HR Policies Every Small Business Should Have

Written by: Izz Murtada

Running a small business is busy work. You look after customers, sales, stock and bills, and HR policies often get pushed to later. But when a problem comes up, such as an argument, a worker who keeps coming in late, or a complaint nobody knows how to handle, a clear written policy makes things much easier for everyone.

A good HR policy is not about being strict. It tells your team what to expect, and it tells you how to act fairly. Here are five policies every small business in Malaysia should have, with what the Employment Act 1955 (Act 265) says about each one.

1. Leave and Attendance Policy

This policy explains how employees apply for leave, how to report sickness, what happens when someone is late, and how attendance is recorded.

The Act sets the minimum. For annual leave, employees get 8 days a year if they have worked for less than two years, 12 days after two years, and 16 days after five years. For sick leave, an employee who does not need to stay in hospital gets 14, 18 or 22 days a year, depending on how long they have worked. If the employee must stay in hospital, the limit is 60 days a year.

The Act also says an employee who stays away without permission and without a good reason for more than 10 percent of working days in a year can lose their annual leave for that year. Writing these rules down helps everyone understand them early.

2. Code of Conduct and Workplace Behaviour Policy

A code of conduct tells employees how to behave at work. Think of honesty, respect, good manners, keeping company information safe, and treating customers and colleagues well.

This matters because the Act allows an employer to act on misconduct. Section 14 says an employer can take action when an employee’s behaviour goes against their job conditions, but only after a proper inquiry. If your rules are not written down, it is hard to show what the employee did wrong.

3. Working Hours and Overtime Policy

Many small business owners get this one wrong, so it is worth spelling out. Under the Act, an employee should not be asked to work:

• more than 5 hours in a row without a break of at least 30 minutes
• more than 8 hours in one day
• more than 45 hours in one week

Every employee must also get one full rest day each week.

For overtime, the Act says the employee must be paid at least one and a half times their hourly rate. If an employee works on a rest day, there are separate pay rules, and the rate for hours beyond normal working hours is at least two times the hourly rate. Your policy should say who can approve overtime and how it is recorded and paid. Please note that some of these pay rules do not apply to employees earning more than RM4,000 a month, unless they do manual work. Check the Act or ask an expert if you are not sure.

4. Disciplinary and Grievance Policy

This policy has two sides. The first is how you handle an employee who breaks the rules. The second is how an employee can raise a complaint.

On discipline, the Act is clear that the employer must hold a due inquiry first. After that, the employer can choose a fair action, such as a warning, a downgrade, suspension without pay, or dismissal. Suspension without pay cannot be more than two weeks. While the inquiry is going on, the employer can suspend the employee for up to two weeks but must pay at least half of the wages. If the inquiry finds no wrongdoing, the full wages must be returned.

On the grievance side, give your team a simple way to speak up, such as telling their manager or writing to HR. Employees can also bring certain complaints to the Director General of Labour, so it is better to settle problems fairly inside the company first.

5. Anti-Discrimination and Harassment Policy

Every workplace should feel safe and respectful for people of all races, religions, genders and ages. The Act takes this seriously.

Section 69F lets the Director General of Labour look into discrimination complaints and make an order. An employer who does not follow the order can face a fine of up to RM50,000.

On sexual harassment, the Act defines it as unwanted behaviour of a sexual nature that is offensive or humiliating, whether spoken, written, shown, gestured or physical. When an employee makes a complaint, the employer must hold an inquiry. If the employer refuses, the employer must tell the employee in writing, with reasons, within 30 days. If harassment is proven, the employer must take disciplinary action. The Act also says an employer must put up a notice about sexual harassment at the workplace where everyone can see it.

Final Thoughts

You do not need a thick rulebook. Start with these five policies, write them in simple words, and make sure every employee gets a copy. Review them once a year, because laws and workplaces change.

If you are not sure where to begin, Kita Strategies is here to help. We are an HR company that works with small businesses in Malaysia, and we can help you write clear HR policies that follow the Employment Act and suit the way your business runs. Feel free to reach out for a friendly chat anytime.