Legal and Tax Updates

Back Pay of Seniority Suspended Until 2021

Pursuant to Prakas No. 443 of Ministry of Labour and Vocational Training (“MLVT”) on Seniority Payment dated 21 September 2018, all employees, under the unlimited duration contract (“UDC”), are entitled to receive the Back Pay of Seniority from January 2019 with the amount of 15 days of base wage per year.   The Back Pay of Seniority shall be paid twice a year.

However, on 22 March 2019, MLVT issued Instruction No. 042/19 of MLVT on the Implementation of Back Pay of Seniority before 2019 for the Enterprise and Establishment that are not in Textile, Garment and Footwear Sector in order to postpone the above Back Pay of Seniority till December 2021. According to this Instruction, the back pay of seniority payment has been decreased from 15 days as originally stated in Prakas No. 443 MLVT to 6 days per annum which shall be paid in June and December, 3 days per each payment.

Pursuant to the above mentioned regulations, even though there is a reduction on the number of days of the Back Pay of Seniority, the total amount of the Back Pay of Seniority remains unchanged, meaning that the employer shall pay the Back Pay of Seniority to their employees until all the amounts have been paid to the employees.

Furthermore, during this suspension period, the Back Pay of Seniority shall be paid to the employees or their heirs even in the case that their UDC were terminated with any reason, except the serious misconduct or retirement or death of employees.

Should you need any advice and/or clarification on this matter, please do not hesitate to contact us.