Employee termination
in Malaysia.

The Employment Act (1955) requires Malaysian employers to give due notice when terminating an employment agreement. Due notice involves providing the employee(s) to be terminated with justification for the dismissal.

The required notice period should be detailed in the employment agreement. In instances where a notice period clause has not been specified in the employment agreement, employers should follow the minimum notice periods as set out in the Employment Act (1955):

• 4 weeks’ notice if the employee has been so employed for less than 2 years;
• 6 weeks’ notice if the employee has been so employed for 2 years or more, but less than 5 years;
• 8 weeks’ notice if the employee has been so employed for 5 years or more.

Alternatively, if an agreement is reached between both parties, employers can make a payment in lieu of notice.

In most cases, employers are also required to pay severance to terminate employees. The Employment (Termination and Lay-Off Benefits) Regulations 1980 sets out the minimum statutory severance payments that should be paid to employees who have been employed for more than 12 months:

• 1 – 2 years employment – 10 days salary
• 2 – 5 years employment – 15 days salary
• 5+ years employment – 20 days salary

Most employers also include any accrued and untaken days of leave in the severance payment. 

Employers do not need to provide notice or severance when terminating an employment agreement for a behavioral issue, such as a serious violation of workplace discipline, severe damage due to grave negligence or a criminal conviction.