In Malaysia, the Employment Act (1955) outlines the legal requirements for notice periods during employment termination. These requirements apply to both employers and employees.

Minimum Notice Periods

The Act specifies minimum notice periods that must be provided, depending on the employee's length of service:

• Less than 2 years' service: 4 weeks' notice
• 2 years or more but less than 5 years' service: 6 weeks' notice
• 5 or more years' service: 8 weeks' notice

These are minimum requirements. Employment contracts can stipulate longer notice periods, but they cannot be shorter than the statutory minimums.

Notice Period in the Employment Contract

The terms of the employment contract prevail over the minimum notice periods if they are clearly defined. This means that if the contract specifies a longer notice period, that period takes precedence. In the absence of a specific notice period clause in the contract, the statutory minimums based on the employee's length of service apply.

Exceptions to Notice Periods

There are some exceptions where the notice period requirement may not apply. These exceptions include:

• Summary dismissal for misconduct: In cases of serious misconduct by the employee, the employer may terminate employment immediately without notice.
• Death of the employee: Notice period is irrelevant in the case of an employee's death.
• Mutual agreement: Both employer and employee can agree to waive the notice period and terminate employment immediately.

In Malaysia, severance pay, also known as termination benefits, is regulated by the Employment (Regulations) 1980.

Eligibility for Severance Pay

Employees are entitled to severance pay if they have been employed under a continuous contract of service for at least 12 months with the same employer. The termination of employment should be due to reasons such as redundancy, business closure, or the employer's reorganization.

Exclusions from Severance Pay

Certain scenarios are specifically excluded from severance pay entitlement. These include dismissal due to misconduct, reaching the company's retirement age, voluntary resignation, and the expiry of a fixed-term contract.

Severance Pay Calculation

The severance pay is calculated based on the employee's length of service and their last drawn salary. For less than 2 years' service, it's 10 days' wages for each year of service. For 2 to 5 years' service, it's 15 days' wages for each year of service. For 5 years' service or more, it's 20 days' wages for each year of service.

Example

Consider an employee with 8 years of service who is made redundant and has a monthly salary of RM 5,000. The severance pay calculation would be: 20 days/month * RM 5,000/month * 8 years = RM 80,000.

Important Points

Severance pay should be made within 7 days of the termination date. Any disagreements regarding severance pay should be referred to the Director General for Industrial Relations.

Employers in Malaysia must adhere to a fair and legally compliant process when terminating an employee's employment. This process is designed to protect the rights of both the employer and the employee.

Types of Termination

There are several types of termination:

• Termination with Notice: Both the employer and the employee are required to provide the notice period specified in the employment contract. This allows for a transition period.
• Summary Dismissal for Misconduct: In cases of serious misconduct, the employer has the right to terminate employment immediately without notice. Examples of misconduct include willful disobedience, sexual harassment, or dishonesty.
• Termination due to Redundancy, Business Closure, etc.: If termination is due to economic or structural reasons, the employer must provide notice.

Steps in the Termination Process

The termination process involves several steps:

1. Written Termination Notice: The employer must provide a notice of termination in writing, specifying the date of termination and the reason(s) for termination. These reasons must be valid and justifiable.
2. Employee's Right to Explanation: The employee has the right to provide an explanation or defense regarding the termination. The employer must give the employee a reasonable opportunity to do so.
3. Employer's Response: The employer must carefully consider the employee's explanation and respond in writing.
4. Domestic Inquiry (If Necessary): If the termination is due to alleged misconduct or performance issues and the matter remains unresolved after the previous steps, a domestic inquiry may be necessary. This is a formal investigation conducted within the company and must be impartial.
5. Decision and Final Notice: After the inquiry (if applicable), the employer reaches a decision. If the decision is to uphold the termination, the employee must be provided a formal written notification.

Important Considerations

There are several important considerations to keep in mind:

• Procedural Fairness: The termination process must be procedurally fair, respecting the employee's rights. This includes providing clear reasons, following contractual terms, and conducting investigations where necessary.
• Constructive Dismissal: If an employee resigns due to the employer breaching contractual terms or creating an intolerable work environment, it may be considered a constructive dismissal. Employees may have grounds to claim unfair dismissal in such cases.