Introduction
Employee termination is a significant aspect of employment law that requires careful navigation to ensure compliance with Malaysian labour laws. This guide provides an overview of the legal requirements and severance packages related to employee termination in Malaysia, offering valuable insights for employers to handle the process lawfully and effectively.
Part 1: Understanding the Legal Framework
1.1 Employment Act 1955
The Employment Act 1955 is the primary legislation governing employment in Malaysia. It outlines the rights and obligations of employers and employees, including provisions on termination and severance pay.
1.2 Industrial Relations Act 1967
The Industrial Relations Act 1967 deals with the relationship between employers and employees, focusing on dispute resolution, unfair dismissal, and industrial actions.
1.3 Employment (Termination and Lay-Off Benefits) Regulations 1980
These regulations provide specific guidelines on the calculation and payment of termination and lay-off benefits, ensuring that employees receive fair compensation upon termination.
Part 2: Legal Process for Employee Termination
2.1 Grounds for Termination
1. Misconduct:
Termination due to employee misconduct must be substantiated with clear evidence and a fair inquiry.
2. Poor Performance:
Employers must provide adequate training and opportunity for improvement before terminating an employee for poor performance.
3. Redundancy:
Termination due to redundancy must follow a fair process, including proper consultation and selection criteria.
2.2 Notice Periods
Statutory Notice Periods: The Employment Act 1955 specifies minimum notice periods based on the length of service:
(a) Less than 2 years: 4 weeks' notice
(b) 2 to 5 years: 6 weeks' notice
(c) More than 5 years: 8 weeks' notice
Contractual Notice Periods: Employers and employees may agree on longer notice periods in the employment contract.
2.3 Procedural Fairness
1. Show Cause Letter:
Employers must issue a show cause letter to the employee, stating the reasons for considering termination.
2. Domestic Inquiry:
A domestic inquiry must be conducted to give the employee an opportunity to defend themselves.
3. Decision and Communication:
Based on the inquiry's findings, the employer makes a decision and communicates it formally to the employee.
Part 3: Calculating Severance Pay
3.1 Entitlement to Severance Pay
Under the Employment (Termination and Lay-Off Benefits) Regulations 1980, employees are entitled to severance pay if they have been employed for at least 12 months.
3.2 Severance Pay Calculation
Calculation Formula: Severance pay is calculated based on the employee's length of service and last drawn salary:
(a) Less than 2 years: 10 days' wages for each year of service
(b) 2 to 5 years: 15 days' wages for each year of service
(c) More than 5 years: 20 days' wages for each year of service
Example Calculation: An employee with 3 years of service earning RM2,000 per month would receive:
(15 days / 26 days) x RM2,000 x 3 years = RM3,461.54
Part 4: Additional Considerations
4.1 Unfair Dismissal Claims
Employees who believe they have been unfairly dismissed can file a claim with the Industrial Relations Department within 60 days of termination.
4.2 Retrenchment and Lay-Off Procedures
Employers must follow specific procedures for retrenchment and lay-offs, including notifying the Labour Department and offering fair compensation.
4.3 Mutual Termination Agreements
In some cases, employers and employees may agree to a mutual termination, which should be documented in a written agreement outlining the terms and severance benefits.
Conclusion
Navigating employee termination in Malaysia requires a thorough understanding of the legal framework and a fair approach to ensure compliance and mitigate risks. Employers must follow the prescribed legal processes and provide appropriate severance packages to maintain good employment practices and avoid potential disputes.
Σχόλια