March 2020 payroll would need to be paid by 15 April 2020. Even if you are only able to process cheque payments, they have stated that the payments may be effected at registered bank agents. Please be sure to check whether the bank branch nearest to you is open to perform the payment.
 

Employee Retention Scheme (“ERP”)

This scheme is for employees receiving notice to take unpaid leaves due to the Covid-19 impact on the economy. To qualify for the ERP, the employees from a private company must first be registered and have been contributing to the Employment Insurance System (“EIS”). They further need to have received a notice of No-Pay-Leave for a minimum of 30 days. This is limited to employees with wages of RM 4,000 and below only. The ERP application for affected employees has to be submitted by the employer. Once the employer receives the funds, they will have to credit the amount to the employee’s bank account within 7 days of receiving the payment from PERKESO.

 

Companies

The Companies Commission of Malaysia (“SSM”) has temporarily ceased its service operation or submission at all SSM offices in Malaysia from 18 to 31 March 2020 due to the Order. This includes the submission of documents or applications via the SSM counter, online service, e-Complaint service, customer service call center and kiosk. SSM also issued a moratorium period of two (2) weeks from 1st April 2020 for all companies to comply with due dates of submissions. During the moratorium period, late lodgment fees shall be waived. Apart of that, from 1st April 2020 onwards companies are also allowed to apply for an extension of time to hold their Annual General Meeting for more than 6 months from its financial year end.
 

For companies reporting under the Malaysian Financial Reporting Standards (“MFRS”), the extent of Covid-19’s effect on loan and financing receivable still has to be recognised. It is advisable that all reporting entities shall consider all possible aspects with supportable information to forecast and measure the expected credit losses in the financial reports which, if the shock is estimated to be temporary, would only affect the 12-month expected credit losses. If the Company would require rescheduling or restructuring of receivables indicating a significant increase in credit risk, the Company would need to recognise loss allowances for lifetime expected credit losses.

Deutschland Weltweit Search Menu