Puzzled over what to do with your employees in Malaysia? You are not the only one.

Puzzled over what to do with your employees? You are not the only one.

“The employer generally gets the employees he deserves.”

Most managers and employers find managing and dealing with employees to be one of the most difficult and stressful parts of their jobs. The stress is compounded by the fact that the failure to do this the right way can lead to significant legal exposure to the employer, including lawsuits filed by disgruntled employees.

From our experience, here are some of the common (costly!) mistakes made by employers in Malaysia and some tips on how to avoid them:

#1 MISTAKE: Poorly drafted contracts. A badly drafted contract could have serious implications on your business. For example, you may have intended to hire an individual for a fixed period of time or to complete a certain project. However, using a “standard or template employment contract” without making the necessary changes could mean that you have ‘accidentally’ hired a full time, permanent employee.

TIP: It is always beneficial to get a lawyer to review your employment contracts. Remember: once an employment contract is signed, it might be difficult to vary or amend the terms. Use “template” contracts with caution as not all templates may suit your specific needs.


#2 MISTAKE: Having no contracts at all. If there could be something worse than having a badly drafted contract, it would be not having a contract at all. You would be surprised at the number of employers in Malaysia who have had long term employees without any sort of written contract. This is typically seen in family businesses where a lot of arrangements are based on trust. However, the lack of proper documentation also means that there will often be ambiguity as to the employee’s length of service, job description, remuneration and benefits. While this may not be an issue when things are going well, the lack of a contract will definitely come back to haunt you when you need to terminate the employee or when disciplinary issues occur.

TIP: Conduct a review of all your employees and ensure that every employee has a signed employment agreement in their personnel file.  If you have an employee without a signed employment agreement, consult a lawyer to prepare the relevant documents – be careful about using a standard employment agreements since you are not hiring a new staff but are regularising and formalising an existing employment arrangement.


#3 MISTAKE: Thinking termination by notice is sufficient. Most employment contracts will include a clause which sounds something like this: “Either party may terminate this employment agreement by providing 1 months’ notice in writing or payment in lieu of notice”. Malaysian employers frequently (and wrongly) believe that this clause entitles them to terminate any employee as long as they give the required notice or make the payment in lieu of notice. In Malaysia, termination of an employee can only be done if there is “just cause and excuse” regardless of what the contract says. Terminating an employee without just cause and excuse can result in a complaint of unfair dismissal pursuant to Section 20 of the Industrial Relations Act.

 TIP:  Before terminating, always consider whether you have a good reason to terminate that employee. Termination for convenience, or because you do not like that employee, is not enough.  Reasons for termination normally fall into 3 broad categories: misconduct, poor performance or redundancy.  There are specific legal requirements for each category.


#4 MISTAKE: Neglecting to investigate Whenever an employee is suspected of committing misconduct, it is very important for employers to investigate the situation to see if: (a) the employee really committed the misconduct; and (b) if so, whether there is a good reason or explanation. Some employers jump to conclusions based on rumours or circumstantial evidence which could cost them later in the long run.

 TIP:  Try to get the employee’s explanation in writing whenever possible. Sometimes, there could also be important mitigating factors to be taken into account – eg: an employee who was absent from work without notice for a few days could have been involved in a serious accident and may have been unable to contact the company.  To punish them without seeking an explanation could be seen as harsh and unfair.  If necessary, you may actually need to conduct a domestic inquiry before taking disciplinary action.


#5 MISTAKE: Badly drafted and/or implemented policies. The importance of good drafting also extends to Company policies. Company policies should always be consistent and clear with little room for ambiguity. They must also be applied consistently to all employees.  Company policy is pointless without implementation. Worse still are policies which are applied only to certain employees and on a case-by-case basis.  This could actually lead to claims of victimisation if an employee is punished for non-compliance of a policy, when his peers get off scot free.

 TIP: Companies should regularly conduct a review of HR policies to ensure that they are being consistently implemented. Policies which are no longer being used should be discarded and removed from the handbook or intranet.  Gaps in implementation or lax implementation should be addressed quickly and corrected.

Overly positive performance reviews may keep your team smiling - but you may be doing yourself a disservice if your reviews aren't honest.

Overly positive performance reviews may keep your team smiling – but you may be doing yourself a disservice if your reviews aren’t honest.

#6 MISTAKE: Silent or overly positive performance reviews. Some managers do not like to give negative remarks during performance reviews for fear of demotivating their employees or hurting their feelings.  Some managers also like to give overly positive performance reviews because they think it will motivate their employees to do better. Performance reviews should always be honest and detailed.  Keeping silent or saying “no comment” could be misconstrued– especially if the employee has an ongoing disciplinary or performance problem and this was never formally raised in a performance review.

TIP: If there is a problem – say so! Being politically correct does not do anyone any favours. However, all criticism should be constructive, objective and polite. After making known your concerns, you should also schedule proper follow-ups to monitor the situation to see if there have been any improvements.


#7 MISTAKE: Failure to document. As a follow up to the item above, failing to document disciplinary or performance problems is a huge mistake that could cost an employer dearly. Prior problems with the employee should always be documented and communicated to the employee, and then filed in his/her personnel file.   Action taken should also always comply with the law and the Company’s disciplinary process.

TIP: When facing a disciplinary problem with an employee – always think: “How am I going to prove this if it ends up in court?”  Contemporaneous documentation can be used as evidence in court proceedings to support your case.  If there is a discussion or a meeting – have minutes prepared and where possible, circulate copies to those who were present.  Since the law does not require minutes of discussions to be prepared in a specific way, a fast and easy way to do so is to e-mail the participants a summary of the meeting/discussion. The e-mail will also have a time-stamp to show when it was sent, so there will be minimal dispute as to when the minutes were prepared.


#8 MISTAKE: Not taking employee complaints seriously. Employers should ensure that they have a clear complaint or grievance policy. Any complaints or grievances made pursuant to this policy should be handled promptly and thoroughly. Confidentiality must be maintained where reasonably possible and there should be no retaliation against employees who have made complaints/grievances in good faith. One mistake commonly made by employers is to ignore the complaint or to just hope it will go away. It probably won’t and might just get bigger.

TIP:  If you have a grievance procedure – follow it! If not, ensure that good faith complaints and grievances are handled professionally and objectively. The adage that “justice must not only be done, but must be seen to be done” applies: avoid simple mistakes like conflict of interest – if the complaint is made against an employee’s supervisor, the supervisor should never be part of the investigating team or decision making team.


#9 MISTAKE: Making statements without thinking of the implications. Be careful about statements that could be misinterpreted. Making promises like “You will always have a job here” or “I wouldn’t worry about it – it’s not a big issue” could later be used against you.

 TIP:  Your words should always match your intentions. If you are not in a position to guarantee or assure something – don’t. In the long run, employees will appreciate your honesty.


#10 MISTAKE: Not thinking things through. Hiring and firing is like any other business decision: you need to think about it carefully and weigh all the risks before coming to an informed decision. In our experience we have seen employers backtrack through important decisions such as retrenchment of staff, just because they did not spend enough time thinking about the implications of that decision.  Some decisions once made cannot be easily undone, and could expose the company to a lawsuit if they are contrary to the law.

TIP:  A failure to plan is a plan to fail.  Businesses should work hand in hand with the relevant departments (human resources, finance department, legal etc) to ensure that a proper risk analysis is done before making any major decisions.


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