Can You Terminate a Probationary Employee in Malaysia? Know Your Legal Duties as an Employer

Terminating a new hire during probation is never an easy decision — but sometimes, it’s necessary for valid business reasons. When handled properly, probationary termination in Malaysia protects both employers and employees. It allows companies to address performance issues, attendance problems, or poor job fit early — without breaching the Employment Act 1955 or the Industrial Relations Act 1967.

The probation period serves as a trial phase to assess whether a new employee meets performance expectations and fits into the organisation’s culture. However, even during this stage, any termination must still be based on just cause and excuse — not personal bias or unfair grounds.

What Is Probationary Termination?

Probationary termination refers to ending an employee’s service before their probation period concludes. Although it may appear simpler than dismissing a confirmed employee, the law requires employers to act fairly, transparently, and with proper justification.

During probation, employers typically evaluate:

• Job performance and competency

• Attitude, attendance, and work ethic

• Team collaboration and cultural fit

Probationary employees are not exempt from their basic rights. Under Malaysian employment law, employers must provide at least one week’s notice if the employee has worked for one month or longer — unless the employment contract states otherwise.

Step-by-Step Guide for Terminating a Probationary Employee

To stay compliant and avoid disputes, every termination during probation should follow a clear and fair process.

1. Issue a Written Notice of Termination

Prepare a formal termination letter stating the reason, the last working day, and whether notice or payment in lieu applies. Clear documentation protects both parties.

2. Collect Supporting Evidence

Before proceeding, gather records such as:

• Performance evaluation reports

• Attendance logs

• Warning letters or counselling notes

This documentation serves as proof that the decision is based on valid grounds.

3. Conduct a One-on-One Meeting

Meet the employee to explain your observations and the reasons behind the termination. Allow them to share their perspective — this ensures transparency and fairness.

4. Communicate the Decision Professionally

Keep the discussion factual and respectful. Confirm key details such as notice duration, final salary, and access to company property or systems.

5. File and Retain Termination Records

Store all related documents — including letters, meeting minutes, and supporting evidence — in the HR file. Proper record-keeping is essential for compliance and audit readiness.

Fair vs Unfair Reasons for Termination During Probation

Not every reason for ending a probation contract is legally acceptable. Below are examples of fair and unfair reasons under Malaysian employment law:

Fair Reasons

• Consistently poor performance despite feedback and support

• Misconduct, absenteeism, or insubordination

• Negligence or breach of company policy

• Redundancy due to restructuring

• Legal or regulatory restrictions preventing continued employment

Unfair Reasons

• Pregnancy, maternity, or family leave requests

• Complaints about workplace safety or conditions

• Participation in unions or employee rights advocacy

• Discrimination based on gender, race, religion, or age

• Retaliation for whistleblowing

To avoid wrongful dismissal claims under Section 20 of the Industrial Relations Act 1967, employers must always show just cause and excuse — supported by documented evidence.

Managing Performance During Probation

A probation period should be a time for development, not punishment. Employers are expected to use this phase to assess, guide, and help employees improve.

Best practices for fair performance management include:

• Setting clear KPIs and performance expectations from the start

• Conducting structured mid-probation and end-of-probation reviews

• Providing feedback, training, and coaching opportunities

• Documenting every review and discussion for transparency

If, after these efforts, the employee still fails to meet expectations, termination may be justified — and better supported with evidence.

Notice Period and Appeal Rights

Even during probation, fairness must be upheld. Employers should observe the following:

• Minimum notice period: 1 week (if employed for at least 1 month), unless stated otherwise in the contract.

• Payment in lieu of notice: Employers may choose to compensate instead of requiring the notice period to be served.

• Appeal opportunity: Some organisations offer an internal appeal process or domestic inquiry to allow the employee to respond.

Having a formal appeal process strengthens trust and shows that the employer prioritises transparency.

Key Takeaways for Employers and HR in Malaysia

Before deciding on probationary termination, keep these best practices in mind:

• Always include probation terms (duration, evaluation process, and notice period) in the employment contract.

• Avoid immediate dismissal without prior warnings or documentation.

• Clearly state objective reasons in the termination letter.

• Maintain complete HR records for future reference.

• Comply with the Employment Act 1955, Industrial Relations Act 1967, and any related regulations.

Streamline HR Compliance with Pandahrms

Handling probation reviews, performance tracking, and documentation manually can be tedious. With Pandahrms, employers can:

• Centralize all employee records and probation evaluations

• Track performance notes and attendance in real time

• Store termination or confirmation letters securely in the system

• Generate digital HR reports instantly for audits or management reviews

By automating your HR process, Pandahrms helps Malaysian employers stay compliant, efficient, and fully prepared for any employment-related audits or disputes.

FAQ: Probationary Termination in Malaysia

Can employers terminate a probationary employee in Malaysia?
Yes. Employers can terminate a probationary employee for fair reasons such as poor performance or misconduct — as long as due process and proper notice are given.

What notice period applies during probation?
At least one week (if the employee has worked for a month or more), or as stated in the employment contract.

Can employees appeal their termination?
Yes. Although not mandatory, providing an internal appeal process demonstrates fairness and transparency.

What are examples of unfair termination?
Dismissing employees for pregnancy, health complaints, or discrimination-related reasons is unlawful.

What if an employee disputes the termination?
They may file a claim under Section 20 of the Industrial Relations Act 1967. The Industrial Court will determine whether the dismissal was with or without “just cause and excuse.”

Final Thoughts

Managing probationary employees fairly is part of building a strong, compliant organisation. By documenting performance clearly and following due process, employers can make confident, lawful decisions.

With Pandahrms, you can simplify probation tracking, documentation, and HR compliance — ensuring every step of your employee lifecycle is transparent and well-organised.