Conciliation Agreement (Malaysia)
CONCILIATION AGREEMENT (FULL AND FINAL SETTLEMENT)
Industrial Relations Act 1967 (Act 177) | Employment Act 1955 (Act 265) | Contracts Act 1950 (Act 136) | Income Tax Act 1967 (Act 53)
This Conciliation Agreement is entered into on [Signing Date] between:
EMPLOYER (Respondent):
[Employer Name] (SSM Reg No. [Employer Reg No])
Address: [Employer Address]
EMPLOYEE (Claimant):
[Employee Name] (NRIC: [Employee NRIC])
Last Designation: [Employee Designation]
SECTION A: BACKGROUND
The Employee was dismissed by the Employer on [Dismissal Date].
Nature of Dispute: [Nature Of Dispute]
JPP Representation Reference No.: [JPP Representation No]
The parties have agreed to settle and resolve all disputes, claims, and differences arising from or in connection with the employment and its termination on the terms set out in this agreement, without any admission of liability by either party.
SECTION B: SETTLEMENT TERMS
Settlement Amount: [Settlement Amount]
Breakdown:
[Settlement Breakdown]
Payment Terms: [Payment Date]
Employee Bank Account: [Employee Bank Details]
Additional Terms:
[Additional Terms]
SECTION C: FULL AND FINAL SETTLEMENT AND MUTUAL RELEASE
In consideration of the settlement amount stated above, the Employee hereby accepts the settlement in full and final satisfaction of all claims, demands, causes of action, and rights of action — whether under the Industrial Relations Act 1967 (Act 177), the Employment Act 1955 (Act 265), the Contracts Act 1950 (Act 136), or any other written law — arising from or in connection with the employment and its termination.
The Employee releases and discharges the Employer, its directors, officers, and employees from all such claims. The Employer releases and discharges the Employee from all counterclaims arising from the employment.
Withdrawal of JPP Representation:
[Withdrawal Confirmation]
Confidentiality:
[Confidentiality Clause]
SECTION D: DECLARATION AND SIGNATURES
Both parties confirm that they have read and understood this agreement, have had the opportunity to seek independent legal advice, and enter into this agreement freely and voluntarily without duress.
Signed for and on behalf of the Employer:
Signature: ____________________________
Name: ____________________________
Designation: ____________________________
Company: [Employer Name]
Date: ____________________________
Signed by the Employee:
Signature: ____________________________
Name: [Employee Name]
NRIC: [Employee NRIC]
Date: ____________________________
Witnessed by:
Signature: ____________________________
Name and NRIC: ____________________________
Date: ____________________________
Employer / Authorised Representative
________________
Signature
Employee (Claimant)
________________
Signature
What Is a Conciliation Agreement (Malaysia)?
A Conciliation Agreement in Malaysia records the terms the parties accept and the commitments each makes to the other.
Section 18 of the Industrial Relations Act 1967 provides a general conciliation mechanism — the Director General of Industrial Relations may, at any time, take steps to effect a settlement of any industrial dispute by conciliation. Section 20(2) specifically requires the Director General to attempt conciliation of a Section 20 representation before referring the matter to the Minister of Human Resources for a decision on referral to the Industrial Court. A conciliation agreement reached under this process is recorded by the JPP officer and is enforceable as an award under Section 56 of the Industrial Relations Act 1967.
Conciliation agreements also arise in the context of employment disputes that do not proceed through the formal Industrial Relations Act 1967 channel — for example, disputes over unpaid wages resolved at the Department of Labour Peninsular Malaysia (JTKSM) under Section 69 of the Employment Act 1955 (Act 265), or disputes between employers and employees resolved directly through negotiation (sometimes called a 'mutual separation agreement' or 'settlement agreement' in the commercial employment law context).
A conciliation agreement in the employment context typically contains: identification of the parties and the dispute; the settlement sum (ex-gratia payment or agreed compensation); the payment date and method; acknowledgement that the settlement is in full and final satisfaction of all claims; a mutual release and waiver of claims (including both the employee's right to pursue the Industrial Court claim and the employer's right to pursue any counterclaims); confidentiality obligations; and a provision withdrawing the Memorandum of Representation from the JPP if proceedings have been commenced.
In the Industrial Court context, a settlement reached during conciliation is recorded as a 'consent award' under Section 30(5) of the Industrial Relations Act 1967, which gives the agreement the force of an Industrial Court award and makes it enforceable through the High Court under Section 56 of the Industrial Relations Act 1967.
The legal framework governing the Conciliation Agreement (Malaysia) in Malaysia draws on several key statutes and regulatory bodies. Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Parties executing a Conciliation Agreement (Malaysia) in Malaysia should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Employment Act 1955 (Act 265) sets the foundational requirements.
When Do You Need a Conciliation Agreement (Malaysia)?
A Conciliation Agreement is required in Malaysia whenever an employer and a dismissed or aggrieved employee have reached a negotiated settlement of an employment dispute and wish to record the terms in a legally binding document.
A Conciliation Agreement is needed when a JPP conciliation conference under Section 20(2) of the Industrial Relations Act 1967 results in the parties agreeing to settle the unfair dismissal representation — the JPP officer will record the agreed terms and both parties sign the conciliation agreement, which is then recorded as a consent award.
A Conciliation Agreement is required when an employer and an employee resolve a dispute over unpaid wages, commission, or benefits directly or through mediation at the Department of Labour Peninsular Malaysia (JTKSM) under Section 69B of the Employment Act 1955 (Act 265), and wish to formalise the settlement in writing to prevent future claims on the same matter.
A Conciliation Agreement is needed when an employer decides to settle a pending Industrial Court representation to avoid the cost, time, and reputational risk of a full hearing — the employer and employee negotiate the settlement sum and terms, and the Memorandum of Representation is withdrawn upon execution of the agreement and payment of the settlement amount.
A Conciliation Agreement is required when an employer is restructuring or retrenching staff and wishes to provide departing employees with an ex-gratia payment above the Employment Act 1955 statutory minimum in exchange for a full and final release of all employment-related claims, including potential Section 20 Industrial Relations Act 1967 representations.
A Conciliation Agreement is needed when parties wish to include confidentiality obligations regarding the terms of the settlement — for example, preventing the employee from disclosing the settlement amount to other employees or the media — as confidentiality terms cannot be imposed by the Industrial Court in a contested award but can be incorporated in a mutually agreed conciliation agreement.
What to Include in Your Conciliation Agreement (Malaysia)
A valid Malaysia Conciliation Agreement for employment disputes must contain the following essential elements to be enforceable and to achieve a thorough resolution of the dispute.
Parties and Dispute Background: Full identification of the employer (company name, SSM registration number, and address) and the employee (full name, NRIC, designation, and last date of employment). A brief description of the dispute being settled — for example, the Section 20 representation number at the JPP, the date of dismissal, and the nature of the claim.
Settlement Sum and Payment Terms: The agreed settlement amount in Malaysian Ringgit (RM), broken down between ex-gratia payment, unpaid wages or benefits, and any other components. The payment date (typically within 14 days of execution of the agreement) and the mode of payment (bank transfer to the employee's named account) must be stated.
Full and Final Settlement: A clear acknowledgement that the settlement sum is paid and accepted in full and final satisfaction of all claims, demands, actions, and causes of action — past, present, and future — arising from or in connection with the employment and its termination. This clause must be unambiguous to prevent the employee from pursuing further claims after payment.
Mutual Release and Waiver: A bilateral release — the employee releases all claims against the employer, and the employer releases all counterclaims against the employee — covering all claims under the Employment Act 1955 (Act 265), Industrial Relations Act 1967 (Act 177), and any other applicable employment legislation.
Withdrawal of Representation: A provision requiring the employee to withdraw the Memorandum of Representation filed at the JPP (if applicable) upon receipt of the settlement payment, and authorising the employer to inform the JPP of the settlement.
Confidentiality: Mutual obligations on both parties not to disclose the terms of the settlement to third parties (other than legal advisers and tax authorities), with a specified remedy for breach.
Employee's Independent Advice: A declaration by the employee that the employee has had the opportunity to seek independent legal advice before signing the agreement, to avoid any future claim that the agreement was signed under duress or without informed consent.
Tax Treatment: Clarity on whether the settlement sum is taxable income in the employee's hands under the Income Tax Act 1967 (Act 53) — ex-gratia payments up to RM10,000 per completed year of service may be exempt from tax under Paragraph 25(1)(e) of Schedule 6 to the Income Tax Act 1967.
Additional compliance elements for a Conciliation Agreement (Malaysia) used in Malaysia include: Under Malaysian law, the Contracts Act 1950 (Act 136) governs contractual obligations. The Companies Act 2016 (Act 777) regulates corporate entities through the Companies Commission of Malaysia (SSM). The Employment Act 1955 (Act 265) and the Department of Labour govern employment matters. The Personal Data Protection Act 2010 (Act 709) and the Personal Data Protection Department protect personal data. The Inland Revenue Board of Malaysia (LHDN) administers tax obligations. The Industrial Court adjudicates employment disputes under the Industrial Relations Act 1967 (Act 177). Forms-legal.com provides this template as a starting point for Malaysia-compliant documentation.
Cite this page
Reference this free template in an article, syllabus, or research note:
Forms Legal. (2026). Conciliation Agreement (Malaysia) (Malaysia) [Legal document template]. Forms Legal. https://forms-legal.com/malaysia/employment/contracts/conciliation-agreement-malaysia
"Conciliation Agreement (Malaysia) (Malaysia)." Forms Legal, 2026, https://forms-legal.com/malaysia/employment/contracts/conciliation-agreement-malaysia.
@misc{formslegal-conciliation-agreement-malaysia,
author = {{Forms Legal}},
title = {Conciliation Agreement (Malaysia) (Malaysia)},
year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/employment/contracts/conciliation-agreement-malaysia}},
note = {Free legal document template. Based on Employment Act 1955 (Act 265)}
}
Frequently Asked Questions
Yes. A conciliation agreement reached during conciliation proceedings conducted by the Industrial Relations Department (JPP) under Section 20(2) of the Industrial Relations Act 1967 (Act 177) is recorded by the JPP officer and both parties sign. This agreement is then recorded as a consent award under Section 30(5) of the Industrial Relations Act 1967, which has the same legal force as an Industrial Court award determined after a full hearing. A consent award is enforceable through the High Court under Section 56 of the Industrial Relations Act 1967 — meaning that if either party fails to comply with the terms of the conciliation agreement (for example, the employer fails to pay the settlement sum), the other party can apply to the High Court for enforcement without the need for a fresh lawsuit. Private settlement agreements reached outside the JPP process — for example, through direct negotiation — are enforceable as contracts under the Contracts Act 1950 (Act 136) and can be enforced through civil litigation if breached.
Generally, no — once a conciliation agreement containing a full and final settlement clause has been executed by both parties, the employee cannot subsequently pursue the Industrial Court representation on the same dismissal. The Industrial Court in multiple decisions has held that a valid settlement agreement — meaning one entered into freely, for consideration, and with the employee's understanding of its terms — operates as a complete bar to further proceedings on the same dispute. However, the Industrial Court retains jurisdiction to set aside a consent award or settlement agreement in limited circumstances — for example, if the agreement was procured by fraud, duress, misrepresentation, or if the employee had no meaningful opportunity to understand the terms (including cases involving foreign workers who did not receive a proper translation of the agreement). Employees who signed a settlement agreement under pressure, without understanding the terms, or without adequate compensation should seek immediate legal advice from an employment lawyer or the Malaysian Bar's Legal Aid Centres.
Settlement amounts in Malaysian unfair dismissal conciliation vary widely depending on the seniority of the employee, length of service, strength of the claim, and the employer's assessment of litigation risk. As a general reference, the Industrial Court's standard formula for compensation (which sets the ceiling for settlement negotiations) awards: backwages from the date of dismissal to the award date, capped at 24 months under Section 30(6A) of the Industrial Relations Act 1967 (Act 177), minus income earned from alternative employment during the period; plus compensation in lieu of reinstatement at one month's salary per completed year of service. In practice, JPP conciliation settlements are typically agreed at a range between 3 and 12 months' salary, with higher amounts for long-serving employees with strong unfair dismissal grounds, and lower amounts for short-serving employees or where the employer has documented performance or misconduct grounds. Employees with 10+ years of service and clear unfair dismissal grounds may command settlements closer to the 24-month backwages cap.
The tax treatment of employment settlement payments in Malaysia depends on the nature and characterisation of the payment under the Income Tax Act 1967 (Act 53). Under Paragraph 25(1)(e) of Schedule 6 to the Income Tax Act 1967, a payment made in respect of loss of employment — which includes ex-gratia payments and compensation in lieu of notice — is exempt from income tax up to RM10,000 for each completed year of service with the same employer. For example, an employee with 5 completed years of service who receives an RM80,000 ex-gratia settlement would have RM50,000 (5 × RM10,000) exempt from tax, with the remaining RM30,000 potentially taxable. Payments that are characterised as unpaid wages, outstanding salary in lieu of notice, or accrued leave encashment are treated as employment income and are subject to income tax at the employee's marginal rate. The conciliation agreement should clearly specify the components of the settlement payment to enable correct tax treatment. Both the employer and employee should consult a tax adviser regarding the appropriate tax treatment.
Yes. A non-disparagement clause — requiring the employee not to make negative or derogatory statements about the employer, its management, products, or services to any person, including on social media — can be included in a conciliation agreement as a contractual term under the Contracts Act 1950 (Act 136). Such clauses are common in Malaysian employment settlements, particularly where the departure involved a dispute that attracted publicity or where the employer has reputational concerns. The clause should be mutual (binding on both parties) and must be reasonable in scope — an overly broad clause that prevents the employee from ever discussing any aspect of the employment may be challenged as an unreasonable restraint. The clause should specify the remedies for breach (typically injunctive relief and liquidated damages) and should be time-limited. Non-disparagement obligations are separate from confidentiality obligations regarding the settlement terms themselves, and both should be clearly drafted in separate clauses.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
Found an error? Let us knowRelated Documents
You may also find these documents useful:
Mutual Separation Agreement (Malaysia)
A Mutual Separation Agreement (MSA) for Malaysia that records the agreed terms of consensual termination of employment between employer and employee. Covers settlement payment, tax exemption under the Income Tax Act 1967, full release of claims, and EIS benefit notification under the Employment Insurance System Act 2017.
Termination Letter (Malaysia)
A formal Termination Letter for Malaysia used by employers to end an employee's contract with notice under the Employment Act 1955 (Act 265) and Industrial Relations Act 1967. Covers notice period, terminal benefits, and compliance with statutory requirements.
Industrial Court Claim Form (Malaysia)
A Malaysia Industrial Court Claim preparation form for employees making a representation for unfair dismissal, constructive dismissal, or breach of a collective agreement under Section 20 of the Industrial Relations Act 1967 (Act 177). Guides claimants through the key facts required for a Memorandum of Representation to the Director General of Industrial Relations.