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The Minimum Retirement Age Act 2012

The Minimum Retirement Age Act 2012

How this affects working people

Introduction

The Minimum Retirement Age Act 2012 (??strong>MRA?? was passed in June 2012 and is expected to be enforced by January next year. What is the significance of the MRA? The retirement age previously stood at 55. The MRA raises the retirement age of an employee in the private sector to 60, bringing it in line with other countries in the region like Thailand and Indonesia. Singapore has increased its retirement age to 62.

Key Features of the MRA

  1. The minimum retirement age for private sector employees is raised to 60, streamlining it with the retirement age for public sector employees. An employer can be fined up to RM10,000 if an employee is prematurely retired.
  1. Any retirement age specified in a contract of service or a collective agreement made before, on or after the coming into operation of the MRA which is less than 60 years will be deemed void and substituted with the minimum retirement age. However, an employee may choose to retire earlier if provided for in the contract of service or collective agreement.
  1. The MRA does not apply to:

(a)??????????????? any 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;

(b)?????????????? any probationer;

(c)??????????????? any apprentice who is employed under apprenticeship contract;

(d)?????????????? a non-citizen;

(e)??????????????? a domestic servant;

(f)??????????????? any person who is employed under any contract for a temporary term of employment, but does not include any employee on study leave or who studies on a part-time basis;

(g)??????????????? any person who is employed on a fixed term contract of service for a period less than 24 months, including any extension; and

(h)?????????????? any person who, before the date of coming into operation of the MRA, has retired at the age of 55 years or above and subsequently is re-employed after s/he has retired.

  1. The MRA enables any employee who believes that he has been prematurely retired by an employer to make a complaint in writing to the Director General of the Department of Labour within 60 days of such retirement.

The Department of Labour will not investigate the complaint if the employee has already made a similar complaint under Section 20 of the Industrial Relations Act 1967 as his complaint will be dealt with under the provisions of that Act.

If the inquiry by the Department of Labour finds that the employee has been prematurely retired, the Director General may direct the employer to reinstate the employee to his former employment OR pay compensation in lieu of reinstatement not exceeding the amount of total salary that is calculated from the date the employee was prematurely retired to the date the employee reaches 60 years.

Effect on Employee Provident Fund (??PF?? Withdrawals

The EPF is a scheme of retirement benefits for both private and public sector employees. Presently, employees are entitled to withdraw one third of their savings at 50 years and the rest at 55. On 15 August 2012, the Human Resources Minister announced that the EPF Act 1991 would be amended to allow private sector employees to withdraw their full EPF savings either at 55 or 60 years. Additionally, employees who withdrew their savings at 55 would have to continue making contributions until they retire. The option of withdrawing one third of their savings at 50 will remain. This announcement was, presumably, aimed at reassuring employees that they could still withdraw their EPF savings before they reached 60 years of age.

Conclusion

Some employers are unhappy with the MRA coming so quickly after the recently passed Minimum Wage Act 2012, as this adds to the operational costs of business. Whilst this may be true, it is not a foregone conclusion as the MRA gives private sector employees a choice: to retire early upon the age of optional retirement agreed in the contract of service or collective agreement OR continue to work until age 60. With the 2010 National Population and Housing Census revealing that the average life expectancy of Malaysians has increased to 75 years (77 for women and 71.9 for men), there is a justification to increase the retirement age. Moreover, with the rising cost of living, many people have sought to work beyond the age of 55 to support themselves in later life. The introduction of the MRA is therefore a good thing as it also allows the country to utilize the experience of citizens over the age of 55 who are able and willing to work. However, a sensible, merit based approach should still be taken towards the retention and promotion of employees, as non-performers should not be retained or promoted simply due to seniority.

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This article was written by Jason Chin and David Dass of Christopher Lee & Co. (www.christopherleeco.com).

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Article length? ?? : ????????? 770 words

Date?????????????? ?? :? ????????? 31 August 2012

Contact??????? ? ?? :? ????????? The Editor

info@christopherleeco.com

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