EMPLOYMENT & HR LAW
Ending employment in Malaysia — resignation, termination and dismissal
The main ways a job can end, what the law asks of you on each route, and the claim that can follow — with the Department of Industrial Relations' 2023 claim figures.
A Malaysian employer can end employment with written notice, with pay in lieu of notice, or, for misconduct, by dismissal after a due inquiry. Notice alone never settles it. The Department of Industrial Relations says every termination or dismissal needs a real reason and a fair process, and a dismissed employee has sixty days to ask for reinstatement under section 20 of the Industrial Relations Act 1967.
- Notice is not a reason. The Department of Industrial Relations states that an employer can neither dismiss nor terminate by contract without just cause or excuse.
- Misconduct needs an inquiry first. Section 14 of the Employment Act allows dismissal without notice only after due inquiry.
- A resignation can be a dismissal if the employer broke a fundamental term of the contract. The Federal Court applies the “contract test”.
- The claim window is sixty days from dismissal, or sixty days from the end of the notice period when notice was given.
- 3,914 reinstatement claims were reported in 2023. Misconduct (822), retrenchment (821) and termination by notice alone (712) topped the list.
This page ties together the exit rules in our Employment Act 1955 Malaysia employer guide. The Employment Act sets how a contract ends. The Industrial Relations Act decides whether it ended fairly.
Five main exit routes
What are the main ways employment can end in Malaysia?
Employment in Malaysia ends through five main routes: the employee resigns, the employer terminates with notice, the employer dismisses for misconduct, the job is made redundant, or the employee leaves because the employer broke the contract. Each has its own rules under the Employment Act 1955 or case law. Fixed-term expiry, non-confirmation and retirement follow separate rules.
| Route | Who acts | What the law asks first | Claims reported in 2023 |
|---|---|---|---|
| Resignation | Employee | Written notice (s. 12) or pay in lieu (s. 13(1)) | 28 voluntary |
| Termination with notice | Employer | Written notice or pay in lieu, and still a just cause | 712 termination simpliciter |
| Dismissal for misconduct | Employer | Due inquiry before any penalty (s. 14(1)) | 822 misconduct |
| Retrenchment | Employer | Just cause (see retrenchment guide) | 821 retrenchment |
| Constructive dismissal | Employee, after an employer breach | No fundamental breach of the contract (contract test) | 364 constructive dismissal; 207 forced resignation |
Claims: Department of Industrial Relations Malaysia, reinstatement claims by cause, 2023.
Retrenchment steps and termination benefits are covered in our retrenchment and VSS procedure guide.
Termination simpliciter
Can an employer end employment just by giving notice?
No. Under the Employment Act, a Malaysian employer can give notice or pay wages in lieu, but notice only sets the timing. The Department of Industrial Relations states that an employer cannot dismiss, or even terminate by contract, except with just cause or excuse. A notice termination with no reason can still go to the Industrial Court.
Section 12 requires notice in writing, the same length for both sides. If the contract says nothing, the minimum is four weeks under two years' service, six weeks from two to under five years, and eight weeks at five years or more. The day notice is given counts as part of it. Our notice-period guide covers how to draft the clause.
The Department of Industrial Relations quotes the Federal Court on why notice is not enough:
“We do not see any material difference between a termination of the contract of employment by due notice and a unilateral dismissal of a summary nature. The effect is the same and the result must be the same.”
— Raja Azlan Shah CJ, Goon Kwee Phoy v J & P Coats (M) Bhd, as quoted by the Department of Industrial Relations
Termination simpliciter, meaning notice with no reason given, produced 712 reinstatement claims in 2023.
Inquiry before penalty
What must an employer do before dismissing for misconduct?
Under section 14(1) of the Employment Act 1955, a Malaysian employer may dismiss without notice, downgrade or impose a lesser penalty for misconduct only after due inquiry. During that inquiry the employer may suspend the employee for up to two weeks on at least half pay. The inquiry comes before the penalty, never after it.
Misconduct produced 822 reinstatement claims in 2023, more than any other cause. Poor performance is a separate category and produced 411 more. The Department of Industrial Relations states that all terminations or dismissals must be with substantive justification and procedurally fair. Our domestic inquiry guide covers the steps, and the probation termination guide covers staff who have not been confirmed.
When leaving is not voluntary
When does a resignation count as a dismissal?
A resignation counts as a dismissal in Malaysia when the employee leaves because the employer committed a fundamental breach of the employment contract. The Federal Court, in Tan Lay Peng v RHB Bank, applies the “contract test”, not a reasonableness test. A transfer that amounted to a demotion has qualified, and an employee who keeps working without protest for too long can lose the claim.
In 2025, in Saharunzaman Barun v Perodua Sales, the Court of Appeal, following the Federal Court in Tan Lay Peng, stated that the test for constructive dismissal is the “contract test”, not the “reasonableness test”. In CIMB Bank v Ahmad Suhairi, the Court of Appeal held that moving the claimant back to tasks he did before becoming Area Commercial Manager was a demotion, even with no pay cut or change in grade. Shearn Delamore notes that a delay of one month has been held too long to claim, and that working on without protest can be treated as accepting the breach.
The Employment Act adds one breach of its own: under section 15(1), an employer who fails to pay wages as the Act requires is deemed to have broken the contract. Constructive dismissal (364) and forced resignation (207) together made up 571 of 2023's 3,914 claims, about 15%.
Sixty days, then conciliation
How does an unfair dismissal claim work, and how quickly must it be filed?
A Malaysian employee who believes they were dismissed without just cause or excuse can file an unfair-dismissal claim, formally a written representation for reinstatement, with the Department of Industrial Relations under section 20 of the Industrial Relations Act 1967. It must be filed within sixty days of the dismissal. If the employee was dismissed with notice, the sixty days run from the end of the notice period.
Advocates are not allowed at the Department's conciliation meetings, and a settlement is recorded in a Memorandum of Agreement. If settlement looks unlikely, the Director General refers the case to the Industrial Court for an award. In 2023, 2,806 of the 4,299 claims resolved, about two in three, ended at conciliation, and 1,493 went to the Industrial Court. Resolved claims include carry-overs from earlier years.
The Industrial Court can award backwages capped at twenty-four months of last-drawn salary, or twelve months for a probationer. The section 20 filing itself is strictly a request for reinstatement. For constructive dismissal, Wen Jie & Co notes that the 60 days may start from the resignation date.
Five checks
What should an employer check before an exit letter goes out?
Before an exit letter goes out, a Malaysian employer should have five things in place: a written reason, an inquiry before any misconduct penalty, written notice, a contract test on any transfer or re-designation, and a diary date for the claim window. Each one leaves a written record the employer can produce later.
- Write the reason down first. Every termination needs substantive justification, not just a notice period.
- Hold the inquiry before the penalty for misconduct, with any suspension capped at two weeks on at least half pay.
- Give notice in writing. The day it is given counts towards the period.
- Test every transfer or re-designation against the contract. Moving someone back to earlier duties can be a demotion, even at the same pay.
- Diarise sixty days from the dismissal or end of notice.
Carriera Academy, an HRD Corp Approved Training Provider, runs HRD Corp-claimable public workshops on employment law and payroll. See the Employment Act, HR and payroll course. When an exit leaves a seat empty, our recruitment team places permanent white-collar staff across Peninsular Malaysia.
Still have questions?
Ending employment — employer FAQ
Can an employee resign without giving notice?
How long does a dismissed employee have to file a claim?
Can a probationer claim unfair dismissal?
Sources: notice, pay in lieu, due inquiry, suspension and deemed breach from the Employment Act 1955, JTKSM consolidated text; the sixty-day window, the referral and the backwages caps from the Industrial Relations Act 1967, Attorney General's Chambers reprint; the just-cause principle and the Federal Court quotation from the Department of Industrial Relations' article on notice terminations; conciliation from its section 20 page and FAQ; all 2023 claim figures from its Statistics and Key Indicators 2023; the constructive-dismissal cases from elaw.my headnotes; the one-month delay point from Shearn Delamore; the resignation-date point from Wen Jie & Co. Reviewed 14 September 2026. General information for employers, not legal advice.
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