Employers sometimes suddenly realise their employment contract, copied from an online template, does not contain a termination clause.
![In its absence, the Employment Act 1955 offers default provisions that grant some measure of structure, but they are no substitute for a tailored clause as shown in this guide where we cover:
what the law provides when a contract is silent
where default provisions fail to account for specific needs, and
benefits of a termination clause tailored to a business
Let’s begin.
Default provisions under the Employment Act
A termination clause mainly specifies two things: Minimum notice periods and grounds for termination.
Without a termination clause, employers instead rely on Sections 12 and 14 of the Employment Act 1955 which also address these, albeit much more broadly.
Section 12: Statutory notice period
Section 12(2) of the Employment Act sets out the following statutory notice periods:
Less than 2 years: 4 weeks’ notice
2 years or more but less than 5 years: 6 weeks' notice
5 years or more: 8 weeks' notice
Why the default provision may not always work
The notice periods are based solely on length of service, but in practice, employers are far more likely to set notice periods based on the strategic importance of a role.
For instance, managerial positions usually need more than eight weeks' notice to allow time for a proper replacement and handover.
Also, these statutory notice periods apply equally to probationers. Employers who wish to impose a shorter notice period during probation must use a specific clause in the contract.
Here’s a recent case illustrating this.
Thurka Thevi Mohan v. Ace Greencemt Venture (M) Sdn Bhd [2025] 2 ILR 23
This case concerns the termination of a probationer under a contract that allowed either party to terminate the employment during probation by giving one day’s notice or salary in lieu. The Industrial Court upheld the dismissal on just cause and excuse, primarily due to poor performance, negative attitude, and frequent absenteeism.
Key Facts: The employee was employed as a Logistics Executive, under a 6-month probation. Her employment contract expressly stated:
“During the period of probation, your employment can be terminated at any time by either side giving one day’s notice in writing or pay in lieu….”
Despite multiple verbal and written warnings, performance review, and guidance, the employee continued to:
Show poor performance,
Take frequent MCs and emergency leave (especially on Fridays and Mondays),
Receive complaints from internal and external parties (client).
The Court found the termination valid after assessing the surrounding circumstances and noted that the grounds for dismissal were justified.
Section 14: Statutory grounds for termination on the grounds of misconduct
Section 14 of the Employment Act 1955 permits employee dismissal without notice (following due inquiry) on the grounds of ‘misconduct inconsistent with the fulfilment of the express or implied conditions of service’.
To put it simply, if your actions violate your job responsibilities or breach your employment duties, your employer can dismiss you on the spot (after due inquiry).
Why the default provision may not always work
Section 14 does not expressly define what constitutes “misconduct,” leaving it open to interpretation.
This lack of clarity creates legal uncertainty as employers struggle to justify dismissals, while employees can more easily claim unfair dismissal under the Industrial Relations Act 1967.
Benefits of a tailored termination clause
Picture 1029107819, Picture
While statutory rules under the Employment Act provide a basic safety net, a proper termination clause allows employers to set their own:
notice terms based on seniority or role criticality, and
valid grounds for termination
Key takeaway: If you have spotted this gap in your employment contract, it’s a good idea to have it addressed sooner rather than later. Speak to us today and we would be happy to help.](https://lpplaw.my/wp-content/uploads/image-of-404-missing-error-as-a-humorous-reference-to-an-employment-contract-lacking-a-termination-clause-1024x675.png)
In its absence, the Employment Act 1955 offers default provisions that grant some measure of structure, but they are no substitute for a tailored clause as shown in this guide where we cover:
- what the law provides when a contract is silent
- where default provisions fail to account for specific needs, and
- benefits of a termination clause tailored to a business
Let’s begin.
Default provisions under the Employment Act
A termination clause mainly specifies two things: Minimum notice periods and grounds for termination.
Without a termination clause, employers instead rely on Sections 12 and 14 of the Employment Act 1955 which also address these, albeit much more broadly.
Section 12: Statutory notice period
Section 12(2) of the Employment Act sets out the following statutory notice periods:
- Less than 2 years: 4 weeks’ notice
- 2 years or more but less than 5 years: 6 weeks’ notice
- 5 years or more: 8 weeks’ notice
Why the default provision may not always work
The notice periods are based solely on length of service, but in practice, employers are far more likely to set notice periods based on the strategic importance of a role.
For instance, managerial positions usually need more than eight weeks’ notice to allow time for a proper replacement and handover.
Also, these statutory notice periods apply equally to probationers. Employers who wish to impose a shorter notice period during probation must use a specific clause in the contract.
Here’s a recent case illustrating this.
Thurka Thevi Mohan v. Ace Greencemt Venture (M) Sdn Bhd [2025] 2 ILR 23
This case concerns the termination of a probationer under a contract that allowed either party to terminate the employment during probation by giving one day’s notice or salary in lieu. The Industrial Court upheld the dismissal on just cause and excuse, primarily due to poor performance, negative attitude, and frequent absenteeism.
Key Facts: The employee was employed as a Logistics Executive, under a 6-month probation. Her employment contract expressly stated:
“During the period of probation, your employment can be terminated at any time by either side giving one day’s notice in writing or pay in lieu….”
Despite multiple verbal and written warnings, performance review, and guidance, the employee continued to:
- Show poor performance,
- Take frequent MCs and emergency leave (especially on Fridays and Mondays),
- Receive complaints from internal and external parties (client).
The Court found the termination valid after assessing the surrounding circumstances and noted that the grounds for dismissal were justified.
Section 14: Statutory grounds for termination due to misconduct
Section 14 of the Employment Act 1955 permits employee dismissal without notice (following due inquiry) on the grounds of ‘misconduct inconsistent with the fulfilment of the express or implied conditions of service’.
To put it simply, if your actions violate your job responsibilities or breach your employment duties, your employer can dismiss you on the spot (after due inquiry).
Why the default provision may not always work
Section 14 does not expressly define what constitutes “misconduct,” leaving it open to interpretation.
This lack of clarity creates legal uncertainty as employers struggle to justify dismissals, while employees can more easily claim unfair dismissal under the Industrial Relations Act 1967.
Benefits of a tailored termination clause
While statutory rules under the Employment Act provide a basic safety net, a proper termination clause allows employers to set their own:
- notice terms based on seniority or role criticality, and
- valid grounds for termination
Key takeaway: If you have spotted this gap in your employment contract, it’s a good idea to have it addressed sooner rather than later. Speak to us today and we would be happy to help.
