Termination is one of the most misunderstood – and sensitive – subjects in the landscape of Malaysian HR.

Employers are concerned about legal repercussions in terminating employees. HR managers dread the confrontation, and employees often perceive termination as personal failure. But when done right, termination isn’t all doom and gloom – it’s necessary, professional, and legally sound.

In this article, we’ll unpack the types of termination, the pitfalls employers encounter, and ways to implement fair termination without inviting legal trouble and mitigating its risks.

Different Forms of Termination

Let’s start by clarifying some key terms:

• Retrenchment: Termination of employment arising from operational restructuring, redundancy, or financial constraints.
• Voluntary Separation Scheme (VSS): An arrangement where the employee voluntarily agrees to leave the organisation in exchange for an agreed compensation package.
• Mutual Separation Scheme (MSS): A negotiated agreement where both employer and employee mutually consent to end the employment relationship, generally with compensation.
• Dismissal due to misconduct or performance: Termination initiated by the employer due to disciplinary breaches, violations of company policy, or failure to meet performance standards.

Each form is governed by distinct legal requirements and procedural safeguards yet in practice, the boundaries between them can blur, creating uncertainty and risk for both employers and employees.

Where Most Employers Go Wrong

A few scenarios we often come across are:

• Using “MSS” as a mask for retrenchment, without following retrenchment guidelines
• Confusing poor performance with misconduct
• Offering payment in lieu of notice without fulfilling due process

When processes aren’t followed, courts lean in favour of the employee – no matter how justified the termination may feel.

How to Get It Right: MECA’s Framework

✅ Identify the reason: Is it performance, misconduct, or redundancy? Don’t mix these up.
✅ Document, document, document: Verbal warnings aren’t enough.
✅ Follow due process: Show cause, inquiry, notice period – no shortcuts.
✅ Consult before acting: Legal advice after termination is damage control. MECA members get guidance before the mistake occurs.

Why Fairness Matters (Even When You’re Right)

Generally, employees don’t just sue because they feel that they were wronged – they sue because they feel disrespected or unheard.

Being humane doesn’t make you weak, it makes you smarter. It protects your brand and your reputation.

Want to avoid a messy termination?
MECA members get access to real-time support and 1-on-1 guidance from our consultants. For more information, contact us today via admin@meca.com.my or +603 2779 4227.