INTRODUCTION

An employer needs to be firm and fair in taking disciplinary action against

employees. No matter how carefully you select employees, one or two will
cause you disciplinary problems or performance problems. If you ignore
wrongdoing by employees, they may keep repeating their misconduct
which could cause major financial losses to your organization. Ignoring
misconduct does not make it stop. In fact, when other employees see that
no action is taken against an employee who is exploiting the employer,
they will follow suit. At the same time, employees rights are protected by
the law. When you take disciplinary action against an employee, if you fail
to respect his rights because you do not follow accepted procedures, he
may file a claim against the company which may be ordered to pay him
compensation. This chapter will explain the procedures to be used when
punishing employees for misconduct. We will also examine common
examples of misconduct. But we will begin by explaining what may
happen if your organization dismisses an employee for misconduct.

9.2 DISCIPLINARY SYSTEM

Every organization needs an employee disciplinary system which is fair
and just. Without discipline, organizations cannot achieve their goals.

9.2.1 Penalties in a Disciplinary System

A fair and just disciplinary systems is progressive. In a progressive. In a progressive
disciplinary system each time an employee commits misconduct he or she will be punished
and the penalties will become increasingly severe each time until the ultimate punishment of
dismissal is used.
1.

Oral warning

2.

First written warning

3.

Final written warning

4.

Suspension without pay

5.

Demotion or downgrading

6.

Dismissal

Pitive Disciplinary Procedure

Step 1 : The superior has a verbal discussion with the employee when he identifies the
problem. He issues an oral reminder and lets the employee know what is expected and what
the actual performance is. The superior will keep a written record of the discussion in a
separate working file in his disk and not in the employee personnel file. If the employees
performance improves, the superior will advise and compliment him so that he will keep up
the good work.
Step 2 : The superior has a serious counselling session with the employee where he will
stress the need for improving performance. The superior will friendly but firm and the
employee will be informed that any help needs will be given. No threats are given because
the aim is to discuss the need for performance to improve. The superior stress his confidence
in the employee ability to act responsibly at work and improve his performance. The
counselling session is recorded in the superior counselling book and the employee initial to
confirm that the counselling session took place.
Step 3 : The superior has a serious discussion with the employee, reminding him of the
previous two counselling session. The employee will be shown his actual performance and
what organization standards are. If the employee has any reason, the superior will listen and if
acceptable the process stop. But if the reason are not acceptable then the employee is advised
to try harder and a letter will be given to him summarizing the situation.
Step 4 : After the counselling session a letter is given to the employee summarizing the
discussion and expressing the hope that he will responded positively if he decides to remain
with the organization. Sometime, the employee is asked to take days leave to consider
whether the job is right for him, or whether there is a job mismatch.
Step 5 : The superior goes through again he various effort of helping the employee. But is
made very clear to him that the organization is taking very serious view of his poor
performance and he should consider seriously if he want to continue working in organization.
If the answers is he want to remain an employee he must comply by the standards. A letter
summarizing discussion is given to him
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Step 6 : if not improvement result, of the employee is given show cause letter as to why his
service should not be terminated. An inquiry is then held and if the employees reasons or
excuses are not acceptable then his service are terminated. The superior tries to make the
ending a cordial one, telling the employee that ,maybe the job was not suitable for him or
some other reason
Negative Disciplinary Procedure
Step 1 : The superior issue a verbal warning to the employee, records it,
and tells him that if he does not improve, he will subjected to more severe
disciplinary action. No attempt is made try to help understand the reason
for the unsatisfactory performance. With this method, even if the
employee improves his performance, he will still bear a grudge against his
superior

Step 2 : The superior issue another verbal warning to the employee,

records it, and tell him that if he does not improve, he will be subjected to
more severe disciplinary action, that is, he will issued a written warning.
Again, no attempt is made to try help or understand the reason for the
unsatisfactory performance.

Step 3 : The superior issues a first written warning to employee and tells
him that if he does not improve, he will subjected to more severe
disciplinary action, that is he will issued a second written warning.

Step 4 : The superior issues a second written warning to the employee

and tells him that is he does not improve, he will subjected to more severe
disciplinary action that is. He will be issued final written warning.

Step 5 : The superior issues a final written warning to the employee and
tell him that if he does not improve, he will be subjected to termination
service

Step 6 : When there is still no improvement, the employee is given a

letter asking him to attend a domestic inquiry to show cause as to why his
services should not be terminated.

9.3 DEALING WITH EMPLOYEE PROBLEM

If an organization is to be competitive and successful, every employee must work towards
achieving the goals of the employer, but a number of problematic issues plague workers and
management. In this section, we will look at some of these problems including issues relating
to transfer and promotion of workers, employee grievance handling and absenteeism. These
issues are not confined to Malaysian workers alone, but can be found in most industrialized
countries.

9.3.1 TRANSFER Of EMPLOYEES

Transfer is the lateral movement of an employee within an organization. Transfer takes place
when an employee either moves from one branch of the same organization to another branch
located elsewhere(i.e. Relocation), or when the employee changes jobs within the
organization, but the move is to a different job at the same level of responsibility and pay (i.e.
Re-designation), or a move from one department to another where the job is the same.

Transfers may involve:

A lateral move to a different department or section
Relocation to a different place

 An internal move to a different job at the same level as the previous job
A move from one organization to another organization within a group of companies
9.3.2 PROMOTION OF EMPLOYEES

Promotion is reassign of an employee to a job at a higher level in the organization. In modern

societies, many individuals desire and expect to be promoted at the some point in their career.
They do not want to be at the same level in the hierarchy throughout their working lives.
However, the need to have power and the amount of ambition people have vary greatly. Some
workers may value promotion opportunities as they can achieve a higher standard of living
through the higher pay and benefits received. Others may want promotion for the status and
respect which is associated with higher-level jobs.
Promotion opportunities are perceived differently by different employees:
Some workers value the higher wages and better benefits earned after a promotion.
Some workers value the respect they receive from society when they hold a senior-level
position.
Some workers do not want the higher levels of responsibilities that are associated with a
promotion.

9.3.3 GRIEVANCE HANDLING

A worker with a grievance is a dissatisfied and unproductive worker. All organizations need a
mechanism to deal with workers grievances. In most companies where the workers are
unionized there is a procedure for handling grievances. It is advisable for all companies,
whether or not the employees belong to a union, to establish suitable machinery for handling
grievances. It is advisable for all companies, whether or not the employees belong to a union,
to establish suitable machinery for handling grievances. Absence of expressed grievances
does not mean workers are contented. Rather, it is more likely that worker problems are not
being addressed because of the lack of a channel to openly express them. Discontent may
thus be seen in increased interest in union activities, deteriorating quantity and quality of
work, high medical bills, absenteeism caused by sickness, increased turnover rates, and
employees taking their complaints to the Department of Labour or other outside bodies such
as political parties, non-government organization (NGOs) and the mass media.

9.3.4 ABSENTEEISM OF EMPLOYEES

Absence without permission is a misconduct which must not be tolerated. An employee

who is absent for even one day without an acceptable excuse, should be given a written
warning the first time. If he repeats the offence, a second warning or third warning and
finally dismissal may be the best response to an employee who is regularly absent without
permission. He is no use to your organisation if he is frequently absent. If an employee is
absent without permission for 3 consecutive working days or more, he may be dismissed. He
must first be given the opportunity to explain his absence. If he has not returned to work by
the third day of absence, a registered letter should be sent to his address demanding that he
explain his absence and return to work. A deadline should be set. The letter should state that if
he does not return to work, it will be deemed that he is no longer interested in his
employment which will come to an end on the last day he actually worked. Do not simply
ignore employees who disappear from work. Make an effort to find out whether they have
quit or whether they are dealing with some personal emergency which would excuse their
absence.
LETENESS
Leteness can be managed and reduce but continuous effort is required to keep this problem
under control. Measures used include:
Rules, penalties and strict enforcement
Reward for workgroups whose members come to work on time
Special awards for individuals who have an exemplary timekeeping record

9.4 TERMINATION OF AN EMPLOYEES CONTRACT OF EMPLOYMENT

Termination is the ultimate step for employers utilizing the hot stove

rule, progressive discipline, or positive discipline. Each year, U.S.

employers in the private sector fire about 3 million employees for noneconomic reasons. Termination has many costs, both direct and indirect.
One of the greatest cost is incurred through legal challenges. Although
there is a worldwide trend towards short-term and temporary contracts of
employment to maximise flexibility at the workplace, employees need a
stable

income

and

reasonable

guarantees

such

as

job

security.

Employees who depend upon the income from their jobs for their survival,
should not be at the mercy of an uncaring employer. For this reason,
legislation has been introduced by Parliament to protect employees job
security.

When an employee chooses to end his contract, he is said to have

resigned. An employer can retire a worker, retrench or dismiss him.

Frustration of contract can also result in the termination of a contract of
employment where the employee is no longer able to offer his services to
his employer for reasons outside his control.

9.4.1

ROLE

OF

THE

INDUSTRIAL

COURT

IN

ESTABLISHING

GUIDELINES ON TERMINATION SERVICES.

The compensation package awarded by the Industrial Court to an

employee who has been dismissed without just cause or excuse can be
hefty. The general principle is that the employer will be ordered to pay the
employee one months wages for every year of his or her service and, in
most cases, back-pay from the date of the dismissal to the date of the
Courts decision.

Therefore, an employer should be very careful about dismissing an

employee to avoid the embarrassing and costly situation of having a

worker return to his job, or having to pay him substantial sums of
compensation.

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9.4.2 RESIGNATION
Employee have the right to resign at any time. You cannot stop n
employee resigning. Some reason employee want resign:

Emigrating
Returning to studies
Staying homes to look after dependents
Joining another organization
Starting own business

Managing The Resignation Of Employee

An employee is required to give notice to his employer before he resign.
The length of the notice period will be stated in the employees letter of a
appointment. An employee who fails to give notice will be required to pay
an indemnity, i.e. wages in lieu notice if :
1. He is written the scope of the Employment Act, or
2. A clause requiring an indemnity has been include in his letter of
appointment.
Depending upon the situation, you can allow an employee to leave
without giving notice if you wish. For example, if an employee is leaving to
further his studies and he is only informed a few days in advance of
registration that he has been offered a place in the college of his choice,
you can let him go without the giving of notice .Resignation letters must
be in writing and they must be written by the employee himself. Do not
draft or prepare a resignation letter for an employee. You may experience
a situation whereby an employee appears to resign, after which he files a
claim for reinstatement under the Industrial Relations Act on the grounds
that he was forced to resign. If he can show that he was forced to resign,
your company will either have to pay him some compensation to settle
the dispute or his case may be referred to the Industrial Court. Again, if
his evidence of forced resignation is strong, the Court may order the
company to pay a substantial amount of compensation and you will also
have incurred legal costs. Do not, therefore, advise those workers whom

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you no longer want to employ to resign. If you have good reason to

dismiss them, do so. Some employers say that they recommend
employees resign when they catch them doing something wrong in order
to protect the employees reputation. You should not worry about an
employees future when he commits misconduct.

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9.4.3 EXPIRY OF A FIXED-TERM CONTRACT

Fixed-term contracts are increasing in popularity throughout the world.
However, employers need to weigh up carefully the advantages against
the disadvantage of this type of temporary contract. Short-term works
may not be committed to achieving the goals of the employer and in the
last few weeks or months of their service may direct most of their effort to
looking for a new job rather than focusing on achieving targets set for
them by the employer.
Malaysian law recognizes that employers have a right to hire employees
on affixed term basis when there is a genuine need to do so. In case, when
a fixed term contract expires, it terminates itself and there is therefore
no dismissal or resignation. As such, even if the workman feels aggrieved
that

his contract has not been renewed, he would not have a remedy

since the employer does not have any obligation to grant him that
renewal. The important condition here is that the fixed term contract has
be a genuine fixed term contract.
Some employers engage their employees on a fixed term basis, but
consistently renew their contracts at the end of the contract term.
Employers should be mindful that this conduct could be used as evidence
that the employees

function are not temporary or seasonal in nature,

and the contract is not a genuine fixed term contract. The courts have
previously held that where an employee fixed term contract is renewed
multiple times, there could be an implied term of the contract of
employment that he is actually a permanent employee. The court will then
treat the contract as a permanent contract of employment that was
merely dressed up in the form of a fixed term contract.
This means that the employee can only be terminated if there just cause
and excuse failing which the employee can lodge a complaint for unfair
dismissal under Section 20 Industrial Relations Act.

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9.4.4 RETIREMENT

The minimum Retirement Age Act 2012 prohibits an employer from

establishing e retirement a retirement age less than 60. If an employer
should wish to retain an employee who has reached the agrees retirement
age, he may offer him further employment, usually on a fixed term
contract, thus giving the option to the employer at the expiry of the time
period to decide whether or not the employee services are still needed.
For example if your effective date of termination is June 30, file your
application with our office no later than August 29 in order to have an
effective date retirement of June 30. If your retirement application is
received after 60 day from you effective date of termination the earliest
you could retire by law would be 15 day from the date that we receive you
retirement application.

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9.4.5 REDUDANCY AND RETRENCHMENT

What is retrenchment?
Retrenchment happens when there is a redundancy when an employer
has more employees than it needs.
The following are some of the common reasons which cause redundancies
to occur:

The company experiencing financial difficulties.

A reorganisation of the workforce to increase efficiency or cut costs.

The shutting-down or termination of products or services which are

unprofitable.

A surplus of employees following a merger due to employees from

each entity performing similar tasks.

A decision to outsource certain tasks or entire departments to

external service providers.

The managements right to decide on reorganisation

Malaysian courts have taken the clear and settled position that it is the
prerogative of the management to decide on the reorganisation of its
business.
The courts will not intervene with the managements decisions in this
respect, as the courts are not in a position to decide how many employees
a company should have.
However, the court will intervene if it is shown that the employers
decision was not genuine, such as where it was a termination disguised as
a redundancy, or where the affected employees were victimised or
selected to be retrenched for unfair reasons.
How employees are selected for retrenchment: the LIFO principle

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An employer cannot randomly choose which employees to be retrenched.

It is almost mandatory that the LIFO principle (last in, first out) is
followed, though exceptions are possible depending on the circumstances.
The LIFO principle means that the most junior employee (as a result of
some queries from readers, I should clarify that junior here refers to the
length of service with the employer, and not the age or rank of the
employee hence last in, first out) must be retrenched first. It is not the
most junior employee in the entire company which has to be retrenched
first, but the most junior employee in the relevant category. For example,
if the retrenchment is due to the outsourcing of accounting services,
employees in the legal department would not be included in the pool.
Giving notice of retrenchment
The employer must give the affected employees a notice of retrenchment.
The notice period is based on the employment contract or collective
agreement, and employees who fall within the scope of the Employment
Act (EA) there are various factors which determine whether an
employee is covered by the EA, but generally these are employees whose
monthly earnings are not more than RM2000 are entitled to the
minimum notice period in the EA.
Its advisable to consult or inform employees of a potential retrenchment
as soon as possible.
Employers are also required to submit a written notification to the nearest
Department of Labour at least 30 days before conducting a retrenchment
exercise.
Termination benefits payable upon retrenchment
The right of an employee to a termination benefit upon retrenchment
depends whether or not he is covered by the EA.

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An employee who falls within the scope of the EA is entitled to termination

benefits if he has been employed for at least 12 months. The termination
benefits payable are as follows (or the amount in the employment
contract if it is higher):

10 days wages for every year of employment if he has been

employed for less than two years;

15 days wages for every year of employment if he has been

employed for 2 years or more but less than 5 years; or

20 days wages for every year of employment if he has been

employed for 5 years or more.

An employee who is not covered by EA is only entitled to termination

benefits if it is provided in his employment contract. If the contract is
silent, then it is up to the employer whether or not to pay termination
benefits, and how much to pay.
Employers who are carrying out a retrenchment due to serious financial
difficulties may also be excused from paying retrenchment benefits.
Recourse for employees who have been unfairly retrenched
Some employers may carry out a termination disguised as a retrenchment
as a way of dismissing unwanted employees. Employees who feel that
they have been unfairly retrenched can bring a claim against the
employer.
In deciding whether or not the retrenchment was justified, the court will
consider the following two key questions:
1. Firstly, was

there

an

actual

redundancy

which

justified

retrenchment? This will depend on all the relevant facts based on

the reason given by the employer for the retrenchment. For
example, if a human resources manager is retrenched, and the
employer hires another human resources manager to perform the

17

same work functions a month after the retrenchment, it is likely to

be concluded that there was not a genuine redundancy.
2. Secondly, if a retrenchment was justified, was the employeeselection process fair? This goes back to the LIFO principle discussed
earlier, and will also involve consideration of whether the employee
pool/category was properly defined.
If the court decides that the retrenchment was unfair, the employer will be
ordered to reinstate the employee or pay compensation in lieu of
reinstatement.
The Code of Conduct for Industrial Harmon a guide for employers
considering retrenchment
Although it is not legally-binding, the Industrial Court encourages
employers

to

comply

with

the Code

of

Conduct

for

Industrial

Harmony which was issued in 1975.

The Code recommends that, where redundancy is likely, an employer
should take positive steps to avert or minimise reductions of workforce by
adopting appropriate measures such as

limitation on recruitment;

restriction of overtime work;

restriction of work on weekly day of rest;

reduction in number of shifts or days worked a week;

reduction in the number of hours of work;

re-training and/or transfer to other department/work.

Where a retrenchment becomes necessary, the Code encourages

employers to take the following measures:

Giving as early a warning as practicable to the affected employees.

Introducing schemes for voluntary retrenchment and retirement and

for payment of redundancy and retirement benefits.

Retiring workers who are beyond the retirement age.

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Assisting workers to find alternative employment.

Spreading the termination of employment over a longer period.

Ensuring that the employees are informed or consulted before a

formal announcement is made.

The Code also recommends that the employer should select the
employees to be retrenched based on an objective criteria, and that
retrenched employees should be given priority to be re-employed by the
employer if the employer decides to employ workers again in the future.
Non-compliance with the Code will not mean that a retrenchment will be
deemed to be unfair, but employers should try to comply with the Code
where possible because the recommendations in the Code are good
practice, and it could also strengthen the position of an employer if an
employee brings an unfair dismissal claim as a result of the retrenchment.

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9.4.6 DISMISSAL FOR MISCONDUCT

What is gross misconduct?
If the misconduct of an employee is so serious that it undermines the mutual trust and
confidence between themselves and their employer and merits instant dismissal, this is
known a gross misconduct. In this situation, the employee can be summarily dismissed which
means that the employee can be dismissed quicker than through the standard dismissal
procedure. This means the dismissal which can be effected more quickly than the standard
dismissal procedure which involves customary formalities, such as a formal written warning
or notice period.
Misconduct may be major or minor depending on the severity.
Major misconduct
A major misconduct is a serious action or failure to act an employee that may lead to
immediate dismissal. The employer may on the grounds of misconduct inconsistent with the
fulfilment of the express or implied conditions of the service of an employee, dismiss without
the notice, downgrade, or impose any other lesser punishment, after due inquiry. Some
examples major misconduct:
1. Participation in an illegal strike or betting, inciting, instigating or acting in furtherance
thereof.
2. Taking or giving bribes or any illegal gratification or receiving presents in cash or
kind other than from relatives and personal friend
3. Engaging in any business or trade within the premise of the company (e.g. direct
selling, insurance)
4. Gambling on the premises of the company
5. Sleeping on duty ( more serious for Guards)
Minor misconduct
A minor misconduct is an offence which is not serious enough to take serious disciplinary
action. However, minor misconduct, if allowed to be prepared often, will become a major
misconduct. For examples, an employee who comes ten minutes late one day has committed
a minor misconduct. If he comes ten minutes late everyday despite being advised and warned,
then it becomes a major misconduct.
Employee who commit criminal offences at work may be charged twice, that is charge of
misconduct to be heard a domestic inquiry within the company and criminal charge in the
Criminal Court.
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If employee is dismissed for misconduct related to criminal offence work (e. g .stealing) ,
and the domestic inquiry was properly conducted, there no obligation to reinstate the
employee even if he acquitted in criminal proceeding against him. The domestic inquiry
process and the Industrial Court deal basically with equity and cannot be equated to Criminal
Court when standards of proof required are high and the case must be proved beyond
reasonable doubt.

How to dismiss someone for gross misconduct?

You cannot summarily dismiss someone instantly for gross misconduct; so while there
is no need to send warnings or give the employee a notice period, you must first hold a fair
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hearing. You should investigate the incident and give the employee a chance to respond
before deciding to dismiss them.
The first thing is to ascertain the facts of the incident and conduct an investigation,
interviewing any relevant witnesses and the employee themselves. If necessary, you may
decide to suspend the employee (on full pay) while your conducting the investigation.
However, suspension should only be considered if there is apparent evidence of the alleged
misconduct and there are perceived risk your business.
Arrange a disciplinary hearing and allow the employee to bring a companion (such as
a colleague or union official), making sure that the employee is aware of the allegations prior
to the meeting. Once you have conducted the hearing and come to a decision to dismiss the
employee, you should prepare a formal letter confirming summary dismissal. This should
cover the reason for dismissal, the legal basis for gross misconduct, any prior warnings, the
termination date and ineligibility for notice or a pay in lieu of notice, arrangements for
holiday pay and final salary payment and the need to return property. It should also mention
the right to appeal against dismissal.

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9.4.7 DISMISSAL FOR POOR MISCOUNDUCT

In the case of non-performance or poor performance on the job, the courts had ruled (the
common law) that employers must bring the lack or poor performance to the attention of the
employees at fault, provide them with counselling and training and give them enough time to
improve.Whether the employee is on permanent appointment or temporary appointment,
termination is carried under the same rules and procedures. The formal process provides a
means for manager to:

Direct the work of their subordinates by setting objectives or outputs targets

Monitor the work done
Evaluate or appraise the finished work, and
Make decision whether :
Reward the employee based upon their performance
Provide them with training if they are not coping with the work, or
Take disciplinary action if training has been given and yet the employees still
not able to perform satisfactory

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