Termination Letter: Definition, How to, and Templates

Letting an employee go is never easy.

Whether it's due to poor performance, misconduct, or company restructuring, handling the termination professionally is important.

A termination letter helps make the process clear, legal, and respectful.

In this guide, we will explain what a termination letter is, why it matters, how to write one and provide different templates for employers in Malaysia.

What is a Termination Letter?

A termination letter is a formal document that informs an employee that their job is ending.

It includes the reason for termination, the last working day, and other important details.

There are two main types of termination:

Termination with cause: When an employee is let go due to misconduct, poor performance, or violating company policies.
Termination without cause: When a company has to let go of employees due to restructuring, downsizing, or other business reasons.

A termination letter makes the process clear for both the employer and the employee, avoiding confusion or disputes.

What is Included in a Termination Letter?

A termination letter must contain key details to avoid misunderstandings. It should include:

Employee’s name and position, clearly state who is being terminated.
Date of termination
Reason for termination
Final salary and benefits. Inform the employee about their last paycheck, unused leave, or severance pay (if applicable).
Company property returns such as laptops or ID cards.
The next steps are what the employee needs to do before leaving, such as signing documents or handing over work.
Employer’s signature

How to Draft a Termination Letter?

Writing a termination letter requires careful wording. It should be professional, respectful, and to the point. Here’s how to write it:

1. Be clear about the reason for termination

Before writing the letter, decide why the employee is being terminated.

If it's due to performance issues, there should be records of warnings or performance reviews.

If because of misconduct, there should be evidence of the violation.

2. Use a formal and professional tone

The letter should be polite and professional. Avoid harsh words or personal opinions. Stick to the facts and keep it clear.

3. Mention previous warnings (if any)

Mention it in the letter if the employee has been warned before. This shows that the company followed proper procedures before making the final decision.

4. Provide clear instructions for the employee

Let the employee know what they need to do before their last day.

This may include returning company property, completing final paperwork, or meeting HR for the final paycheck.

5. Keep it respectful

Even if the termination is due to misconduct, the letter should remain professional.

A respectful approach leaves a better last impression and reduces the chances of conflict.

Why Use a Termination Letter in Malaysia?

A termination letter is not just a formality. It protects both the company and the employee. The importance of termination letters are:

Documentation for HR and legal protection. So, if an employee challenges the termination, a written record helps the company prove that the process was fair.
Clarity for the employee by explaining the reason for termination and what the employee needs to do next.
Follows Malaysian labor laws. Employers must comply with the Employment Act 1955 and the Industrial Relations Act 1967 to avoid legal disputes.

When Do You Use a Termination Letter?

A termination letter is needed in different situations, such as:

Misconduct: When an employee is involved in theft, harassment, or other serious violations.
Poor performance: An employee does not meet job expectations despite multiple warnings.
Company restructuring: The company needs to downsize or reorganize.
Policy violations: An employee breaks company rules.

What is the Legislation in Malaysia Regarding Termination Letters?

In Malaysia, employers must follow legal rules when ending an employee’s job.

The Employment Act of 1955 states that termination must have a valid reason, such as misconduct, poor performance, or company downsizing.

Employers must also give proper notice or pay instead.

The Industrial Relations Act 1967 protects employees from unfair dismissal.

If they believe they were wrongly terminated, they can file a complaint with the Industrial Court within 60 days.

Employers who do not follow the correct process may have to pay compensation or even reinstate the employee.

To avoid legal trouble, companies should keep records and provide a clear termination letter.

When is Final Termination Letter Sent to Employees?

A final termination letter is given when all other steps have been completed, such as warnings or disciplinary actions.

It clearly states that the employee's job has officially ended and outlines any last steps.

The letter may also remind employees about agreements they signed, such as confidentiality clauses that remain valid after leaving the company.

Templates: Termination Letter Based on Reasons

Template for Misconduct (e.g., insubordination, theft)

[Date]

Subject: Termination of Employment Due to Misconduct

Dear [Employee Name],

This letter serves as formal notice that your employment with [Company Name] is terminated effective immediately due to serious misconduct.

Despite previous warnings and discussions regarding workplace expectations, we have found that you [briefly describe the misconduct, e.g., engaged in theft, violated workplace safety rules, or displayed insubordination]. This behavior is a direct violation of company policy, and after a thorough review, we have determined that termination is necessary.

Your final paycheck will be processed and sent to you on [date]. Please return all company property, including [list of items such as laptop, ID card, keys] by [return deadline].

Should you have any questions about your final wages or benefits, you may contact [HR Representative Name] at [HR Contact Information].

Sincerely,
[Your Name]
[Your Position]
[Company Name]

Template for Poor Performance (failure to meet goals, KPIs)

[Date]

Subject: Notice of Termination Due to Performance Issues

Dear [Employee Name],

After multiple discussions regarding your job performance and several attempts to support your improvement, we regret to inform you that your employment with [Company Name] will end on [Last Working Day].

Over the past [time period], we have provided feedback, training, and performance improvement plans to help you meet your key responsibilities. However, your performance has not reached the expected standards, particularly in areas such as [specific performance issues, e.g., missed sales targets, failure to complete projects on time, or lack of required skills].

Your final paycheck, along with details regarding any outstanding benefits, will be provided on your last working day. Please return all company property, including [list items], before [return deadline].

We appreciate your efforts at [Company Name] and wish you the best in your future career. If you have any further inquiries, please contact [HR Representative Name] at [HR Contact Information].

Sincerely,
[Your Name]
[Your Position]
[Company Name]

Template for Redundancy or Downsizing

[Date]

Subject: Notice of Employment Termination Due to Redundancy

Dear [Employee Name],

We regret to inform you that due to business restructuring and operational needs, your position at [Company Name] has been made redundant. As a result, your employment will officially end on [Last Working Day].

This decision was not based on your performance but is a necessary measure due to [reason for redundancy, e.g., financial constraints, restructuring, company downsizing]. We greatly appreciate your contributions and dedication during your time with us.

As part of your exit process, you will receive [details of severance package if applicable, final paycheck, or any additional compensation]. Please return all company property by [return deadline].

We would be happy to provide a letter of recommendation to assist you in your job search. If you have any questions, please contact [HR Representative Name] at [HR Contact Information].

We sincerely thank you for your hard work and wish you success in your future endeavors.

Sincerely,
[Your Name]
[Your Position]
[Company Name]

Template for Breach of Company Policy (e.g., unethical behavior)

[Date]

Subject: Termination of Employment Due to Policy Violation

Dear [Employee Name],

This letter serves as official notice that your employment with [Company Name] is terminated, effective immediately, due to a serious violation of company policy.

After an internal review, it has been found that you have engaged in [describe the specific policy breach, e.g., sharing confidential information, engaging in workplace harassment, or violating ethical standards]. This behavior is in direct violation of our company’s policies, which you acknowledged upon your hiring. Given the severity of this matter, we have decided to end your employment.

Your final paycheck, including any applicable benefits, will be processed and made available by [date]. Kindly return all company-issued property before [return deadline].

If you need further clarification regarding this decision, you may contact [HR Representative Name] at [HR Contact Information].

Sincerely,
[Your Name]
[Your Position]
[Company Name]

Template for Final Termination Letter

[Date]

Subject: Final Notice of Termination

Dear [Employee Name],

After multiple discussions, performance reviews, and disciplinary actions, we regret to inform you that your employment with [Company Name] will be terminated, effective [Last Working Day].

Despite previous warnings regarding [mention repeated issues, such as failure to meet expectations, continuous policy violations, or inability to perform job duties], there has been no significant improvement. Given these circumstances, we are left with no option but to proceed with your termination.

Your final paycheck will be provided on [date], along with any relevant details regarding benefits or outstanding compensation. Please arrange to return company property, including [list items], by [return deadline].

If you need any clarification or assistance regarding your final settlement, please contact [HR Representative Name] at [HR Contact Information].

We appreciate your time with [Company Name] and wish you success in the future.

Sincerely,
[Your Name]
[Your Position]
[Company Name]

Letting an employee go is a difficult decision, but handling it properly is crucial.

Through a termination letter, an employer is able to provide clear communication, maintain professionalism, and help meet legal requirements.

Are you planning to find new candidates?

Start your hiring journey with Ajobthing today! Post your job ads, connect with top talents, and streamline your recruitment process with our easy-to-use platform.