Can You Terminate a Probationary Employee in Malaysia? Know Your Legal Duties as an Employer

Terminating a new hire during probation is never an easy decision, but sometimes, it’s necessary due to some valid reasons. Handled properly, probationary termination in Malaysia can protect both employer and employee. It allows businesses to manage performance concerns or cultural mismatches early, without violating the Employment Act 1955 or the Industrial Relations Act 1967.

The probation period of employment in Malaysia serves as a trial phase to assess the employee’s performance, conduct, and long-term suitability. However, any employee dismissal during probation must still be based on just cause and excuse, not personal bias or unfair grounds.

What Is Probationary Termination?

Probationary termination refers to ending an employee’s service before the end of their probation period. It is usually simpler than terminating a confirmed employee, but Malaysian law still requires employers to act fairly and reasonably.

During this period, employers evaluate:

Job performance and competency
Attitude, attendance, and work ethic
Cultural fit and teamwork

Probationary employees are not exempt from their basic rights, including notice of termination and protection from discrimination. Employers under Malaysian law must provide at least one week’s notice if the employee has worked for a month or longer.

Step-by-Step Guide for Terminating Employees on Probation

Terminating a probationary employee must follow proper procedures to stay compliant and fair.

Below is a clear step-by-step process Malaysian employers can follow to ensure the termination is lawful and professionally handled.

1. Prepare a Written Notice of Termination

Issue a written letter that states the termination reason, last working day, and applicable notice period or payment in lieu.

2. Collect Supporting Evidence

Gather all performance records, attendance data, or disciplinary documentation to support your decision. This helps prove fair and lawful termination.

3. Schedule a Meeting with the Employee

Hold a one-on-one meeting before the probation period ends. Explain your observations, reasons for termination, and allow the employee to respond.

4. Communicate Termination Clearly

Keep the discussion factual and respectful. Avoid emotional or personal remarks. Confirm whether the employee will serve the notice period or receive payment instead.

5. File Termination Documents

Store all termination-related documents (letter, meeting notes, supporting records) in the HR file for compliance and potential audit reference.

Fair vs Unfair Reasons for Probationary Termination

Not every reason for ending a probation contract is acceptable under Malaysian law. So, how employers can distinguish between fair and unfair grounds for terminating a probationary employee?

Fair Reasons

Poor performance despite feedback and training
Repeated absenteeism or misconduct
Gross negligence or insubordination
Redundancy or operational restructuring
Legal restrictions preventing continued employment

Unfair Reasons

Pregnancy, maternity, or family leave requests
Health or safety complaints
Union participation or employee rights advocacy
Discrimination based on gender, race, religion, or age
Whistleblowing or reporting company wrongdoing

Employers should always document the just cause and excuse behind any termination. Unfair reasons can lead to disputes under Section 20 of the Industrial Relations Act 1967.

Performance Management During Probation

A probation period is meant for learning and evaluation, not immediate dismissal. Employers should use it to identify skill gaps, provide feedback, and give employees the opportunity to improve.

Best practices include:

Setting clear KPIs and job expectations from day one.
Conducting formal reviews midway and near the end of probation.
Documenting all coaching or training provided.

If performance doesn’t improve despite support, the employer has stronger grounds to terminate employee probation period fairly.

Notice and Appeal in Malaysia

Even during probation, employees are entitled to notice and fair treatment. Below are key points for employers to consider regarding termination notice periods and the proper handling of appeals.

Minimum notice period: 1 week (if employed for at least 1 month).
Longer notice periods may apply if stated in the contract.
Employers may offer payment in lieu of notice.
A domestic inquiry or internal appeal process may be provided to allow employees to challenge the termination decision.

Documenting the appeal process reinforces fairness and transparency as the key elements of probationary employee rights in Malaysia.

Key Considerations for Malaysian HR and Employers

Keep in mind the considerations below before making any final decision:

Always include probation terms (duration, evaluation process, and notice period) in the employment contract.
Avoid terminating without prior warning or performance documentation.
Ensure termination letters cite factual and measurable reasons.
Keep HR records updated for audit or dispute purposes.
Comply with the Employment Act 1955, Industrial Relations Act 1967, and other relevant regulations.

Free Template: Probationary Termination Letter (PDF)

Employers can prepare a formal letter for probationary termination Malaysia using this template below as a reference.

Free Download Template Probationary Termination Letter

FAQ

Can you terminate a probationary employee in Malaysia?

Yes, employers can terminate a probationary employee for fair reasons such as poor performance or misconduct, provided they follow due process and give the required notice.

What notice period is required for probationary termination?

At least one week’s notice if the employee has been employed for one month or more, or as stated in the employment contract.

Can probationary employees appeal their termination?

Yes. Some companies provide an internal appeal process. While not mandatory, it’s recommended for fairness and transparency.

What are unfair reasons for dismissing a probationary employee?

Discrimination, retaliation, or dismissing someone for lawful actions like taking medical leave are considered unfair and may be challenged.

What if an employee disputes the termination?

The employee can raise the matter under Section 20 of the Industrial Relations Act 1967, where the Industrial Court determines if the dismissal was with or without “just cause and excuse.”

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