What HR Must Do When an Employee Leaves the Company

When an employee leaves the company, HR responsibilities do not end with accepting a resignation letter. Whether the exit happens through resignation, termination, retirement, or mutual separation, HR must manage the process carefully to ensure legal compliance, smooth operations, and protection of business interests.

Poor exit handling is a common cause of disputes, unpaid entitlements, and statutory non-compliance.

What Does It Mean When an Employee Leaves the Company?

When an employee leaves the company, it means the employment relationship has formally ended, whether by choice or by decision of the employer.

For HR, this triggers a series of obligations, including final salary settlement, statutory reporting, system access control, and proper documentation. Mishandling any of these steps may expose the company to complaints, penalties, or disputes.

Types of Employee Exit

Different exit types involve slightly different obligations and risks, so HR should identify the exit type clearly from the start.

1. Resignation

The employee voluntarily leaves the company by serving notice or paying salary in lieu of notice. HR cannot reject a valid resignation once notice is properly given.

2. Termination

The employer ends the employment due to misconduct, performance issues, redundancy, or restructuring. Requires strict adherence to due process and documentation.

3. Retirement

The employee leaves due to age or company retirement policy. Often involves additional tax clearance and benefits considerations.

4. Mutual Separation

Both employer and employee agree to end the contract. Terms should be clearly documented and mutually acknowledged.

Notice Period Requirements

Notice periods determine how long the employee continues working before leaving.

Check the Employment Contract First

Most contracts specify notice length. HR must follow this unless both parties agree otherwise.

Apply Employment Act Minimums If the Contract is Silent

The Act sets minimum notice periods based on years of service, which HR must respect.

Less than 2 years: 4 weeks
2 to under 5 years: 6 weeks
5 years and above: 8 weeks

Respect Notice for Both Resignation and Termination

Employers are equally bound by notice obligations when terminating employment.

Understand That Resignation Cannot Be “Rejected”

Once notice is properly served, the resignation takes effect regardless of acceptance.

Final Pay & Entitlements

Final pay is often the most sensitive part of an employee exit.

Outstanding Salary

Salary must be paid up to the employee’s last working day.

Unused Annual Leave

If company policy allows, unused leave should be paid out in cash.

Overtime, Allowances, and Commissions

Any earned but unpaid amounts must be included in the final settlement.

Bonuses or Contractual Benefits

Only bonuses or benefits that are contractually due should be paid.

Final pay is generally expected to be settled within seven days after the last working day.

Statutory Contributions & Tax Forms

Statutory handling does not stop until the final payroll cycle.

HR must ensure:

EPF (KWSP) contributions are paid up to the last salary
SOCSO and EIS records are updated with the employee’s resignation date
Payroll systems reflect the correct final status

LHDN (Income Tax) Obligations

In certain situations, HR must:

Submit Form CP22A at least 30 days before departure
Withhold payments until tax clearance is received, especially when:
- The employee is retiring
- The employee is leaving Malaysia permanently
- PCB deductions were not properly made

Handover & Knowledge Transfer

Operational continuity is a business risk if exits are not managed properly. Ensure that HR include these things in the handover:

Clear handover of duties, files, and ongoing work
Documentation of key processes and contacts
Assignment of interim or replacement responsibility
Collection of company assets:
- Laptop
- Access cards
- Keys
- Documents

Using a signed clearance checklist helps protect the company.

Exit Interview

Exit interviews are optional but strongly recommended. Purpose of an exit interview:

Understand why the employee is leaving
Identify issues affecting retention
Gather feedback on management, workload, or culture

Examples of common questions include:

What influenced your decision to leave?
What could the company improve?
What did you value most about your role?

Exit interviews should be conducted professionally and without confrontation.

Update Records & IT Access

System and data security must be addressed immediately after exit.

Disable System Access

Email, HR systems, and internal platforms should be deactivated promptly.

Update HR Records

Last working day, exit reason, and benefits status must be accurately recorded.

Document Retention

Exit documents should be stored securely for future reference.

Employee Rehire Policy

Some employees may leave on good terms and be suitable for rehire in the future. HR should have a clear rehire policy outlining eligibility, cooling-off periods, and conditions.

Clear policies help ensure consistency and avoid subjective decisions later.

Best Practices for HR in Malaysia

Below are some best practices that HR can apply in the exit interview:

Communicate Clearly and Respectfully

Clear communication reduces misunderstandings and tension.

Confirm Exits in Writing

Acceptance of resignation and final arrangements should be documented.

Apply Procedures Consistently

Consistency helps defend decisions if disputes arise.

Keep Proper Records

Documentation is critical for compliance and future reference.

FAQs

What notice period is required when an employee leaves?

As stated in the employment contract or the Employment Act minimum.

What must HR include in final pay?

All outstanding salary and contractual entitlements.

Can the company withhold final salary if handover is incomplete?

Generally no, unless legally justified.

Does HR need to update EPF and SOCSO after an employee leaves?

Yes, statutory records must be updated.

Is an exit interview mandatory?

No, but it is considered good HR practice.

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