The Story

When Kavitha joined her new job, she signed a thick employee handbook filled with “company policies.” At first, she did not pay much attention—she was eager to start and assumed policies were just routine rules.

But soon, issues began to surface.

When she applied for annual leave, HR told her: “Sorry, our company policy allows leave only after you complete one year of service.” Kavitha was surprised. She thought annual leave was her right after working continuously, but the HR officer insisted: “It’s company policy.”

Later, when she worked overtime, she submitted her claim. Her supervisor rejected it, saying: “Here, overtime is not paid because company policy says it’s part of the job.”

Frustrated, Kavitha began to ask herself: Are all these “policies” lawful? Or is the company hiding behind its rules to deny what the law actually guarantees?

The Law

In Malaysia, the primary reference for workers’ rights is the Employment Act 1955 (Act 265, as amended in 2022). Where “company policy” and the Act clash, the law is clear: the Act prevails.

1. Section 7 – Protection Against Less Favourable Terms

• Section 7 of the Employment Act provides that any contract of service, company policy, or agreement that offers terms less favourable than what the Act guarantees is void to that extent.
• In simple terms: company policy can give more than the law, but it cannot take away what the law guarantees.

2. Example: Annual Leave

• Under Section 60E, employees are entitled to minimum annual leave after 12 months of service:
  • 8 days for service between 1–2 years,
  • 12 days for service between 2–5 years,
  • 16 days for more than 5 years.
• A company policy saying “no annual leave until after one year of service” is illegal, because annual leave entitlement begins once the employee has completed the first 12 months.

3. Example: Overtime

• Under Section 60A, any work beyond 45 hours per week is overtime, payable at 1.5 times the hourly rate (2x on rest days, 3x on public holidays).
• A company policy saying “overtime is not paid” is invalid. Employers cannot deny statutory OT by citing internal rules.

4. Example: Sick Leave

• Under Section 60F, employees are entitled to sick leave certified by a registered medical practitioner.
• A company policy saying “only government hospital MCs are accepted” is unlawful. The law recognises MCs from any doctor registered under the Medical Act 1971.

5. Example: Maternity Protection

• Section 37 provides female employees with 98 days of paid maternity leave.
• Section 41A prohibits dismissal of pregnant employees except for gross misconduct or closure of the business.
• Any policy attempting to reduce maternity leave or deny protection is invalid.

6. Example: Termination

• Section 12 requires notice for termination, and Section 14 requires inquiry before dismissal for misconduct.
• A policy saying “management may terminate without notice or reason” is not enforceable.

The Relationship Between Company Policy and Law

Company policies are important. They set workplace standards, clarify expectations, and regulate benefits. But they must always be consistent with the law.

• Company policy may enhance the law. For example, giving 20 days annual leave instead of the statutory minimum of 8.
• Company policy cannot reduce the law. For example, saying no overtime pay or denying sick leave.
• Where silence exists, policy fills the gap. If the law is silent (e.g., dress codes, office hours, internet use), company policy applies.

The Industrial Court often examines whether company policies are reasonable, non-discriminatory, and consistent with statutory rights. If not, the Court may strike them down.

Lessons

For Employees:

1. Know your rights. Read the Employment Act (available online). Do not assume “company policy” is the final word.
2. Ask for clarity. If denied benefits, politely ask HR to show the legal basis. Distinguish between what is policy and what is law.
3. Seek redress. If your employer enforces unlawful policies, you can lodge a complaint with the Jabatan Tenaga Kerja (JTK). The Director General has powers to investigate and order compliance.
4. Document everything. Keep emails, memos, or payslips showing where policies conflict with the law.

For Employers:

1. Policies must comply with the law. Review handbooks and contracts regularly to ensure alignment with amendments, such as the 2022 changes on working hours and discrimination.
2. Don’t misuse the phrase “company policy.” Employees are more legally aware today. Hiding behind unlawful rules exposes the company to disputes and penalties.
3. Be generous where possible. Company policies that go beyond statutory minima build loyalty and reputation.
4. Update managers. Many disputes arise because supervisors enforce outdated or unlawful practices. Training is essential.

For HR Practitioners:

1. Audit policies regularly. Cross-check against current legislation. Outdated leave, OT, or maternity provisions may now be unlawful.
2. Educate employees. Handbooks should clearly state which benefits are statutory rights and which are company enhancements.
3. Ensure fairness. Even where the law is silent, policies must be reasonable and applied consistently.
4. Anticipate changes. Amendments to the Employment Act (e.g., flexible work, anti-discrimination) mean HR must stay ahead to avoid legal non-compliance.

Conclusion

So, when your employer says, “It’s company policy,” what does the law really say?

The Employment Act 1955 is clear: company policies cannot override or reduce statutory rights. They can only enhance them. Any term in a contract or policy that is less favourable than the Act is void.

For employees like Kavitha, the lesson is to know your rights and challenge policies that unlawfully deny them. For employers, the lesson is to ensure policies comply with the Act and to avoid using “company policy” as a shield for bad practices.

Company policies matter—but the law matters more. Ultimately, a fair and lawful workplace requires both: the law to set the minimum, and company policies to reflect good practice, fairness, and respect for employees.

In short: Company policy ends where the law begins.