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Notice Period in Malaysia

In Malaysia, the notice period is four weeks if employed for less than two years and six weeks for two to five years. It extends to 8 weeks if employed for more than five years.

Key Takeaways

  • Malaysia’s Employment Act 1955 sets the minimum notice period requirements based on an employee’s length of service.
  • The employment contract determines the notice period length, and being aware of the agreed-upon terms is vital for compliance.
  • Proper understanding of the legal framework surrounding notice periods is necessary for a smooth employee exit process.

An employment contract in Malaysia typically outlines the specifics regarding the notice period. The Employment Act 1955 states that the contract’s agreed-upon terms will determine the notice length. Both parties must know the notice period regulations, as insufficient notice can lead to legal consequences. In some cases, employees may also choose to “buy out” their notice period by paying their employer the salary equivalent of the remaining days.

Both employers and employees must be familiar with the legal framework surrounding notice periods. Properly managing employee exits, handling breaches of contracts, and ensuring industrial harmony all come under the purview of employment law in Malaysia. Knowing the regulations and contractual specifics allows both parties to navigate the exit process effectively and professionally.

Understanding Notice Period in Malaysia

When resigning from a job in Malaysia, knowing the notice period requirements outlined in the Employment Act 1955 is essential. This legislation governs the minimum notice periods employees must provide when they intend to leave their positions. These notice periods vary depending on the employee’s duration of employment with the company.

The Employment Act (1955) provides the following minimum notice periods for employees in Malaysia:

4 weeks notice Less than 2 years employed
6 weeks’ notice More than 2 years but less than 5 years employed
8 weeks’ notice More than 5 years employed

These notice periods serve as a guideline for both employers and employees to ensure they have adequate time to find a replacement or complete any pending tasks before the employee’s departure. However, the notice period can also be outlined in the employment contract, which may differ from the minimum requirements provided by the Employment Act 1955.

In addition to the notice periods, a written contract may be necessary if the employee’s work extends beyond one month or if the work required may reasonably take longer than a month to complete. The Employment Act requires a written contract in these cases to protect the interests of both the employee and the employer.

It is essential for all parties involved to adhere to these notice period requirements to ensure a smooth transition during employee resignation. Not doing so may lead to legal disputes or complications for both the employee and the employer. To avoid such issues, it is always best to be well-versed in the resignation procedure and notice periods in Malaysia.

Employment Contract Specifics

Contractual Obligations

In Malaysia, the Employment Act (1955) governs the minimum notice periods, wages, working hours, and other aspects of employment contracts. Employers and employees must abide by these contractual obligations to maintain smooth work relations.

An employment contract must be in writing for a specified period exceeding one month or for the performance of a specified piece of work where the time required for completion exceeds or might exceed one mont

Type and Terms of Employment

Employment contracts in Malaysia can be classified into permanent, part-time, and probationary.

  • Permanent contracts cover employees with continuous, ongoing employment without a specified end date. These employees are entitled to full benefits and rights under the Employment Act.
  • Part-time contracts apply to employees working less than the standard work hours per week. They are also entitled to pro-rated benefits and rights per the Employment Act.
  • Probationary contracts usually last for a trial period to determine whether the employee meets the role’s requirements. Once the probationary period is over, the employee may be offered a permanent or part-time position, depending on their performance.

The Employment Act stipulates that wages must be paid no later than the 7th day after the last day of any wage period, which is deemed one month if no wage period is specified in the contract.

Regulations About Notice Period

Terminating Employment

In Malaysia, the Employment Act 1955 governs notice periods for terminating employment. Notice period lengths depend on the duration of an employee’s service with the company. For those who have worked between 0 to 2 years, a 4-week notice period is required. Employees with 2 to 5 years of service must provide a 6-week notice, while those who have been with the company for more than five years need to give an 8-week notice. Employers and employees must adhere to these regulations to avoid any legal complications.

It’s important to note that these notice periods are the minimum required by law. The actual notice period may be agreed upon between the employee and employer in the employment contract. The notice period may be extended or shortened based on mutual agreement.

Resigning From a Job

When an employee resigns, they must also follow the notice period guidelines as laid out in the Employment Act or the agreed-upon terms in the employment contract. Employees must provide adequate notice to avoid negative consequences or legal issues.

Employees are expected to complete outstanding tasks during the notice period and assist in the handover process. This ensures a smooth transition for the employer and minimizes disruption to the workplace. Failure to provide the appropriate notice of termination may result in financial or legal consequences for the employee or employer.

Understanding and adhering to the regulations surrounding notice periods in Malaysia is vital for both employees and employers. This ensures a professional approach to termination, resignation, and handover processes while also minimizing the risk of legal disputes or negative consequences.

Payment Terms

Pay in Lieu of Notice

In Malaysia, the Employment Act 1955 allows either party, employee or employer, to provide notice or make a payment in lieu of the notice period. The value of the payment is equal to the wages payable for the required notice period. For instance, if an employee is required to give a 4-week notice, the payment in lieu of notice would equal 4 weeks’ worth of salary.

Retrenchment Benefits

When an employee is retrenched in Malaysia, they are entitled to certain benefits. The specifics of these benefits, such as the amount and eligibility, are typically outlined in the employee’s contract or company policy. In some cases, retrenchment benefits may also be offered as an alternative to termination if the employer wishes to retain an employee during difficult financial times.

Severance Pay

Severance pay in Malaysia can be offered when an employee’s contract is terminated due to reasons beyond the employee’s control, such as company restructuring or downsizing. It is important to note that severance pay differs from retrenchment benefits and payment instead of notice. The employment contract or company policy typically outlines the amount and terms of severance pay.

Less than 2 years10 days’ salary for each year of service
Between 2 – 5 years15 days’ salary for each year of service
More than 5 years20 days’ salary for each year of service

Legal Framework

Industrial Relations Act 1967

In Malaysia, the Industrial Relations Act 1967 and the Employment Act 1955 serve as the main legal framework for employment and industrial relations. The Industrial Relations Act 1967 plays a central role in regulating labor disputes and resolving conflicts between employers and employees. This act covers a wide range of employment matters, such as strikes, lockouts, dismissals, workforce reduction, and more. The act also establishes the Industrial Court, which has the jurisdiction to handle disputes between parties arising from their employment contracts.

Employment Act 1955

On the other hand, the Employment Act of 1955 provides the foundation for minimum statutory benefits and entitlements for employees in Malaysia. It details provisions concerning working conditions, hours, wages, leave, and termination, among other aspects. In particular, the Employment Act outlines the notice period requirements for instances of resignation or termination.

Court Judgment

The Industrial Court and the Civil Court have jurisdiction over disputes related to notice periods. The Industrial Court is primarily responsible for disputes under the Industrial Relations Act, whereas the Civil Court handles cases involving contractual issues or individual employees’ claims.

The role of the courts is to ensure that the parties comply with the relevant provisions of the Industrial Relations Act 1967 and the Employment Act 1955 while also considering the agreed-upon terms in their respective employment contracts. The court may require the employer to provide a valid reason for dismissal or termination, and both parties must be given a fair opportunity to present their case. A court judgment determines the outcome of the dispute and ensures that the rights and interests of both employers and employees are protected under Malaysian law.

Handling Breach of Contract

Unjust Dismissal

In Malaysian employment law, unjust dismissal refers to the termination of an employee without cause or excuse. This might occur due to misconduct, poor performance, or constructive dismissal. Constructive dismissal occurs when an employee resigns due to the employer’s action or inaction, making the working environment intolerable.

To handle such cases, the aggrieved employee must file a complaint with the Industrial Relations Department within 60 days of the dismissal. The Department will then mediate between the employee and the employer to reach an amicable resolution. If no agreement is reached, the case may be referred to the Industrial Court for a final decision.

Suing and Legal Recourse

Legal action may be necessary in cases of breach of contract in the Malaysian employment scenario. First, an employee or employer should send a Letter of Demand to the defaulting party indicating the breach and requesting rectification. This letter warns of possible legal action if the breach is not remedied within an agreed-upon period.

The aggrieved party can file a lawsuit in the appropriate court if the defaulting party still does not comply. For employment contract disputes, the Industrial Court has jurisdiction over unjust dismissal cases. At the same time, the Civil Court handles other breaches, such as non-payment of wages or violations of specific terms of the employment contract.

It is important to note that taking legal action can be time-consuming and costly, so it is generally advisable to try resolving the dispute via negotiation or mediation first. However, should the need arise, seeking legal recourse is a valid option to protect the rights of both employees and employers.

Managing Employee Exit

Handling Vacancies

When an employee resigns in Malaysia, the employer must handle both planned and unplanned vacancies effectively. For planned vacancies, the notice period required varies depending on the employee’s length of service. This allows employers to manage the transition and plan for vacancies, including searching for replacement candidates.

Malaysia Job vacancy infographic
Job Vacancies Landscape in Malaysia, 2022 - Ministry of Economy Department of Statistics Malaysia

However, unplanned vacancies, such as those resulting from an employee’s sudden departure, can be more challenging. In these cases, the employer should quickly assess the situation, identify any outstanding matters that must be addressed, and determine a course of action to fill the vacancy. This may involve hiring temporary staff or redistributing tasks among existing team members until a suitable replacement can be found.

Transition and Handover

It’s essential to manage the transition effectively to ensure a smooth employee exit process. This should involve a structured handover of tasks, responsibilities, and any ongoing projects the departing employee was working on.

An effective handover typically involves the following steps:

  • Identify Key Responsibilities: Make a list of the employee’s key responsibilities and any projects or initiatives they were involved in.
  • Determine Task Ownership: Assign these tasks and projects to other team members or new hires, ensuring clear ownership and understanding of their status.
  • Document Processes: Make sure the departing employee records any critical processes, procedures, or knowledge they possess. This will be invaluable to their replacement and ensure a smoother transition.
  • Set Expectations: Communicate expectations and deadlines to both the departing employee and their replacement, which will help avoid confusion or misunderstandings.
  • Monitor Progress: Regularly review the handover progress, addressing any issues or concerns that may arise during the transition period.

Handling the employee exit professionally can minimize the impact of the departure. This ensures that work continues with minimal disruption and allows the organization to focus on filling the vacancy with a qualified candidate.

Retirement and Redundancy

Minimum Retirement Age

In Malaysia, the minimum retirement age for employees is 60 years old, per the Minimum Retirement Age Act 2012. This age ensures that employees can continue working and contributing to the economy while providing some stability in the workforce. Employers may offer early retirement packages or arrangements for older employees if agreed upon mutually.

Redundancy Procedures

Malaysian employers must follow certain procedures to treat employees fairly in redundancy situations. Firstly, redundancy must be established as a precondition for retrenchment. Reasons for redundancy may include business closures, economic downturns, or company restructuring.

Employers are advised to adhere to the Code of Conduct for Industrial Harmony guidelines when carrying out retrenchment exercises. This includes consulting employees or their representatives about the impending retrenchment, exploring alternative options to avoid reduction, and considering adopting a “last in, first out” policy when selecting employees for retrenchment.

In cases of redundancy, retrenchment benefits must be provided to employees as prescribed by Regulation 6 of the Employment (Termination and Lay-Off Benefits) Regulations 1980. The amount of these benefits will depend on the length of service and other factors.

Understanding Industrial Harmony

The Code of Conduct for Industrial Harmony is a crucial aspect of employment law in Malaysia. Established as an agreement between the Ministry of Human Resources and the Malaysian Council of Employers’ Organisations, it aims to promote harmonious working relationships between employers, employees, and trade unions in the country source.

One of the key objectives of the Code is to ensure non-discrimination in the workplace and maintain fair treatment of employees based on their ability, experience, and seniority. Doing so encourages an environment of respect, cooperation, and understanding among all parties involved in employment relationships. This, in turn, substantiates the importance of adhering to the Code for all parties in the Malaysian workforce.

When it comes to appointing or promoting employees, the Code emphasizes the recognition of individuals’ abilities, qualifications, and experience. Employers are expected to provide equal opportunities for all employees, ensuring no discrimination occurs based on irrelevant factors such as race, religion, or gender. This approach promotes a diverse and inclusive work environment that drives individual and organizational growth.

In situations where termination or reduction is necessary, the Code stipulates the consideration of seniority. This means that employers should respect employees’ service length and make decisions accordingly. By doing so, employers not only show respect for their workforce’s loyalty and dedication but also help to maintain employee morale and a sense of fairness within the company.

Adhering to the Code of Conduct for Industrial Harmony is essential for fostering a healthy and productive work culture in Malaysia. By considering factors like ability, experience, and seniority, employers and employees can work together to achieve shared goals and sustain harmonious labor relations in the long run.

Any global company looking to ensure full compliance with Malaysia notice period requirements should consider advice from a Malaysia Professional Employer Organization or Employer of Record company. 

Frequently Asked Questions

The notice period in Malaysia is determined by the terms agreed upon in the employment contract. If the contract does not specify a notice period, the Employment Act 1955 sets the minimum notice periods, which are four weeks for employees with less than two years of employment, six weeks for employees with 2 to 5 years of employment, and eight weeks for employees with five or more years of employment source.

If an employee does not serve the required notice period in Malaysia, they may be liable to pay compensation to their employer for their period of noncompliance, which is typically the salary equivalent of the unfulfilled notice period. Employers may also take legal action against employees who do not serve the required notice.

Yes, payment in lieu of notice is allowed in Malaysia. Both employer and employee can mutually agree to terminate the contract early by making a payment equivalent to the salary for the unfulfilled notice period source.

The probation period does not, in general, affect the notice period unless stated otherwise in the employment contract. During the probation period, the notice period may be shorter, as set by the employment contract. However, if the contract is silent on probation period notice, the statutory notice periods under the Employment Act 1955 should still apply source.

Employees in Malaysia can consider buying out their notice period by paying an amount equivalent to the unfulfilled notice period, as long as it has been mutually agreed upon between the employee and employer. However, this is subject to the terms set in the employment contract.

The legal rights related to notice period termination according to the Employment Act 1955 include: the right to a minimum notice period as specified by the Act, the right to payment in lieu of notice if mutually agreed upon, and the right to compensation for damages if there is a breach of contract related to the notice period source.

Travis is a global business development advisor. He has spent the last 14 years supporting business establishment and development in North America, Southeast Asia, and throughout the world. With multiple degrees from the University of Oregon, Travis currently splits his time between the US, and Bali, Indonesia. At RemotePad, Travis writes about remote work, hiring internationally and PEO/EOR business models.

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