Employee Relations - Termination


Can an employer require an employee who tenders notice of resignation to leave the company immediately?

Yes, however the employer must pay the employee wages in lieu of the balance of the notice period.


My termination notice is 3 months and I have 2 weeks of annual leave left. Can the Company force me to leave immediately (within a week) and force me to compensate (pay the Company 2.5 months' salary) them for leaving early?

Your notice of termination would be 3 months or payment of 3 months wages in lieu of termination notice. If the Company wishes you to leave immediately, then the Company needs to pay you the payment in lieu of notice. You do not have to pay the Company any payment in lieu of notice, as you do not leave early, instead it was the Company that want you to leave early and as such the Company has to pay you in lieu of the remaining notice period.


Can a company use the services of outsiders to conduct domestic inquiry?/strong>

Domestic inquiry is an internal matter and should as far as possible be handled by employees of the Company. However, if all the employees of the company have prior knowledge of the case, company may use the services of the company's Board of Directors and outsiders to hold a domestic inquiry.


Is an employee entitled to payment in lieu of annual leave not taken at the time of termination of service?

The employee who resigns from service or whose service is terminated otherwise than for misconduct is entitled to paid annual leave in direct proportion to the completed months of service during the year in which termination takes place and the employer shall pay the annual leave wages in respect of the balance of annual leave.


How long is the notice period required for either party to terminate the contract of service?

General guidelines for disciplinary action are as follows:

  • The notice period must be equally the same and it must be clearly stipulated in the contract.
  • If not define in the contract, the minimum period for a notice of termination to be effected are as follows; If not define in the contract, the minimum period for a notice of termination to be effected are as follows
Less Than 2 years' service 4 weeks
More Than 2 years' but less than 5 years 6 weeks
More than 5 years

8 weeks



Can a termination be effected without notice by either the employer or employee?

  • Can a termination be effected without notice by either the employer or employee?
  • In the event of willful breach of contract on either party, the other party may terminate the contract without notice.

What is the recourse or action for an employer, in the event he finds his employee commits misconduct that goes against the conditions of contract?

After due investigation and after finding the act/s tantamount to misconduct that goes against the conditions of contract, either express or implied terms, the employer may:

  • Dismiss the employee without notice
  • Demotes the employee
  • Demotes the employee
  • Any other lighter punishment

For the purpose of investigation, an employer may suspense his employee for the maximum period of 2 weeks. Full wages shall be reimbursed to the employee once he is exonerated.


What is the regulation made pursuant to the Act that provides the entitlement to termination/lay-off benefits?

The Employment (Termination and Lay-off Benefits) Regulations 1980.


When a Frustration of Contract does occur?
Frustration of Contract occurs when the performance of the contract of employment is rendered impossible by some "intervening" or "supervening" event beyond the control of either party not provided for by the contract. For example, if the employee has been detained by the police or has a prolonged illness. The contract of employment thus comes to an end as the employee is not capable of fulfilling his part of the contract.


Under what circumstances can an employer dismiss a probationer?
An employer has the right not to confirm a probationer. However, there must be a good cause: that is, the person's work must be clearly inadequate. The employee must be told before the end of the probation period and given sufficient time and opportunity to improve. The employer must keep all written records of all discussions held with the employee concerning his performance and of any formal warnings given to him. The employer must get the employee to sign a record card if he is given counseling or warnings. Show him his supervisor's written appraisal of him and get him to acknowledge that he has been informed of the opinion of his supervisor. A probationer who commits misconduct can be dismissed just like any other employee by following the correct procedure.


Can an employee be suspended while an investigation is being carried out?
An employee can be suspended for up to two (2) weeks while the employer is investigating his misconduct. The employee must be informed about the suspension in writing. Suspension is not always necessary but in certain cases, the employer may not want the employee to be at work while the employer is collecting the facts, if the alleged misconduct relates to the theft of property or fraud. If the employee is likely to be violent or threaten witnesses, he should be sent home. During the suspension period, he is entitled to half wages. If he is later found innocent, the remainder of his wages must be paid to him.


How many types of suspension specified under the Employment Act?
There are three (3) types of suspension specified under the Act:

  • Suspension Without Pay as a punishment;
  • Half-Pay Suspension pending investigations; and
  • Full-Pay Suspension which is used if investigations could not be completed within the half-pay suspension period of two weeks. In such case, any extension of the suspension would have to be on full pay.

Can an employee be forced to resign?
Forcing an employee to resign either by threatening to dismiss him if he doesn't  resign or making his life miserable in the hope that he will resign, is not a good HR Practice. If the employer takes such action, the employee may file a claim of unfair dismissal with the Department of Industrial Relations. If an employer has a valid reason to dismiss the employee, the employer is recommended to follow the correct procedure.


Can an employer dismiss an employee under poor performance?
Yes, an employer can dismiss an employee under poor performance. The employer should inform and warn the employee that his work is not up to standard. Combine the warning with a coaching session. Explain precisely what it is that the employer is not happy about and offer suggestions on how to overcome the problem. Give the employee an opportunity to put forward any reasons or explanations for his poor performance. Employer has to record this meeting. Invite his union representative if he is a union member. Give him one last opportunity to improve. Then, if there is still no upgrading of his performance, he should be given a letter of dismissal.


What is meant by 'Last In, First Out"?
In the event of a retrenchment exercise, the employer must follow the principle of  "Last in First out" LIFO i.e. from the group of local workers working in a similar capacity, the employer has to retrench first the most recent staff who join the firm  (the last to join, the first to go).


Mr. Chan with 5 years' service was being retrenched with effect from 1 April  2014. How to determine the termination benefits that he is entitled?  
Total wages earned in the preceding twelve months / 365 = Average True Day's Wage*

Basic Pay, All Allowances, Overtime Earnings but excluding travelling allowance and reimbursement. Hence, his wage for the preceding twelve months was as follows:


Basic (RM)

Allowance (RM)

Overtime (RM)


Mar 2014





Feb 2014





Jan 2014





Dec 2013





Nov 2013





Oct 2013





Sep 2013





Aug 2013





Jul 2013





Jun 2013





May 2013





Apr 2013











The Average True Day's Wage is RM 12,150 / 365 = RM33.29

Termination Benefit:

(12 month's salary / 365)     x     Years of Service     x     Days of Entitlement of Each Year

= RM33.29  x  5  x  20

= RM3,329


I am not a Malaysian citizen but I am employed by a Malaysian company. Do I have any recourse for unfair dismissal under the Malaysian Industrial Relations Act?


Yes. The right to file a representation under the Industrial Relations Act is available to all employees in Malaysia and is not limited to Malaysian citizens.


What is the difference between the Industrial Court and the Labour Court?


Industrial Court deals with individual disputes arising from the employer-employee relationship (such as dismissals) and trade disputes between trade unions and employers (such as transfers, collective agreements) and breaches of rights and obligations imposed under the Industrial Relations Act 1967; whilst Labour Court deals mainly with recovery of wages and other monies and employment benefits provided to employees under the Employment Act 1955 such as overtime pay, maternity allowance, salary in lieu of notice of termination and termination benefits. The "Labour Court" is not a statutory tribunal like the Industrial Court but refers to the hearing conducted by a Labour Officer of the Labour Department into complaints by employees. Employees whose monthly wages are RM2,000 and below and other categories of employees who are entitled to the benefits in the Employment Act 1955 can file their claims in the Labour Court. Employees who fall outside the scope of the Employment Act 1955 but whose monthly salary does not exceed RM5,000 may also seek the assistance of the Labour Court for recovery of salary or other monies due and payable by their employers under their individual contracts of service.


Can dismissal cases be settled "Out of Court"?


Yes, dismissal cases be settled "Out of Court". Many employers negotiate a settlement with the employee claiming unfair dismissal before the date of hearing. The Court welcomes such settlements as much time is saved. They need to be presented to the Court and once accepted by the Claimant become awards and enforceable like any decision made by the Court itself.


Why do employers frequently lose their cases at the Industrial Court?


There are many reasons why employers lose their cases at the Industrial Court. Three major causes of workers either being reinstated or compensated can be discerned. They are:

  1. Lack of proof of the employee's guilt;
  2. Failure to follow proper procedures prior to the termination;
  3. Ignorance of employee rights.


My employment contract says that either party may terminate the contract by providing 1 months' notice in writing or by making payment in lieu of notice. Does this mean that my employer can terminate my contract for any reason as long as he gives me 1 months' notice or payment in lieu?


Despite the notice clause in your contract, your employer is still required to show "just cause and excuse" before terminating your contract of employment. This means they must show good grounds for the termination and cannot merely rely on the notice clause to terminate the employment.  Termination by an employer based solely on the notice clause could result in an employer facing a claim for unfair dismissal.   Please note that the requirement to show "just cause and excuse" only applies to the employer – an employee can terminate their employment/resign from employment for any reason by following the notice clause.


What sort of remedy or damages can I get if I win my case at the Industrial Court?



The Industrial Court will usually award back wages (capped at 24 months of the last drawn salary for confirmed employees, and 12 months for probationers) and reinstatement. In the event reinstatement is not feasible (which is usually the case since the employer-employee relationship may have broken down by the time the matter goes to trial), the Industrial Court may also award compensation in lieu of reinstatement. There is no fixed formula for how much will be awarded as compensation in lieu of reinstatement, but the usual practice is one month's salary for every year of service. This sum is still subject to reduction at the discretion of the Court depending on the circumstances such as the employee's conduct and whether they are already gainfully employed.


What steps can be taken by the employer to prevent termination of employees?


When a redundancy situation arises, the employer must first take the necessary measures to avoid workers termination as proposed by the Procedure for Industrial Harmony, namely: -

1. Freeze new recruitment except for critical areas;

2. Limit overtime;

3. Limit work on weekly rest day and public holidays;

4. Reduce weekly working days or reduce the number of shift job;

5. Reduce daily working hours;

6. Conduct retraining programmes for workers;

7. Identify alternative work and transfer to other division / work within the same company;

8. Implement temporary layoff, for example in the form of temporary shutdown by offering a reasonable salary and help workers obtain temporary work elsewhere until operations can be resumed. If employers implement temporary layoffs, the information regarding the period of layoff must be reported to the Labour Department Peninsular Malaysia (JTKSM) for the purpose of monitoring whether the employee is reinstated or offered Voluntary Separation Scheme (VSS) or permanently terminated in future; and

9. Reduce employee's wages (Pay-Cut) which is made fairly at all levels can also be implemented as a last resort, after other cost saving measures has been implemented.


Is it true that probationers are not entitled to termination benefits?


As far as the law is concerned, it does not distinguish between probationers and confirmed staff. As long as the employee has served at least 12 months, the employer becomes liable to pay if the employee does not fall into any of the exclusion provisions.