HR’s Guide to Legal Compliance and Smoother Offboarding
When it comes to ending an employment relationship in Malaysia, issuing a proper notice of termination isn’t just about courtesy—it’s a legal requirement under the Employment Act 1955 (EA 1955). Mishandling termination procedures can lead to disputes, claims at the Industrial Court, and even reputational damage to your business. This article walks you through the legal obligations, notice periods, and HR best practices for issuing a proper notice of termination—and how Pandahrms can help you streamline the entire process.
What Is a Notice of Termination?
A notice of termination is a formal communication from the employer to the employee, stating that their employment will be ending on a specified date. It serves both as a legal document and a record of the employment relationship’s conclusion.
Depending on the reason for termination—whether due to redundancy, misconduct, performance issues, or resignation—notice periods and procedures may vary.
Legal Requirements for Termination Notice in Malaysia
Under Section 12 of the EA 1955, either the employer or the employee can terminate the contract of service by giving notice in writing or by paying salary in lieu of notice. The minimum statutory notice periods are:
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Less than 2 years of service – 4 weeks’ notice
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2 to 5 years of service – 6 weeks’ notice
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More than 5 years of service – 8 weeks’ notice
These notice periods apply unless the employment contract states otherwise (as long as the contract terms are not less favourable than the Act).
⚠️ Remember: The EA 1955 covers employees earning RM2,000 and below, or engaged in manual labour regardless of wage. For higher earners, contract terms apply—but fair practices should still be followed.
What Should Be Included in a Notice of Termination?
A termination notice should be formal and clearly state:
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The employee’s name and position
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Effective date of termination
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Reason for termination
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Entitlement to final salary, unused leave, or other compensation
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Return of company property (if applicable)
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Acknowledgement or signature section
Is Payment in Lieu of Notice Allowed?
Yes. Instead of serving the full notice period, either party can make payment in lieu of notice based on the employee’s average daily wages multiplied by the required notice days.
This provides flexibility, especially when the employer prefers immediate termination due to performance or conduct issues. Pandahrms Payroll Module automatically calculates salary in lieu of notice and includes it in the final payslip.
Special Cases: Termination Without Notice
An employer may terminate an employee without notice if there’s misconduct proven through a domestic inquiry (DI), such as:
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Theft or fraud
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Serious insubordination
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Willful breach of company policy
However, immediate dismissal must be handled carefully and documented properly. Pandahrms allows HR to store all inquiry records, employee warning letters, and termination justifications securely in one place.
Termination vs. Retrenchment vs. Resignation
It’s important to distinguish between:
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Termination – employer ends contract for reasons like performance or redundancy
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Retrenchment – termination due to downsizing or restructuring (must notify JTK)
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Resignation – initiated by employee
For each case, Pandahrms lets you tag the termination reason, generate exit checklists, and archive employee data according to retention policies.
Termination Best Practices for HR
Here are key practices HR should follow when terminating an employee:
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Maintain proper documentation – Keep performance records, disciplinary notes, or PIP outcomes.
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Follow fair procedures – Especially in cases of misconduct or poor performance.
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Conduct exit interviews – Gain insights to reduce future turnover.
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Avoid emotional decisions – Terminations should be objective and justified.
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Comply with SOCSO, EPF, and tax clearance obligations – Notify relevant statutory bodies on time.
How Pandahrms Can Support HR in Managing Termination Cases
Pandahrms provides essential HR reporting and analysis tools that help you manage the termination process more strategically:
✅ Reason of Resignation Analysis – Identify common resignation triggers and take proactive action.
✅ Employment Status Listing – Track who is on probation, confirmed, resigned, or retired—critical when planning exits.
✅ Turnover Analysis & Workforce Analysis – Understand your company’s attrition trends and workforce stability.
✅ Service Year Resigned Statistic – Spot patterns in early resignations and adjust hiring/retention strategies accordingly.
✅ Confirmation Due Listing – Avoid premature dismissals by keeping tabs on probation timelines.
By leveraging Pandahrms’ smart analytics, HR teams can reduce guesswork, plan ahead, and ensure that termination decisions are well-supported by data.
Final Thoughts
Issuing a termination notice in Malaysia involves more than just handing over a letter—it requires planning, empathy, and compliance. Using an HR system like Pandahrms gives you the insights needed to manage workforce exits more efficiently and reduce turnover risks in the long run.
Want to see how Pandahrms can streamline your HR reports and help you stay compliant?
Contact us to schedule a personalized demo today!
