There has recently been some uncertainty regarding the requirement to stamp employment contracts. At the outset, it is important to note that the requirement to stamp employment contracts within 30 days of the execution of the contract at RM10.00 per copy of the contract, has always been in place pursuant to Section 4 and item 4 of the First Schedule of the Stamp Act 1949 (“
SA”).
1
Notwithstanding this, most employers do not stamp employment contracts as the legal impact of non-stamping typically arises only on the occasion of an employment contract being exhibited/ produced in the course of court proceedings. Even then, this issue rarely becomes a point of contention as employment disputes are mainly heard in the Industrial Court – a forum where formal evidentiary rules do not strictly apply. The Industrial Court will not refuse to admit an employment contract as evidence only on the basis that it is not stamped.
The recent audits by the Inland Revenue Board (“
IRB”) on payment of stamp duty on stampable instruments, including employment contracts, raised many concerns amongst employers especially since late stamping would have exposed them to penalties of up to RM100.00, or 20% of the duty, whichever is higher.
2 Additionally, a finding of non-compliance exposes employers to the imposition of penalties, including but not limited to a penalty of RM1,500.00 for executing and signing documents not duly stamped.
3 Adding to the confusion were the various unverified statements circulating about waivers to be granted for late stamping.
The IRB has now provided clarity on the matter. In its statement dated 6 June 2025, the IRB has announced the following requirements relating to the stamping of employment contracts:
The IRB’s press release can be read
here.
Comments
The reliefs from stamp duty and late stamping penalties announced by the IRB will be welcomed by employers who have hitherto omitted to stamp the employment contracts with their employees.
Employers are strongly advised to adhere to stamping requirements accordingly to mitigate potential risks especially as a result of audits by the IRB. Employers are also advised that the stamping requirement under the SA is not limited to employment contracts. All documents that record terms agreed between the employer and employee, including mutual separation agreements, confidentiality agreements, etc. should also be stamped in accordance with the SA.
For further information, please contact Selvamalar Alagaratnam (Partner), Foo Siew Li (Partner), Sara Lau (Partner) or Ashreyna Kaur Bhatia (Associate) of the Employment Law Practice of Skrine.