Review Your Employment Contracts

Written by: Izz Murtada

Many business owners sign an employment contract once and never read it again. The template may have come from a friend, an old job or a quick download online. It goes into a drawer and stays there for years. Then one day a staff member resigns, or a disagreement starts, and the owner finds out the contract does not say what they thought it said.

This is a common problem. It is also easy to avoid.

When your contract says something the law does not accept

Under the Employment Act 1955, any term in a contract that is less favourable to the employee than what the Act gives is void. This is in Section 7. The Act’s rule takes its place, even if the employee signed the contract.

Here is a simple example. Say your contract tells staff to work ten hours a day. The Act says an employee should not be required to work more than eight hours in a day or 45 hours in a week, with some exceptions (Section 60A). Another example is annual leave. If your contract gives five days a year to someone who has worked with you for three years, the Act says the minimum is 12 days for staff with two to five years of service (Section 60E).

The employee may never complain. But if a dispute starts, your own contract can work against you. You may also be paying for a mistake that was written into the contract years ago.

When the contract is silent about how to end the job

Section 10 says a written contract must include a clause on how either side can end it. Many contracts skip this or copy a line without thinking about it.

Notice is where the trouble starts. The Act says the length of notice must be the same for the employer and the employee. If your contract does not state it, the Act sets a minimum: four weeks for less than two years of service, six weeks for two to five years, and eight weeks for five years or more. The notice must also be in writing (Section 12).

There is one more point that surprises many owners. If you end someone’s job because the business is closing, or the work they do is no longer needed, the notice cannot be shorter than those minimums, even if the contract says something else.

Imagine you believe the notice period is one week, but your staff member and a lawyer read it differently. That is a costly way to find out the clause was never clear.

When there is no contract, or only a verbal one

The Act accepts verbal agreements as contracts. So you may already have a contract without knowing it. But a fixed-term job of more than one month must be in writing (Section 10). Without a written contract, nobody can prove what was agreed about pay, hours, duties or leave.

The contract should also state the wage period, which cannot be longer than one month (Section 18). If it says nothing, the Act treats it as one month.

What this really costs your business

A weak contract rarely causes trouble on day one. It causes trouble later, when you are busy and a problem arrives.

You may spend days looking for papers and trying to remember what was promised. You may pay more than you planned. Your other staff may hear about the dispute and start to wonder if the company treats people fairly. For a small business, this takes time and focus away from the work that earns money.

Where Kita Strategies can help

At Kita Strategies, we often see contracts that were fine when the company had three staff but no longer fit a team of thirty. We read your contracts the way a regulator or a tribunal would, and we point out the parts that need attention. Then we help you rewrite them in plain language, so your staff and your managers can understand them too. Because we also work with payroll, we check that what the contract says is what actually gets paid.

Your next step

Pick one current contract and read it slowly. Look at the working hours, leave, notice period and wage period. If anything feels unclear or outdated, you have found the problem early, which is the best time to find it. If you would like a second pair of eyes, send us one contract and we will tell you where it needs attention.

A good contract protects both the employer and the employee. If you want your contracts to match how your business works today, Kita Strategies, an HR and payroll consulting firm in Malaysia, is happy to help you review them and make them clear for everyone.