Foreign Employee: Fixed-term Or Permanent Contract

Foreign Employee: Fixed-term Or Permanent Contract

Whether a foreigner engaged in employment is considered working on a permanent basis or fixed term

Employees’ right and status under the employment contract are not decided on the express terms of the contract itself. In considering whether a contract is a fixed-term or permanent employment, the courts would have to consider the intention of parties, conduct of the employer subsequently and the nature of the employer’s business and nature of work the employee is engaged to perform.

Employment contracts are either:

  1. Short term, known as fixed-term contracts; or
  2. Long term, in which case they may be labelled permanent or regular contracts.

It is accepted in industrial jurisprudence that mere description of a contract as one for a fixed term or a similar label attached to it is not conclusive of whether an employee was indeed employed as such.

Malaysian Airlines Bhd v Michael Ng Liang Kok [2000] 3 ILR 179

The Claimant was at all times under a permanent contract of employment. The Company disguised it as a fixed-term contract. The true question is whether the employer’s business or that part of its operation or undertaking in respect of which an employee is employed under a fixed-term can be seen to be one which is ongoing for an undefined and indefinite period of time or which is required for only a certain fixed term?

In examining employment contracts and to determine their true character i.e. whether an ordinary contract or one for a fixed term, the court must take into consideration inter alia the nature of the employer’s business and the nature of the work which an employee is engaged to perform.

Whether an employee’s citizenship is a material consideration in deciding whether an employment is a permanent basis

In Toko Inomoto & Ors v Malaysian Philharmonic Orchestra [2017] 1 LNS 201, the High Court judge took the view that the issue of citizenship is not a material consideration. In Assunta Hospital v Dr. A Dutt [1981]1 MLJ 115, the Federal Court held that the citizenship of an employee has no bearing in deciding whether the applicant was in permanent employment or under a fixed-term contract.

In the most recent Federal Court case of Ahmad Zahri Bin Mirza Abdul Hamid v Aims Cyberjaya Sdn Bhd [2020] 1 LNS 494, His Lordship Mohd Zawawi Salleh FCJ held that the citizenship of the Claimant has no bearing in deciding whether the Claimant was in permanent employment or in employment under a fixed-term contract.

The International Labor Organization (ILO) Conventions relating to migrant workers expressly provides that states should undertake to promote and guarantee equality of opportunity and treatment between migrant workers and nationals.

Thus, the Federal Court judge in Ahmad Zahri (supra) took the view that all workers should be treated with fairness dignity and equality without distinction whether they are local or foreigners. The Federal Court went on also to hold that the work permit issue has no application in determining whether the Claimant’s contract was a fixed-term contract or whether he was a permanent employee.


It is imperative to have employment contracts reviewed by lawyers in ensuring that the contracts are carefully worded to make it clear that it is for specific period only or otherwise. No mention of extensions should be included in the contract, nor should promises to this effect be made to job applicants if the contract is intended to be one of a fixed-term.

Disclaimer: Please note that the contents above do not constitute legal advice. Should you require legal advice, please contact any of our lawyers as listed below:

If you have any queries, please contact our via e-mail, we are available for a scheduled conference call.

Messrs. Jeeva Partnership
V. Jeevaretnam (Managing Partner):
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Tel: 03-7932 3962

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