▷ Effective 1 May 2025, the Labour Ordinance of Sabah (Amendment) Act 2025 and the Labour Ordinance of Sarawak (Amendment) Act 2025 harmonise key labour standards with Peninsular Malaysia. These amendments are part of Malaysia’s efforts to align national labour laws with the standards set out in the International Labour Organisation (ILO) Declaration on Fundamental Principles and Rights at Work 1998.
▷ Note should be taken of the Code of Conduct for Industrial Harmony 1975 (CCIH), 1975, which is an Agreement between the Ministry of Human Resources and the main social partners. The aim of the Code is "to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony". Although it is not a binding instrument, it is, however, taken into consideration by the Industrial Court in retrenchment cases.

No statutory provisions were found in the examined legislation in this respect.

▶ Employment Act (EA)
▷ See the definition of the notion of "employee" under section 2(1) EA and under Subsection 2(1) of the First Schedule EA.
→ Section 2B EA provides that the Minister may, by order, exempt or exclude, subject to such conditions as he may deem fit to impose, any person or class of persons from all or any of the provisions of this Act.
→ Under sub-section 2(1)(1) of the First Schedule EA, "employee" refers to: Any person, irrespective of his occupation, who has entered into a contract of service with an employer under which such person’s wages do not exceed two thousand ringgit a month.

▶ Employment Act (EA)
→ Section 10(1) EA indicates that: A contract of service for a specified period of time exceeding one month or for the performance of a specified piece of work, where the time reasonably required for the completion of the work exceeds or may exceed one month, shall be in writing.

No statutory limitation found in the legislation reviewed.

No statutory limitation found in the legislation reviewed.

▷ No reference to probationary period in the legislation.
▷ In practice, employees on probation enjoy the same rights as a permanent employee, and they cannot be terminated without just cause.

No general statutory obligation to provide reasons for dismissal exists. However, an employee who considers that he has been dismissed without just cause or excuse may make representations for reinstatement under the Industrial Relations Act.
▶ Employment Act (EA)
→ Section 10(2) EA indicates that: Every written contract of service shall include a clause setting out the manner in which the contract may be terminated by either party.
▶ Industrial Relations Act (IRA)
→ Section 20(1) IRA provides that "where a workman, irrespective of whether he is a member of a trade union of workmen or otherwise, considers that he has been dismissed without just cause or excuse by his employer, he may make representations in writing to the Director General to be reinstated in his former employment; (...)".

▶ Employment Act (EA)
▷ Pregnancy and maternity
→ Section 37(4) EA indicates that: Any employer who terminates the service of a female employee during the period in which she is entitled to maternity leave commits an offence:
Provided that for the purpose of this section, such termination shall not include termination on the ground of closure of the employer’s business.
New section 41A introduces stronger restrictions on the termination of pregnant female employees
→ Section 41A EA (as introduced by the Employment (Amendment) Act 2022, in force 1 January 2023) indicates that:
(1) Where a female employee is pregnant or is suffering from an illness arising out of her pregnancy, it shall be an offence for her employer to terminate her services or give her notice of termination of service, except on the grounds of—
(a) wilful breach of a condition of the contract of service under subsection 13(2);
(b) misconduct under subsection 14(1); or
(c) closure of the employer’s business.
(2) Where the service of a female employee under subsection (1) is terminated, the burden of proving that such termination is not on the ground of her pregnancy or on the ground of illness arising out of her pregnancy shall rest on the employer.
→ Section 42(1) EA stipulates that: Where a female employee remains absent from her work after the expiration of the eligible period as a result of illness certified by a registered medical practitioner to arise out of her pregnancy and confinement and to render her unfit for her work, it shall be an offence, until her absence exceeds a period of ninety days after the expiration of the eligible period, for her employer to terminate her services or give her notice of termination of service. (...).
▶ Industrial Relations Act (IRA)
▷ Union membership and activities
→ Section 5(1)(d) IRA states that: No employer or trade union of employers, and no person acting on behalf of an employer or such trade union shall— dismiss or threaten to dismiss a workman, injure or threaten to injure him in his employment or alter or threaten to alter his position to his prejudice by reason that the workman—
(i) is or proposes to become, or seeks to persuade any other person to become, a member or officer of a trade union; or
(ii) participates in the promotion, formation or activities of a trade union; (...).
→ Section 59(1) indicates that:
(1) Subject to subsection 5(2), it shall be an offence to dismiss a workman or injure or threaten to injure him in his employment or alter or threaten to alter his position to his prejudice, by reason of the circumstances that the workman—
(a) is, or proposes to become, an officer or member of a trade union or of an association that has applied to be registered as a trade union;
(b) is entitled to the benefit of a collective agreement or an award;
(c) has appeared or proposes to appear as a witness, or has given or proposes to give any evidence in any proceeding under this Act;
(d) being a member of a trade union which is seeking to improve working conditions, is dissatisfied with such working conditions;
(e) is a member of a trade union which has served an invitation under section 13 or which is a party to negotiations under this Act or to a trade dispute which has been reported to the Director General in accordance with Part V or Part VII;
(f) has absented himself from work without leave for the purpose of carrying out his duties or exercising his rights as an officer of a trade union where he applied for leave in accordance with section 6 before he absented himself, and leave was unreasonably deferred or withheld; or
(g) being a member of a panel appointed under section 21 has absented himself from work for the purpose of performing his functions and duties as a member of the Court and has notified the employer before he absented himself.
(2) An employer who contravenes any of the provisions of subsection (1) shall be guilty of an offence and shall be liable, on conviction, to imprisonment for a term not exceeding one year or to a fine not exceeding two thousand ringgit or to both.
⫸ Note: Prior to the 2012 amendments, the maternity leave provisions applied to female employees based on their wages. As of April 2012, a new Section 44A was introduced in the EA, extending maternity leave entitlements to all female employees, regardless of their wages.

▶ Employment Act (EA)
▷ Pregnancy and maternity
→ Section 37(4), section 41A and section 42(1) EA provide special protection against dismissal during maternity leave and related pregnancy-related illness.
▷ Nationals
The EA provides special protection for local (national) employees against termination for the purpose of employing foreign workers.
→ Section 60M EA stipulates that: No employer shall terminate the contract of service of a local employee for the purpose of employing a foreign employee.
→ Section 60N EA indicates that: where an employer is required to reduce his workforce by reason of redundancy necessitating the retrenchment of any number of employees, the employer shall not terminate the services of a local employee unless he has first terminated the services of all foreign employees employed by him in a capacity similar to that of the local employee.
▶ Industrial Relations Act (IRA)
▷ Union membership and activities
→ Section 5(1)(d) and section 59(1) IRA protect against dismissal or unfavourable treatment on grounds of trade union membership, intention to join a trade union, or performance of lawful trade union activities.

▶ Employment Act (EA)
→ Section 12(1) EA indicates that: Either party to a contract of service may at any time give to the other party notice of his intention to terminate such contract of service.
→ Under sections 12(3) and 12(4) EA, employees are entitled to, and the employer is required to give to the employee, notice of termination of service in writing.
→ Under section 57 EA, domestic employees are entitled to notice of termination of their contracts (14 days).

▶ Employment Act [EA]
→ Under section 12(4) EA, notice of termination of a contract of service must be given in writing.
→ Under Section 12(2) EA: The following statutory minimum notice periods apply to all dismissals (except summary dismissal for misconduct):
▻ 4 weeks’ notice for employees with less than 2 years of service;
▻ 6 weeks’ notice for employees with 2 to 5 years of service;
▻ 8 weeks’ notice for employees with more than 5 years of service.
▷ Note: These periods do not apply in some cases (e.g., wilful breach, misconduct or apprenticeship contracts).
▷ Exception: Termination of contract of domestic employees.
→ Section 57 EA indicates that: Subject to any express provision to the contrary contained therein, a contract to employ and to serve as a domestic employee may be terminated either by the person employing the domestic employee or by the domestic employee giving the other party fourteen days’ notice of his intention to terminate the contract, or by the paying of an indemnity equivalent to the wages which the domestic employee would have earned in fourteen days:
▻ Provided that any such contract may be terminated by either party without notice and without the paying of an indemnity on the ground of conduct by the other party inconsistent with the terms and conditions of the contract.

▷ No statutory definition of "collective dismissal" was found in the legislation examined. However, under the "Code of Conduct for Industrial Harmony (CCIH), 1975", Paragraphs 20 to 24 provide for Redundancy and retrenchment.
▻ The CCIH is an Agreement "between representatives of the Malaysian Trades Union Congress and the Malayan Council of Employers' Organisations held under the auspices of the Ministry of Labour and Manpower". The aim of the Code is "to lay down principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony".
▻ Although the CCIH is not a binding instrument, it is, however, taken into consideration by the Industrial Court in retrenchment cases.

▷ No statutory provisions were found in this respect.
▶ Code of Conduct for Industrial Harmony (CCIH) - (not binding)
→ Paragraph 20 CCIH indicates that: In circumstances where redundancy is likely, an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
(i) limitation on recruitment;
(ii) restriction of overtime work;
(ii) restriction of work on the weekly day of rest;
(iv) reduction in the number of shifts or days worked a week;
(v) reduction in the number of hours of work;
(vi) re-training and/or transfer to other department/work.
→ Paragraph 21 CCIH states that: The ultimate responsibility for deciding on the size of the workforce must rest with the employer, but before any decision on reduction is taken, there should be consultation with the workers or their trade union representatives on the reduction.

▶ Employment Retrenchment Notification 2004 (Borang PK) - gazetted under P.U. (B) 430/2004 on November 11, 2004.
→ Pursuant to the Employment (Retrenchment) Notification 2004 [PU(B) 430], there is a mandatory reporting regulation in Malaysia. It legally requires employers to submit the PK Form (Borang PK) to the nearest Department of Labour office before executing any retrenchments, voluntary separation schemes (VSS), temporary layoffs, or pay cuts. (Official Portal of the Ministry of Human Resources: https://jtksm.mohr.gov.my/en/frequently-asked-questions/employees-retrenchment).
▶ Code of Conduct for Industrial Harmony (CCIH) - (not binding)
→ Paragraph 20 CCIH indicates that: In circumstances where redundancy is likely, an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
(i) limitation on recruitment;
(ii) restriction of overtime work;
(ii) restriction of work on the weekly day of rest;
(iv) reduction in the number of shifts or days worked a week;
(v) reduction in the number of hours of work;
(vi) re-training and/or transfer to other department/work.

▷ No statutory provisions.
▶ Code of Conduct for Industrial Harmony (CCIH) - (not binding)
→ See above - Paragraphs 20 and 21 of the CCIH.

No statutory provisions were found in the examined legislation in this respect.

No statutory provisions were found in the examined legislation in this respect.

▶ Employment Act [EA]
→ Section 60N EA indicates that: Where an employer is required to reduce his workforce by reason of redundancy necessitating the retrenchment of any number of employees, the employer shall not terminate the services of a local employee unless he has first terminated the services of all foreign employees employed by him in a capacity similar to that of the local employee.
▶ Code of Conduct for Industrial Harmony (CCIH) - (not binding)
→ Section 22(b) of the CCIH provides that: The employer should select employees to be retrenched in accordance with objective criteria. Such criteria, which should have been worked out in advance with the employees' representatives or trade union, may include:
(i) The need for the efficient operation of the establishment or undertaking
(ii) Ability, experience, skill and occupational qualifications of individual workers required by the establishment or undertaking under part (i)
(iii) Consideration for length of service and status (non-citizens, casual, temporary, permanent)
(iv) Age
(v) Family situation
(vi) Such other criteria as may be formulated in the context of national policies.
▶ Court of Law
The courts have required employers to operate the "last on, first off" principle when retrenching employees, unless there are sound and valid reasons for departing from this principle (see i.e: East Asiatic v. Ong Wai Beng, Award 24/87).

▷ No statutory provisions.
▶ Code of Conduct for Industrial Harmony (CCIH) - (not binding)
→ Paragraph 23 of the CCIH indicates that: Employees who are retrenched should be given priority of engagement/re-engagement, as far as is possible, by the employer when he engages workers.

▷ No statutory provisions.
▶ Code of Conduct for Industrial Harmony (CCIH) - (not binding)
→ Paragraph 20 CCIH indicates that: In circumstances where redundancy is likely, an employer should, in consultation with his employees' representatives or their trade union, as appropriate, and in consultation with the Ministry of Labour and Manpower, take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
(i) limitation on recruitment;
(ii) restriction of overtime work;
(ii) restriction of work on the weekly day of rest;
(iv) reduction in the number of shifts or days worked a week;
(v) reduction in the number of hours of work;
(vi) re-training and/or transfer to other department/work.
→ Paragraph 22(a) CCIH provides that: If retrenchment becomes necessary, despite having taken appropriate measures, the employer should take the following measures:
(i) Giving as early a warning as practicable to the workers concerned
(ii) Introducing schemes for voluntary retrenchment and retirement and for payment of redundancy and retirement benefits
(iii) Retiring workers who are beyond their normal retirement age
(iv) Assisting, in co-operation with the Ministry of Human Resources, the workers to find work outside the undertaking
(v) Spreading termination of employment over a longer period
(vi) Ensuring that no such announcement is made before the workers and their representatives or trade union have been informed.

▶ Judicial Development (2022): In 2021, the Court of Appeal in Malaysia has in the case of "Ng Chang Seng v. Technip Geoproduction (M) Sdn Bhd & Anor" reemphasized and set out the key legal principles for retrenchment.
▷ For an employer to justify dismissal on the basis of redundancy, the following criteria ought to be satisfied:
▻ There must be actual redundancy
▻ There must be fair selection of the employee for retrenchment; and
▻ A fair procedure must be carried out before the retrenchment exercise takes place.
- Employers should take note of the key principles of retrenchment and observe the Code of Conduct of Industrial Harmony (especially clauses 20 – 24) when carrying out a retrenchment exercise. The Court of Appeal in Ng Chang Seng v. Technip Geoproduction (M) Sdn Bhd & Anor is of the view that although the Code has no force of law, the same “is still the gold standard by which a company’s action may be measured against to see if the whole exercise of retrenchment had been carried out bona fide and that every attempt had been made to explore alternatives before the termination on account of retrenchment."
[See: https://www.elaw.my/JE/01/JE_2021_03.html] - (Paragraph 91)

▶ Employment (Termination and Lay-off Benefits) Regulations 1980
→ Section 6(1) provides for statutory termination or lay-off benefits payment on the following scale:
(a) Ten days’ wages for every year of employment under a continuous contract of service with the employer if the employee has been employed by that employer for a period of less than two years;
(b) Fifteen days’ wages for every year of employment under a continuous contract of service with the employer if the employee has been employed by that employer for two years or more but less than five years;
(c) Twenty days’ wages for every year of employment under a continuous contract of service with the employer if the employee has been employed by that employer for five years or more, and pro-rata as respects an incomplete year, calculated to the nearest month.
▻ These benefits apply only to employees who have completed at least one year of continuous service (section 3(1)) and do not apply to dismissal for misconduct after due inquiry (section 4).
▻ The payment is in addition to any payment to which the employee may be entitled under Section 13 of the Employment Act (section 6(4)).

▶ Employment (Termination and Lay-off Benefits) Regulations 1980
▷ The same statutory benefit as severance pay above (see section 6(1) of the Employment (Termination and Lay-off Benefits) Regulations 1980) applies.

The Regulations provide a single statutory benefit that covers both ordinary termination (severance) and redundancy/lay-off situations. No additional or separate redundancy payment exists under the current legislation.