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Ready to use legal template

Drafted by lawyers

Compliant with Malaysian law

HomeEmployeesEmployment termination letter

Learn more about Employment Termination Letter in Malaysia

An employment termination letter in Malaysia is important as it serves as a formal document that outlines the reasons for termination, the notice or payment in lieu of notice, and any other legal requirements. Easily download our termination letter to ensure that your company provides a clear and consistent record of termination, which can help avoid disputes and ensure compliance with the law. With this letter written by our lawyers who follow the local jurisdiction, the employer will be protected in case of legal action taken by the employee or in case of accusations of discrimination and any other legal problem such as labor laws.

Table of contents


What are the legal requirements for an employment termination letter?

In Malaysia, there are several legal requirements that an employer must follow when drafting an employment termination letter. Firstly, the employer must have just and fair reasons for terminating the employee, such as misconduct or poor performance, and this must be clearly mentioned in the termination letter. To keep the employee informed of the situation, the employer may issue an employee warning letter. Secondly, the employer must provide the employee with notice of termination or payment in lieu of notice, according to the terms of the employment contract or the provisions of the Employment Act 1955. This must also be stated in the termination letter. Thirdly, if the termination is due to retrenchment, the employer must comply with the guidelines set out in the Industrial Relations Act 1967, which includes giving notice to the relevant authorities and the employee’s union, as well as providing severance pay and this should be mentioned in the termination letter. Fourthly, the employer must not discriminate against the employee on certain grounds such as pregnancy, trade union membership, race, religion and disability and must mention it in the termination letter. Finally, the employer should also provide the employee with any supporting documents that were used as evidence to terminate their contract.

How to terminate an employee's contract in Malaysia?

In Malaysia, there are several steps that an employer must follow when terminating an employee’s contract.

1. The employer must have just and fair reasons for terminating the employee, such as misconduct or poor performance. To keep the employee informed of the situation, the employer may issue an employee warning letter.

2. The employer must conduct a fair and reasonable investigation, and provide the employee with an opportunity to be heard before terminating the contract.

3. The employer must provide the employee with notice of termination or payment in lieu of notice, according to the terms of the employment contract or the provisions of the Employment Act 1955. If the termination is due to retrenchment, the employer must comply with the guidelines set out in the Industrial Relations Act 1967, which includes giving notice to the relevant authorities and the employee’s union, as well as providing severance pay. The employer must also not discriminate against the employee on certain grounds such as pregnancy, trade union membership, race, religion and disability.

4. Finally, it’s important to note that if an employer fails to comply with these legal requirements, the employee may be able to contest the termination and seek redress through the Industrial Court.

What are the causes for termination of employment?

In Malaysia, there are several causes for termination of employment. These include misconduct, poor performance, retrenchment, and the expiration of a fixed-term contract. Misconduct refers to actions that violate company policies or are illegal. Poor performance refers to an employee’s inability to meet the standards set out in their job description or performance agreement. Retrenchment refers to the termination of an employee’s contract due to the employer’s economic or financial difficulties. Finally, the expiration of a fixed-term contract refers to the end of an employment contract that has a specific end date. It’s important to note that employers must have just and fair reasons for terminating an employee, and must comply with the legal requirements set out in the Employment Act 1955 and the Industrial Relations Act 1967.

In the situation where the employee intends to leave the company, they can inform their employer by filling in our employee resignation letter. This will allow the employee to give an official notice of their resignation.

What are the rights of an employee who has been terminated?

Employees who have been terminated have the right to contest the termination and seek redress through the Industrial Court if their employer has not followed proper procedures. They have a right to receive notice or payment in lieu of notice, and in case of retrenchment, they may be entitled to severance pay. Employees also have the right to access any evidence that was used against them during the investigation process and to be heard and given the opportunity to defend themselves. Additionally, employers are prohibited from discriminating against employees on certain grounds such as pregnancy, trade union membership, race, religion and disability and thus employees have the right to be protected against such discrimination. Finally, employees are also entitled to a fair and reasonable process throughout the termination process.

What are the consequences for terminating without following proper procedures?

If an employer terminates an employee without following proper procedures, the employee may be able to contest the termination and seek redress through the Industrial Court. The employer may also be liable for damages or penalties. This can include financial compensation for lost wages, as well as any other losses suffered by the employee as a result of the termination. Additionally, if the employee is able to prove that the termination was discriminatory, the employer may also face penalties under anti-discrimination laws. Furthermore, an employer who terminates an employee without following proper procedures may also face reputational damage and potential legal action from the employees union. Additionally, if an employer is found to have violated any laws or regulations in connection with the termination, they may also be subject to fines or other penalties.

It’s important for employers to familiarize themselves with the legal requirements and to ensure compliance with them to avoid any legal disputes.

How does Malaysia's labor law address termination?

The Employment Act 1955 and the Industrial Relations Act 1967 set out the legal requirements for terminating an employee. The Employment Act 1955 stipulates that an employer can only terminate an employee for just and fair reasons, such as misconduct or poor performance, and must provide notice or payment in lieu of notice. The Act also requires employers to conduct a fair and reasonable investigation and provide the employee with an opportunity to be heard before terminating their employment. The Industrial Relations Act 1967 provides guidelines for retrenchment, which include giving notice to the relevant authorities and the employees union, as well as providing severance pay. The Act also prohibits employers from terminating an employee on the grounds of pregnancy, trade union membership, race, religion and disability. If an employee feels that their rights have been violated, they may seek redress through the Industrial Court.

It’s important for employers to familiarize themselves with the legal requirements and to ensure compliance with them to avoid any legal disputes.

What are the procedures for appealing a termination of employment?

An employee who wishes to appeal a termination of employment, using an employment termination letter, may do so by filing a complaint with the Industrial Court. The complaint must be filed within 60 days of the termination, and the employee should also provide a copy of the employment termination letter as evidence. The complaint should include evidence that the employer has not followed proper procedures, and any other relevant information related to the case. The employee should also provide any proof of discrimination, if applicable. The Industrial Court will conduct a hearing and review the evidence presented by both parties, including the employment termination letter, and may make a ruling on whether or not the termination was legal. If the court finds that the termination was not legal, the employee may be entitled to compensation, reinstatement or other remedies.

How to avoid disputes over termination of employment in Malaysia?

Disputes over termination of employment can be avoided by following proper procedures, using an employment termination letter and complying with the legal requirements set out in the Employment Act 1955 and the Industrial Relations Act 1967. Employers should ensure that they have just and fair reasons for terminating an employee, conduct a fair and reasonable investigation, provide the employee with notice or payment in lieu of notice and not discriminate against the employee on certain grounds. Using an employment termination letter will also provide clear and consistent documentation throughout the process and keep a clear record of the reason for termination. Employers should also establish and maintain good communication with the employees, to ensure that they understand the reasons and the process of termination. With this employment termination letter, the employer will ensure compliance with the law. Employers should also be open to resolving disputes through alternative dispute resolution methods such as mediation or arbitration.

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