A notice of termination is a formal notification, usually in writing, done by an employer or employee to signify the termination of the employee’s contract of service in a company. A notice period is the duration to make the employer aware of an employee’s termination of contract before the actual date of departure, usually stated in an employment contract. In simple terms, this means the date from when an employee hands in the notice to the actual date the employee leaves the company.
The duration of notice period generally varies depending on an employee’s position and work duration. Under Section 12(2) of the Employment Act 1955, it states that “the length of such notice shall be the same for both employer and employee and shall be determined by a provision made in writing for such notice in the terms of the contract of service, or, in the absence of such provision in writing, shall not be less than—
- four weeks’ notice if the employee has been so employed for less than two years on the date on which the notice is given
- six weeks’ notice if he has been so employed for two years or more but less than five years on such date
- eight weeks’ notice if he has been so employed for five years or more on such date
The notice period is essential for employers to settle any outstanding matters with the employee as well as provide a smooth transition when hiring a replacement. But what if an employee resigns without adhering to the contractual notice period, and just stops showing up to work without notice? Well, in such scenarios, the sum of money lost through the immediate resignation of an employee may be recovered by an employer, from the money earned by the employee during the contractual notice period, as stipulated in Section 13(1) of the Employment Act 1955. This action is known as ‘payment in lieu of notice’ or an indemnity of the notice period.
Essentially, there are 2 ways an employee is able to recover payment in lieu of notice from an employee:
- Labour Court
If the employee’s salary is not more than RM5000.00, an employer is able to recover the payment in lieu of notice through the labour court, in provisions to Section 69(2) (iii) of the Employment Act 1955.
There are lesser legal procedures involved in recovering payment in lieu of notice through the Labour Court and filling fees are not required. Based on the Employment Act 1955, there is no specific timelines to appeal for the payment through the Labour Court.
- Civil Court
If the employee’s salary is more than RM5000.00, an employer may head to the Civil Court to take legal action against the employee for breaching the contract. A court judgement will be held against the employee if the court is satisfied with the employer’s claim.
Before taking legal action through the Civil Court, an employer should issue a letter of demand to claim the payment in lieu of notice, in the case where the employee adheres to the demand and offers the payment to avoid legal actions taken against them.
