Termination Letter (Malaysia)

A Termination Letter in Malaysia states formally the matter at hand and what the writer asks the recipient to do.

Under Section 20(1) of the Industrial Relations Act 1967, an employee who has been dismissed, discharged, or not re-engaged may file a representation to the Director General of Industrial Relations claiming that the dismissal was without just cause or excuse. The Industrial Court of Malaysia, in exercising its jurisdiction, will scrutinise the Termination Letter for: whether the reason for termination is stated; whether the stated reason is substantiated by evidence; and whether natural justice requirements — including the show cause letter and domestic inquiry processes established in cases such as Goon Kwee Phoy v J&P Coats (M) Bhd [1981] 2 MLJ 129 — were observed.

A Termination Letter on grounds of redundancy or retrenchment must be distinguished from a termination for misconduct or poor performance. For retrenchment, the Employment (Termination and Lay-Off Benefits) Regulations 1980 require the employer to pay termination benefits based on length of service. For misconduct termination, the employer must have conducted a domestic inquiry under the Employment Act 1955 before issuing the termination. This Termination Letter template is for termination with notice for non-misconduct reasons such as restructuring or performance.

Employers in Malaysia must also comply with Section 63 of the Employment Act 1955, which requires the Labour Department to be notified of retrenchments involving 10 or more employees through the e-Pemberhentian portal at least 30 days before the retrenchment takes effect.

The legal framework governing the Termination Letter (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 Termination Letter (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.

A Termination Letter is needed in Malaysia whenever an employer decides to end an employee's employment, whether on grounds of redundancy, company restructuring, poor performance, or for any other lawful reason that does not involve misconduct.

A Termination Letter is required when a company undergoes a workforce reduction due to financial difficulties, merger, or operational restructuring, and individual employees are being retrenched under the Employment (Termination and Lay-Off Benefits) Regulations 1980.

A Termination Letter is needed when an employee has been placed on a Performance Improvement Plan (PIP) but has failed to meet the required performance targets, and the employer has exhausted the progressive discipline process before proceeding to termination.

A Termination Letter is required when an employee's fixed-term contract is not being renewed upon expiry, and the employer needs to formally confirm the non-renewal and the last day of service to avoid any implied permanent employment argument under the Industrial Relations Act 1967.

A Termination Letter is needed when a company is wound up or ceases business under the Companies Act 2016 (Act 777), and the liquidator or receiver must issue termination notices to all employees as part of the winding-up process.

A Termination Letter is required during business sales or transfers under Section 40 of the Employment Act 1955, which governs the continuity of employment obligations when a business is transferred, and employees who are not transferred to the new owner must be issued termination letters with corresponding terminal benefits.

Parties in Malaysia should prepare a Termination Letter (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.

A valid Termination Letter in Malaysia must contain the following essential elements to withstand scrutiny before the Industrial Court of Malaysia and to comply with the Employment Act 1955.

Employee identification: Full name, employee ID, designation, and department. The Industrial Court of Malaysia will refer to the Termination Letter to identify the parties and the role from which the employee was terminated.

Reason for termination: A clear statement of the reason for termination — such as retrenchment due to restructuring, redundancy, or non-renewal of fixed-term contract. While the Employment Act 1955 does not prescribe that reasons must be stated in all termination letters, the Industrial Court requires reasons to assess whether just cause or excuse exists under Section 20 of the Industrial Relations Act 1967.

Notice period or payment in lieu: The notice period being given under Section 12(1) of the Employment Act 1955 — four, six, or eight weeks depending on length of service — or the contractual notice period if longer, or confirmation of payment in lieu of notice under Section 12(3).

Last working day: The precise date, calculated from the notice date plus the notice period. This determines the terminal EPF contribution cut-off, the SOCSO coverage end date, and the payment deadline under Section 20 of the Employment Act 1955.

Termination benefits: For employees covered by the Employment (Termination and Lay-Off Benefits) Regulations 1980, the termination benefit entitlement based on length of service — 10 days' wages per year of service for the first two years, 15 days for years three to five, and 20 days for five years and above — must be acknowledged.

Return of company property: Specification of company property to be returned, access cards to be surrendered, and IT credentials to be deactivated.

Outstanding entitlements: Confirmation that accrued annual leave under Section 60E, outstanding salary, and other sums will be paid within three days of the last working day under Section 20 of the Employment Act 1955.

Additional compliance elements for a Termination Letter (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.