In Malaysia, both employers and employees must follow legal guidelines when it comes to employment termination. The Employment Act 1955 (EA 1955) lays out these requirements, detailing notice periods, severance pay eligibility, and procedural steps for a fair termination process.

Notice Periods: Minimum Requirements and Exceptions

Notice periods vary according to the length of employment:

   – Less than 2 years of service: 4 weeks’ notice

   – 2–5 years of service: 6 weeks’ notice

   – 5+ years of service: 8 weeks’ notice

Employment contracts may specify a longer notice period but cannot require a shorter period than these minimums. If no specific notice period is mentioned in a contract, these statutory minimums apply.

Exceptions to standard notice periods include:

– Summary dismissal for misconduct, where immediate termination is justified.

– Death of the employee ends the employment immediately.

– Mutual agreement allows both employer and employee to waive the notice period and end employment immediately.

Severance Pay Eligibility and Calculation

Severance pay is awarded under specific conditions, primarily when the employer terminates employment due to redundancy, business restructuring, or company closure. An employee must have at least 12 months of continuous service to qualify, and certain situations, such as voluntary resignation, retirement, or dismissal for misconduct, exclude an employee from receiving severance pay.

The formula for severance pay calculation depends on the length of service:

   – Less than 2 years: 10 days’ wages per year of service

   – 2–5 years: 15 days’ wages per year of service

   – 5+ years: 20 days’ wages per year of service

Key Steps in the Termination Process

The EA 1955 mandates a clear process for employment termination:

1. Written Notice:

   The employer must provide a clear written notice detailing the termination date and reason.

2. Employee’s Right to Explanation:

   Employees are allowed to present an explanation or defense.

3. Employer’s Response:

   The employer must fairly review the employee’s explanation.

4. Domestic Inquiry (if necessary):

   A formal inquiry may be held to assess the case for termination if misconduct is alleged.

5. Final Decision and Notification:

   Once a decision is made, a formal notification of termination is issued.

By following these procedures, employers can ensure a fair and lawful termination process.