Termination of Employment in Malaysia

Termination of Employment in Malaysia

According to the Department of Labour of Peninsular Malaysia, termination of employment refers to the cessation of service due to company closure or worker redundancy. Redundancy can result from various factors such as corporate restructuring, decreased production, mergers, technological changes, acquisitions, and more. It's important to note that termination due to disciplinary action or dismissal is not included in this definition.

Steps for Employers

Whether termination occurs immediately or after the contractually agreed notice period, employers must present a reasonable cause or justification for dismissal. There are two main types of dismissals: direct dismissals and constructive dismissals.

Direct Dismissal

Direct dismissal happens when an employer decides to end employment, typically through a formal termination letter. Courts generally allow employers considerable discretion in making managerial decisions, including dismissals. However, they will intervene if the dismissal is proven to be unfair.

Constructive Dismissal

Constructive dismissal is less straightforward. It occurs when an employer indicates an intention not to continue the employment relationship, leading the employee to consider the contract terminated by the employer. In such cases, the employee may regard themselves as dismissed.

Grounds for Dismissal

Ideally, employment relationships should not end prematurely. However, termination may be necessary for various reasons, such as employee misconduct or poor work performance. Employers must ensure that dismissals are substantively and procedurally fair.

• Substantive Fairness: There must be a justifiable reason for the dismissal.

• Procedural Fairness: The dismissal process must follow proper procedures, including conducting a domestic inquiry.

Elements of a Domestic Inquiry

A domestic inquiry is an employer-led investigation to gather facts and information about an employee’s alleged misconduct. The process begins with a 'show cause' letter asking the employee to explain the misconduct. If the response is unsatisfactory, a more formal inquiry is conducted. This inquiry is solely for information gathering and does not determine guilt or punishment.

Ensuring Fair Dismissal

Employers must ensure they have a fair reason for dismissal. Failure to do so can lead to claims of unfair dismissal, which can have significant implications for both parties.

Professional Assistance

Low TH & Co offers professional expertise in accounting and human resources. Our team can provide the right advice and connect you with specialists to resolve employment termination issues. Contact us today at info@lowthco.com to learn how we can assist you.