Employee dismissals—whether they're initiated by the employer or the employee—are significant events in the world of work. In Malaysia, these dismissals can happen for various reasons, and each has its own set of rules and considerations. Let’s break it down in a more straightforward way, using real-life scenarios you might encounter:

  1. Voluntary Dismissal
    Resignation: Imagine you decide to leave your job because you found a better opportunity or want a change. In Malaysia, you usually need to give notice as per your employment contract. If the contract does not provide a specific notice period, the statutory notice period is:

    • Four weeks' notice if employed for less than two years.

    • Six weeks' notice if employed between two to five years.

    • Eight weeks' notice if employed for more than five years.

  2. Involuntary Dismissal

    • Termination for Cause: Picture an employee who consistently fails to perform their duties or behaves inappropriately, like committing serious misconduct or repeatedly breaking company rules. However, the list of misconduct is not limited to the above and is subject to the employee handbook of the respective companies (if available). In Malaysia, there are strict processes an employer must follow, including conducting a fair investigation and ensure due process is adhered to.

    • Termination Without Cause: This happens when a company needs to let employees go due to economic reasons or restructuring. Imagine a factory using new machines that require fewer workers — it's not about the worker's performance, but the company's needs. Employers must comply with the Employment (Termination and Lay-Off Benefits) Regulations 1980, which stipulates the requirements for severance payments:

      • Ten days' wages for every year of service if employed for less than two years.

      • Fifteen days' wages for every year of service if employed between two to five years.

      • Twenty days' wages for every year of service if employed for more than five years.

    • Redundancy: Think of a situation where a company merges with another or adopts new technology, making some job roles unnecessary. The process for redundancy in Malaysia requires employers to:

      • Follow the "Last In, First Out" (LIFO) principle, prioritising the retention of longer-serving employees.

      • Notify the Labour Department and affected employees in advance.

      • Provide redundancy payments as per the Employment (Termination and Lay-Off Benefits) Regulations 1980.

  3. Mutual Agreement

    • Settlement Agreements: Consider a scenario where both the employer and the employee agree it’s time to part ways, perhaps due to differences or changing job requirements. They may negotiate a settlement that includes compensation.

    • Early Retirement Packages: Some companies offer attractive packages to encourage older employees to retire early. It could include benefits like a lump sum of money or enhanced pension plans.

Legal Considerations

  1. Compliance with Malaysian Labour Laws
    Employers must comply with the Employment Act 1955 and other relevant legislation when dismissing employees. This includes adhering to notice periods, providing severance pay where applicable, and ensuring that the dismissal is not discriminatory.

  2. Documentation and Due Process
    Proper documentation and adherence to due process are crucial, especially for termination for cause. Employers should maintain detailed records of performance issues, disciplinary actions, and communications with the employee.

  3. Avoiding Unfair Dismissal Claims
    To avoid claims of unfair dismissal, employers must ensure that the dismissal is justified and that all procedures are followed correctly. Employees have the right to challenge their dismissal through the Industrial Court if they believe it was unfair or discriminatory.

  4. Employee Rights and Protections
    Employees have rights and protections under Malaysian employment law, including the right to receive notice, severance pay, and to be free from wrongful termination. Understanding these rights is essential for both parties to ensure a fair and lawful dismissal process.

Conclusion

Employee dismissals are part of work life, but they should always be handled with respect and following the law in Malaysia. Whether someone leaves on their own, is let go, or both agree it’s time to part, understanding the rules helps keep things fair for everyone involved.

If you would like to dive deeper into this topic or need legal advice, please feel free to reach out to us directly at 03 – 8084 3832 or drop us an e-mail at general@yikuan.com.my.