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- The Act covers more than platform companies, requiring clear contracts, transparency, and compliance with statutory obligations.
- Misclassification between 'employee' and 'gig worker' may lead to legal claims, backdated EPF and SOCSO contributions, and enforcement action.
- New protections, dispute mechanisms, and rules on termination and safety are set to reshape how gig workers are engaged.
Malaysia is set to enforce the Gig Workers Act 2025 on 31 March (Tuesday), marking a milestone in the regulation of the country’s gig and platform economy. This comes alongside the establishment of a Gig Economy Commission, aimed at strengthening oversight and governance of the sector.
With the enforcement kicking in, organisations that rely on freelance, contract, and platform-based talent may need to ensure their practices align with the new framework. This includes reviewing contracts, payment structures, and operational processes, as well as clarifying how gig workers are classified and managed.
In view of this,Umairah Nasir speaks to four lawyers to unpack three key questions:
- What are the main compliance pitfalls organisations should be aware of?
- How should employers distinguish between employees and gig workers, and what are the risks of getting this wrong?
- How could the Act shape contracts, protections, and obligations in the gig economy going forward?
One point raised consistently across their responses is the importance of getting classification and contractual arrangements right, as missteps could expose organisations to significant legal and financial risks.
Let's delve into what they have to share.
Broader scope of the Act and compliance gaps
Selvamalar Alagaratnam, Partner, Skrine says one key compliance pitfall is the assumption that the Act applies only to platform providers. In practice, it also extends to organisations that hire individuals for a wide range of services, including acting, filming, music-related work, aesthetic services, translation, journalism, prenatal and postnatal care, palliative and elderly care, rehabilitation, as well as photography and videography.
As such, she reminds, organisations engaging such services – for example those organising events and hiring photographers or performers, would need to ensure that these engagements comply with the Act.
On classification, Selvamalar affirms the need for employers to clearly distinguish between employees and gig workers, as the rights, obligations, and applicable laws differ, in some cases significantly. "The risk of misclassification, as in all cases, would bring with it exposure to civil claims, unjust dismissal actions and even potential prosecution by the authorities for failure to comply with applicable laws, if relevant."
"This difference in both categories should most obviously be captured in the contractual document between the employer and individual and just as importantly in the day-to-day communication and interaction", she notes.
Looking ahead, she acknowledges the fact that the Act ensures that gig workers enjoy basic protections that are akin to the protection afforded to employees under other statutes." However, she also notes that this means gig workers will now be able to raise disputes with the Director General of Industrial Relations, with a Tribunal established to hear and resolve such matters.
"It will not be surprising to see the gig worker landscape being shaped by developing jurisprudence as time passes."
Control, dependency, and documentation under scrutiny
According to Arulkumar Singaraveloo, Advisor, Metropolitan College (Malaysia), one of the biggest compliance pitfalls organisations should avoid is assuming that gig arrangements automatically fall outside traditional employment obligations. The new framework, he says, expected to impose baseline protections and regulatory oversight for both platform operators and businesses engaging gig workers.
Therefore, he adds that employers should review how gig workers are engaged, managed, and remunerated, particularly where there is significant control over work schedules, pricing, performance monitoring, or exclusivity.
Arulkumar also highlights the risk of failing to clearly document the relationship between the organisation and individual, urging employers to audit contracts, payment structures, and operational practices to ensure alignment with the Act’s intent and to avoid inadvertently creating an employment relationship.
When it comes to distinguishing employees from gig workers, he says the distinction will likely continue to focus on the degree of control, economic dependency, and integration into the business. "When workers are required to follow strict schedules, are closely supervised, or depend primarily on a single platform or company for income, the arrangement may resemble employment rather than genuine gig work."
With such instances come the risk of misclassification, which could lead to claims for statutory benefits, backdated contributions such as to the Employees Provident Fund or Social Security Organisation (SOCSO), and disputes before the Industrial Court.
To avoid this, Arulkumar says: "Employers should therefore assess not only the contractual wording but also the practical reality of the working relationship. They may need to pay extra attention to the vague classification of those non-platform gig workers."
Concluding with his viewpoint on the Act, he notes that it is expected to formalise what has been a loosely regulated segment of the labour market, requiring clearer contracts, transparent payment structures, and defined dispute resolution mechanisms. Over time, he adds, businesses may also face stronger expectations around social protection, insurance coverage, and accountability, potentially pushing employers workforce strategies to balance flexibility with responsible engagement.
He thus highlights:
"Organisations that proactively adapt their engagement models will likely face fewer regulatory risks and maintain stronger reputational standing."
Termination rights, registration, and evolving legal framework
Concurring with the insights shared above, Amardeep Singh Toor, Partner, LHAG says the Act introduces a right for gig workers not to have their services terminated without “just cause or excuse”, a standard that mirrors protections afforded to employees and has been developed through case law to include reasons such as poor performance, redundancy, and misconduct.
He notes that gig workers may now challenge terminations before the Gig Workers Tribunal, and that it remains to be seen how this standard will be interpreted in a non-employment context. This development, he notes, means that arbitrary deactivation of accounts by platform providers may no longer be sustainable.
Additionally, organisations must ensure all service agreements comply with the minimum requirements set out in the Act, and that gig workers are registered under the Self-Employment Social Security Scheme.
Turning to how employers should distinguish between employees and gig workers, he notes that Malaysian law has historically recognised only two categories of workers – employees and independent contractors, with courts determining the true nature of the relationship based on conduct using tests such as control, integration, and economic reality.
"The Act now introduces a third category: gig workers, defined by reference to those operating through platform providers or falling within the scope of the Schedule. The key risk remains that a purported gig worker may still assert employee status."
If successful, he adds, this exposes the organisation to investigations and enforcement action, claims before the Labour department/Industrial Court, statutory benefits and protections under employment laws etc.
As a starting point to tackling this, he says:
Companies should review and update their gig worker agreements, avoid incorporating employment-type provisions and review work arrangements to ensure it does not indicate an employment relationship.
Looking ahead, he says the Act addresses previous uncertainty in the gig economy, where workers were treated as independent contractors with limited protection while still facing the risk of reclassification. By recognising gig workers as a distinct legal category, the Act introduces a more tailored framework of rights and obligations. "This brings much-needed clarity."
From a commercial perspective, he adds, the Act is expected to reshape how platform providers structure their contracts and manage their workforce. "There will be an increased emphasis on among others transparent contractual terms and fair and defensible decision-making processes."
While some platform operators may initially push back due to increased regulatory burden and potential cost implications, he notes that such challenges are typical of new regulatory regimes and are likely to stabilise over time.
Mandatory contract terms, automated decision-making, and enforcement risks
Naveen Joshua, Partner, MahWengKwai & Associates says the Act introduces a wide range of obligations that organisations can no longer treat lightly, noting that non-compliance may expose them to financial penalties, criminal liability, and reputational damage.
He explains that the crucial point lies in the service agreement. Under Section 3 of the Act, organisations are required to clearly set out key terms such as duration, task descriptions, rate of earnings, and payment methods. Any attempt to include less favourable terms will not stand, he adds, as Section 5 automatically voids such provisions and replaces them with more favourable ones under the Act.
Beyond contracts, he highlights a shift towards greater transparency in how gig workers are managed. Organisations are now required to disclose how automated systems influence task assignments, ratings, and deactivation decisions. Citing a specific example, he notes that deactivating a worker's access for more than 14 days without an inquiry breaches the Act, while failing to provide a human review may result in compensation orders from the Gig Workers Tribunal.
At the same time, Naveen points out that organisations must now take grievance handling more seriously. Businesses, excluding individuals and sole proprietors, are required to establish internal mechanisms and resolve complaints within 30 days. Unresolved matters may escalate to the Industrial Relations Department and the Tribunal, making it risky to treat these processes as procedural formalities.
He adds that compliance also extends to social protection. "Platform providers are legally required to register eligible gig workers and deduct/remit contributions to SOCSO.
"Failure to remit these contributions triggers 'joint and several liability', meaning individual corporate directors and managers can face personal prosecution, fines, and imprisonment."
He then turns to how organisations should approach classification, noting that the distinction between employees and gig workers goes beyond contractual labels. Employers are expected to rely on established legal tests applied by the courts, including control, integration, provision of tools, and economic reality. These tests examine whether workers set their own schedules, operate independently, supply their own equipment, and remain free to work across multiple platforms.
Where these factors point towards employment, he warns that misclassification may carry significant consequences. Workers may bring claims for reinstatement under the Industrial Relations Act 1967, potentially resulting in back wages of up to 24 months. Organisations may also face liability for unpaid EPF and SOCSO contributions, along with interest, penalties, and enforcement action against company officers.
Moving forward, he says the Act signals a broader shift in how gig work is structured. "Contracts will transform from simple liability waivers into complex, outcome-based documents. Exclusivity clauses will be rendered void, as the Act explicitly grants gig workers the right to work for other entities. Businesses will need to rely on incentives rather than legal prohibitions to retain top talent."
Further, companies can no longer unilaterally alter pay rates as they are legally bound to inform and consult workers before modifying terms.
Responsibilities around occupational safety and health are also set to expand. According to Naveen, organisations may need to conduct risk assessments, provide safety equipment, and report work-related incidents, potentially requiring gig workers to complete safety modules before accessing tasks.
At a broader level, he notes that while gig workers do not have traditional trade union rights, the tripartite MPG may provide a platform for engagement between worker associations, the government, and businesses. This could pave the way for sector-based minimum earnings and structured pay adjustments that take into account operational costs such as fuel, maintenance, and insurance.
Conclusion
As the Gig Workers Act 2025 comes into force on 31 March, it is set to introduce clearer standards and stronger protections across Malaysia’s gig economy, while increasing compliance expectations for organisations.
For HR leaders and business decision-makers who engage gig workers, this may require a comprehensive review of how gig workers are engaged, from classification and contracts to operational practices and dispute handling. As the regulatory landscape evolves, organisations that align early with the new framework are likely to be better placed to manage risks and adapt to the future of gig work.
Before you go, here’s a quick visual recap of what to check before 31 March:
Lead image / Provided
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