Probationary Employment Contract (Malaysia)
PROBATIONARY EMPLOYMENT CONTRACT
Employment Act 1955 (Act 265) | EPF Act 1991 | Industrial Relations Act 1967 (Act 177)
This Probationary Employment Contract is entered into on [Contract Date]
BETWEEN:
(1) [Employer Name] (SSM No. [Employer SSM No.]) of [Employer Address] (hereinafter referred to as the "Employer"); AND
(2) [Employee Name] (MyKad/Passport No. [Employee IC/Passport]) of [Employee Address] (hereinafter referred to as the "Employee").
1. APPOINTMENT ON PROBATION
1.1 The Employer offers to employ the Employee on probation as [Job Title] in the [Department] department, commencing on [Commencement Date], at the primary place of work of [Place of Work].
1.2 The Employee's appointment is subject to a probationary period of [Probation Period] (the "Probation Period"). During the Probation Period, the Employer will assess the Employee's suitability, performance, and conduct.
1.3 The Employer reserves the right to extend the Probation Period for a further period if the Employee's performance or conduct is unsatisfactory, subject to a written notice of extension being issued prior to the expiry of the initial Probation Period.
2. SALARY AND STATUTORY CONTRIBUTIONS
2.1 During the Probation Period, the Employee shall receive a monthly salary of [Monthly Salary], plus [Allowances], payable on the last working day of each month.
2.2 The Employer and Employee shall contribute to the Employees Provident Fund (EPF) under the EPF Act 1991, SOCSO under the Employees' Social Security Act 1969, and EIS under the Employment Insurance System Act 2017 at the applicable statutory rates from the date of commencement.
3. PERFORMANCE REVIEW AND CONFIRMATION
3.1 The Employer shall conduct a performance review before the end of the Probation Period to assess whether the Employee has satisfactorily met the performance standards and demonstrated the conduct required for the role.
3.2 If the Employee's performance and conduct are satisfactory, the Employer shall issue a written confirmation letter confirming the Employee's appointment as a permanent employee on such terms as set out in a separate contract of employment or as notified in writing.
3.3 If the Employee's performance is unsatisfactory, the Employer may, subject to Clause 4, decline to confirm the appointment.
4. TERMINATION DURING AND AFTER PROBATION
4.1 During Probation: Either party may terminate this Contract by giving [Notice During Probation] written notice, or payment of salary in lieu thereof.
4.2 After Confirmation: Following confirmation, either party may terminate the employment by giving [Notice After Confirmation] written notice, subject to Section 12 of the Employment Act 1955.
4.3 Non-confirmation at the end of the Probation Period (whether or not expressly communicated) constitutes a dismissal and gives the Employee the right to file a representation under Section 20 of the Industrial Relations Act 1967 within 60 days. The Employer should issue a written notification of non-confirmation with reasons.
4.4 The Employer may terminate summarily for gross misconduct at any time, including during the Probation Period, following a fair inquiry process.
5. LEAVE AND WORKING HOURS
5.1 The Employee is entitled to annual leave, sick leave, and public holidays in accordance with the Employment Act 1955 from the date of commencement, prorated where applicable during the Probation Period.
5.2 Normal working hours shall not exceed 45 hours per week in accordance with Section 60A of the Employment Act 1955.
6. GOVERNING LAW
6.1 This Contract is governed by the laws of Malaysia, including the Employment Act 1955, the Industrial Relations Act 1967, and the Contracts Act 1950.
Employer (Authorised Signatory)
________________
Signature
Employee
________________
Signature
What Is a Probationary Employment Contract (Malaysia)?
A Malaysia Probationary Employment Contract is a legally binding employment agreement that incorporates a trial period — typically 3 to 6 months — during which both the employer and employee assess the suitability of the employment relationship before permanent confirmation. The probationary period is a legitimate feature of Malaysian employment law, recognised under the Employment Act 1955 (EA 1955) and by the Industrial Court of Malaysia as a period during which the employer evaluates the employee's suitability for the role.
The Employment Act 1955 does not expressly define or limit probationary periods, but Malaysian Industrial Court decisions have established that a probationary employee retains full statutory entitlements under the EA 1955 — including annual leave under Section 60E, sick leave under Section 60F, and EPF contributions under the EPF Act 1991 — from the first day of employment, not from the date of confirmation. The common misconception that probationary employees are not entitled to leave or benefits is legally incorrect.
The Industrial Relations Act 1967 (IRA 1967) protects probationary employees from arbitrary dismissal. A significant body of Industrial Court decisions has established that an employer who dismisses a probationary employee must have a valid reason for the dismissal (poor performance, unsatisfactory conduct) and must follow a fair process — including informing the employee of the areas in which they are deficient and giving them a reasonable opportunity to improve. The decision in Dreamland Corporation (M) Sdn Bhd v Choong Chin Sooi & Anor [1988] 1 ILR 213 is a seminal Industrial Court authority on the standard of fairness required in probationary dismissals.
The Employees Provident Fund Act 1991 (EPF Act 1991) requires employers to register all new employees — including probationers — with the EPF from the first day of employment. Mandatory EPF contributions are required from the first month of employment. A Probationary Employment Contract should expressly confirm these statutory contribution obligations.
A Probationary Employment Contract differs from a permanent Employment Contract primarily in the inclusion of a probation clause specifying the trial period, the performance review mechanism, the confirmation criteria, and the shortened notice period applicable during probation. Upon satisfactory completion of the probation period, the employer issues a confirmation letter and the employee's employment continues under the same contract on permanent terms.
The legal framework governing the Probationary Employment Contract (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 Probationary Employment Contract (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 Probationary Employment Contract (Malaysia)?
A Malaysia Probationary Employment Contract is needed whenever an employer wishes to incorporate a formal trial period into a new employment relationship to assess the employee's suitability before granting permanent employment status.
A Probationary Employment Contract is required when an employer hires a candidate for a skilled or specialist role — such as an engineer, accountant, IT developer, or marketing manager — and needs the flexibility to terminate the employment during the probation period if the employee's performance or conduct does not meet the required standard, with a shorter notice period than would apply after confirmation.
A Probationary Employment Contract is needed when a Malaysian company is scaling rapidly and hiring multiple employees, to confirm that all new hires go through a structured performance evaluation before permanent status is granted, reducing the risk of retaining underperforming employees.
A Probationary Employment Contract is required when the employer's industry involves regulated roles requiring professional qualifications — such as a finance company regulated by Bank Negara Malaysia under the Financial Services Act 2013 hiring a compliance officer — where the probation period allows verification that the employee holds and maintains the required licences and qualifications.
A Probationary Employment Contract is needed when the employer wishes to specify a probation period of 3 or 6 months that can be extended by up to 3 months if the employee's performance is borderline, giving the employer additional time to assess suitability before making a confirmation decision.
A Probationary Employment Contract is required when establishing clear confirmation criteria — objective performance targets, behavioural standards, or competency milestones — that the employee must meet to achieve permanent status. Clear confirmation criteria protect the employer from unfair dismissal claims if the probationer is not confirmed.
Parties in Malaysia should prepare a Probationary Employment Contract (Malaysia) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. 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). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.
What to Include in Your Probationary Employment Contract (Malaysia)
A valid Malaysia Probationary Employment Contract must contain the following essential elements to be enforceable and to withstand Industrial Court scrutiny.
Parties and Appointment: Full legal names of the employer (with SSM registration number) and the employee (with MyKad or passport number), the position title and department, and the commencement date of employment.
Probation Period: The duration of the probation period (typically 3 to 6 months from the commencement date), the conditions for extension (up to a further 3 months where performance is borderline), and the process by which the employer will notify the employee of confirmation or non-confirmation.
Confirmation Criteria: Objective performance standards, KPIs, or behavioural benchmarks that the employee must achieve to be confirmed in the role. Clear confirmation criteria are critical — Malaysian Industrial Court decisions consistently emphasise that an employer must communicate performance deficiencies to the probationer before declining to confirm.
Salary and Benefits During Probation: The monthly salary in Malaysian Ringgit (MYR/RM) during the probation period (which may differ from the confirmed salary), and confirmation that all statutory entitlements under the Employment Act 1955 — including annual leave under Section 60E and sick leave under Section 60F — apply from the first day.
EPF and SOCSO Contributions: Confirmation that the employer will register the employee with the EPF from the first day and make mandatory contributions under the EPF Act 1991 and the Employees' Social Security Act 1969 throughout the probation period.
Notice Period During Probation: A shorter notice period applicable during the probation period — typically 1 to 4 weeks — compared to the notice period that will apply after confirmation under Section 12 of the Employment Act 1955.
Performance Reviews: The frequency and format of performance reviews during the probation period, who conducts them, and the process for documenting feedback to the probationer.
Termination During Probation: The employer's right to terminate during the probation period for unsatisfactory performance or conduct, subject to the fair process required by the Industrial Relations Act 1967 and the Industrial Court's established principles for probationary dismissals.
Post-Probation Terms: A statement that upon successful completion of the probation period, the employee will be confirmed in the role on permanent terms, and that the confirmed salary, benefits, and notice period will apply from the confirmation date.
Additional compliance elements for a Probationary Employment Contract (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.
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year = {2026},
howpublished = {\url{https://forms-legal.com/malaysia/employment/contracts/employment-contract-probationary-malaysia}},
note = {Free legal document template. Based on Employment Act 1955 (Act 265)}
}Also available for these jurisdictions:
Frequently Asked Questions
Probationary employees in Malaysia are entitled to all statutory leave and EPF contributions from their first day of employment, regardless of their probationary status. The Employment Act 1955 does not distinguish between probationary and confirmed employees for the purposes of annual leave (Section 60E), sick leave (Section 60F), maternity leave (Section 37), or paternity leave. EPF contributions under the Employees Provident Fund Act 1991 must commence from the employee's first month of employment. Employers who deny probationary employees their statutory leave entitlements or fail to make EPF contributions commit offences under the Employment Act 1955 and the EPF Act 1991 respectively. The common belief that probationary employees receive no leave until confirmed is legally incorrect and may expose employers to liability.
A Malaysian employer cannot dismiss a probationary employee arbitrarily or without a valid reason. Malaysian Industrial Court decisions have consistently held that while probationary employees do not enjoy the same degree of security as confirmed employees, they cannot be dismissed without just cause and excuse under the Industrial Relations Act 1967. The employer must have a genuine reason for non-confirmation or termination — such as unsatisfactory work performance, poor attendance, or misconduct — and must have given the employee a fair opportunity to improve before dismissal. The seminal Industrial Court decision in Dreamland Corporation (M) Sdn Bhd v Choong Chin Sooi & Anor [1988] 1 ILR 213 established that an employer who fails to inform the probationer of their deficiencies before dismissal acts without just cause. Dismissed probationers may file representations to the Industrial Court under Section 20 of the Industrial Relations Act 1967 within 60 days.
The Employment Act 1955 does not set a maximum duration for probation periods in Malaysia, leaving this to the agreement of the parties. Standard probation periods in Malaysian practice range from 3 to 6 months. Many Malaysian Employment Contracts include a provision allowing the employer to extend the probation period by up to 3 months (one extension) if the employee's performance is borderline and the employer needs additional time to assess suitability. Malaysian Industrial Court decisions have generally accepted extensions of probation as lawful provided the extension is communicated to the employee in writing with reasons, the employee is informed of the specific deficiencies to be addressed, and the total probation period (including any extension) does not extend beyond what is reasonable for the role. Excessively long probation periods — such as 12 months or more — may be treated by the Industrial Court as a permanent employment relationship regardless of the label.
The notice period applicable during a probation period in Malaysia is a matter of contract — the parties may agree on a shorter notice period during probation than will apply after confirmation, reflecting the trial nature of the probationary arrangement. A probationary notice period of 1 to 4 weeks is common in Malaysian employment practice. The minimum notice periods under Section 12 of the Employment Act 1955 (4 weeks for less than 2 years service, 6 weeks for 2-5 years, 8 weeks for over 5 years) apply to all employees including those on probation, but since most probationary periods are less than 2 years, the 4-week minimum applies as the floor. Employers and employees may agree on a shorter probationary notice period provided it is not less than any statutory minimum applicable. Payment in lieu of notice is always an option under Section 12 of the Employment Act 1955.
If a probationary employee's performance is unsatisfactory, a Malaysian employer should follow a structured process to protect against an unfair dismissal claim under the Industrial Relations Act 1967. First, the employer should identify and document the specific performance deficiencies with reference to the employee's job description and confirmation criteria. Second, the employer should communicate the deficiencies clearly to the employee in writing — a performance improvement discussion or written warning — and provide a reasonable opportunity and timeline for improvement. Third, if performance does not improve sufficiently, the employer should conduct a formal performance review and document the outcome. Fourth, the employer may then extend the probation period with written notice explaining the reasons, or issue a notice of non-confirmation with the appropriate notice period or payment in lieu. Documentary evidence of the performance management process is critical if the matter proceeds to the Industrial Court.
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
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