How to Use a Letter of Indemnity in HR and Employee Requests

HR teams deal with a variety of employee requests every week. Some are simple, but others involve risk. To handle those cases properly, many companies in Malaysia use a letter of indemnity. It’s a useful tool to manage expectations, avoid misunderstandings, and protect the business from unexpected issues.

What Is a Letter of Indemnity?

A letter of indemnity is a formal written document used to protect a company or individual from legal or financial responsibility if something goes wrong.

In the workplace, this letter is often issued when an employee or external party makes a request that carries some level of risk, such as asking for a lost document to be replaced or requesting an early release of salary before clearance is complete.

The purpose of the letter is to make it clear who will be responsible if a problem arises. For example, if an employee loses an offer letter and asks for a replacement, they may be asked to sign a letter of indemnity confirming that the company is not liable if the original letter resurfaces or is misused.

This kind of letter helps protect employers from future claims, disputes, or losses. It also gives peace of mind when dealing with unusual requests or non-standard procedures. By having everything in writing, both sides understand their responsibilities clearly.

Functions of an Indemnity Letter in HR

In HR, a letter of indemnity plays several important roles, especially when handling non-standard or risky employee requests. Here are some of its key functions:

1. Protects the Company from Legal or Financial Risk

When an employee requests something outside normal procedure, such as getting their final salary before clearance or asking for a replacement document, the company could be exposed to future claims. The indemnity letter makes the employee take full responsibility, protecting the employer from any loss, misuse, or dispute later on.

2. Provides Written Proof of Responsibility

The letter shows that the employee or requester understands and agrees to the risks. This written proof can be useful if issues arise down the line. HR can refer back to it during internal reviews or in the event of legal complications.

3. Formalises Exceptions to Company Policy

In cases where the company decides to make a one-time exception, such as approving unpaid leave under special circumstances, the indemnity letter serves as a formal record. It confirms that the employee accepted the terms and that the company is not liable for any consequences.

4. Minimises Disputes and Misunderstandings

Having everything in writing reduces confusion. If an employee later questions the agreement or forgets what was discussed, HR can refer to the signed letter. This helps avoid verbal misunderstandings and keeps communication clear.

5. Supports Fair and Transparent HR Processes

Using indemnity letters shows that the company treats exceptional cases seriously and with structure. It promotes consistency and fairness, especially when dealing with cases that are outside the normal HR process.

Common HR Use Cases in Malaysia

In many Malaysian workplaces, HR teams deal with unusual or special employee requests that fall outside normal procedures. These cases can expose the company to risk, which is why a letter of indemnity is often used. Below are some of the most common situations where this letter comes in handy:

1. Early Release of Final Salary or Payslip

If an employee requests their final salary or payslip before completing clearance (like returning company assets or finishing formal handover), HR may require a letter of indemnity. The letter protects the company in case unresolved issues arise after payment has been made.

2. Lost Official Documents

Sometimes, employees lose important HR documents, like their offer letter, confirmation letter, or increment letter. If they request a replacement, an indemnity letter is used to confirm that the company is not responsible if the lost document is found and misused in the future.

3. Special Leave Requests with Potential Risk

If an employee asks for unpaid leave or emergency leave that goes against company policy or affects workflow, the company may approve it based on a signed letter of indemnity. This keeps things clear and helps avoid complications if the leave causes disruptions.

4. Issuing Reference Letters Under Special Conditions

Some employees may request a reference letter even if their service record has unresolved issues. In these cases, HR may issue the letter along with an indemnity letter to clarify that the company holds no liability over how the reference is used or interpreted.

Key Information to Include

To be useful and legally sound, an indemnity letter must include the right details to avoid confusion and protect the company if the letter is ever referred to later. Below are the elements that should be included in every letter:

1. Full Name and IC/Passport Number of the Requester

Always write the full legal name and identification number of the person making the request. This confirms exactly who is taking responsibility.

2. Clear Description of the Indemnity Clause

The letter must state what the company is being protected from. For example, “I hereby indemnify [Company Name] from any loss or liability that may arise from the replacement of the lost confirmation letter.”

3. Reason for the Request

State why the letter is being written. This could be a lost document, early release of salary, or special leave approval. The context should be simple but complete.

4. Formal Statement of Responsibility

Include a sentence where the requester clearly agrees to take all responsibility. For example, “I accept full responsibility and will not hold the company liable for any consequences related to this request.”

5. Date and Signature

The letter must be dated and signed by the requester. This makes the document valid and traceable.

6. Company Stamp or Sign-Off (if applicable)

Some letters might need to be signed by a representative of the company or stamped for record-keeping. This depends on your internal HR policy.

Templates / Examples

Sample 1: Lost Document (e.g. Confirmation Letter)

[Company Letterhead]

To: Human Resource Department

[Company Name]

[Company Address]

Date: [Insert Date]

Letter of Indemnity – Lost Confirmation Letter

I, [Full Name], NRIC/Passport No. [IC/Passport Number], hereby confirm that I have lost the original copy of my confirmation letter issued by [Company Name].

I kindly request that a duplicate confirmation letter be issued to me. I understand and agree that should the original document be found or misused in the future, I will take full responsibility and indemnify [Company Name] from any legal or administrative consequences arising from the duplicate issuance.

This letter serves as my formal agreement to hold [Company Name] harmless from any claims, disputes, or liabilities that may occur due to this request.

Sincerely,

[Signature]

[Full Name]

[Date]

Sample 2: Early Release of Final Salary Before Clearance

[Company Letterhead]

To: Finance and HR Department

[Company Name]

[Company Address]

Date: [Insert Date]

Letter of Indemnity – Early Release of Final Salary

I, [Full Name], NRIC/Passport No. [IC/Passport Number], hereby request the early release of my final salary from [Company Name] before the clearance process is completed.

I fully understand the risks involved and agree to indemnify [Company Name] from any loss, disputes, or liabilities that may arise in connection with this request. I confirm that I will complete all clearance requirements and return all company property in good condition.

This letter serves as my written acknowledgment and acceptance of full responsibility regarding this early release.

Sincerely,

[Signature]

[Full Name]

[Date]

FAQs

Is a letter of indemnity legally valid in Malaysia?

Yes, a letter of indemnity (LOI) is legally recognised in Malaysia as long as it is properly written and signed.

To be valid, the agreement must clearly outline the responsibilities, risks, and parties involved. It is important to include full names, identification numbers, dates, and signatures to show that everyone agrees voluntarily and understands the terms.

Should every indemnity letter be stamped?

Not all indemnity letters need to be stamped. In most internal HR situations, such as replacing lost documents or granting unpaid leave, a signature and date are enough.

However, for more serious or external matters, such as those involving financial risk or legal implications, HR may choose to stamp the letter with stronger formality and record-keeping.

Can HR create its own LOI templates for internal use?

Yes, HR departments can and should prepare their own letter of indemnity templates. These templates can help speed up internal processes and maintain consistency.

It’s best to have templates reviewed by a legal advisor to ensure that they meet the necessary legal standards and reflect company policy.

Is an indemnity letter needed for ex-employees?

Sometimes, yes. If a former employee requests documents after leaving the company, especially before all clearance steps are done, it’s wise to ask for a letter of indemnity. This helps protect the company in case the ex-employee misuses the documents or raises a dispute later.

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