One of the most common misconceptions in Malaysian employment law is that an employer can simply terminate an employee by giving notice or paying salary in lieu of notice, without having to explain why.
Many employees are surprised to learn that this is not how the law works in Malaysia.
While an employee is generally free to resign for any reason by giving the required notice, employers do not enjoy the same unrestricted right to dismiss employees. Malaysian law places significant emphasis on an employees’ job security, and an employer must generally have a valid reason and follow a fair process before terminating employment.
So, can your employer fire you without notice? The answer depends on the circumstances.
The Difference Between Resignation and Dismissal
Section 12 of the Employment Act 1955 provides that either party to a contract of service may give notice to terminate the employment relationship.
For employees, this is relatively straightforward. An employee may choose to resign at any time, provided the required notice period is observed.
For employers, however, the position is very different.
Some employers mistakenly assume that as long as they provide the required notice or pay salary in lieu of notice, they can terminate an employee without giving any reason. Malaysian employment law does not support this approach.
An Employer Must Have Just Cause or Excuse
In Malaysia, a dismissal must generally be supported by a valid reason.
Under Section 20 of the Industrial Relations Act 1967, an employee who believes that they have been dismissed without just cause or excuse may challenge the dismissal and seek reinstatement.
Over the years, the Industrial Court has consistently rejected what is commonly referred to as “termination simpliciter” i.e. a termination without any proper justification.
In other words, an employer cannot simply decide that they no longer want an employee and terminate the employment relationship without a legitimate reason.
Examples of circumstances that may justify termination include:
- Serious misconduct;
- Poor performance after proper performance management procedures;
- Redundancy or genuine business restructuring;
- Breach of company policies; or
- Other legitimate business reasons recognised by law.
Importantly, having a valid reason alone may not be sufficient. The employer is also expected to follow a fair procedure before making the decision to dismiss.
Does My Employer Have to Give Notice?
In most cases, yes.
Employment contracts usually contain provisions specifying the notice period required to terminate employment. Common notice periods range from one month to three months, depending on the employee’s position and seniority.
Where the employment contract does not specify a notice period, the minimum notice periods under Section 12 of the Employment Act 1955 apply:
| Length of Service | Minimum Notice Period |
|---|---|
| Less than 2 years | 4 weeks |
| 2 years or more but less than 5 years | 6 weeks |
| 5 years or more | 8 weeks |
These statutory notice periods act as a safety net where the contract is silent.
Notice Periods Must Be Equal
Another important rule that is often overlooked is that the notice period must be the same for both employer and employee.
For example, an employment contract generally should not require an employee to give three months’ notice while allowing the employer to terminate the employee with only one month’s notice.
The law requires parity between both parties in relation to the agreed notice period.
Can an Employer Terminate Employment Immediately?
Yes.
Section 13 of the Employment Act allows either party to terminate the contract immediately by paying an indemnity in lieu of notice.
This means that instead of allowing the employee to serve the notice period, the employer may make a payment equivalent to the wages the employee would have earned during that period.
For example, if an employee is entitled to two months’ notice, the employer may choose to terminate the employment immediately and pay two months’ salary in lieu of notice.
This practice is common where employers prefer not to have an employee remain in the workplace during the notice period.
What Is Garden Leave?
In some situations, an employee may have already submitted a resignation and intends to serve the notice period.
An employer may nevertheless decide that the employee should leave immediately and pay salary in lieu of the remaining notice period.
This often happens where the employee is moving to a competitor or occupies a sensitive position involving confidential information, client relationships, or trade secrets.
By paying the required indemnity, the employer can effectively end the employment relationship without requiring the employee to continue working during the notice period.
What If My Employer Gives No Notice and No Payment?
If an employer terminates an employee without giving the required notice and without paying salary in lieu of notice, the employee may have a claim for the unpaid indemnity.
In such circumstances, a complaint can generally be lodged with the Labour Department to recover the amount owed.
The indemnity is calculated based on the wages the employee would have earned during the applicable notice period.
Can I Claim Unfair Dismissal as Well?
This is where many employees need to be careful.
If an employee’s complaint is simply that the employer failed to provide notice or salary in lieu of notice, the employee may pursue a claim for the contractual indemnity.
However, if the employee’s complaint is that the dismissal itself was without just cause or excuse, the employee may pursue an unfair dismissal claim under the Industrial Relations Act.
Generally speaking, an employee cannot recover both remedies for the same dismissal and may need to decide which avenue is more appropriate based on the circumstances.
Because the choice can have significant legal consequences, employees facing dismissal should obtain legal advice before commencing proceedings.
The Key Takeaway
Many people assume that an employer can terminate employment at any time as long as notice is given. In Malaysia, that assumption is incorrect.
While employers may terminate employment by giving notice or paying salary in lieu of notice, they must generally still have a just cause or excuse for the dismissal. Malaysian courts have consistently recognised that employees are entitled to a degree of job security and protection against arbitrary termination.
If you have been dismissed and are unsure whether the termination was lawful, it is important to examine not only whether notice was given, but also whether the employer had a valid reason and followed a fair process before bringing your employment to an end.
