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Malaysian Businesses Warned Against Imposing Lengthy Resignation Periods on Employees

  • Publish Date: Posted about 6 years ago

A leading employment lawyer in Malaysia has warned companies against forcing employees to serve excessively long resignation periods, saying that in many cases, the notice periods can cause businesses more harm than good.

Ravindra Kumar, a practitioner in industrial relations dispute resolution and a partner with Kuala Lumpur-based law firm Raja, Darryl & Loh, said that this was particularly true for notice periods that were sometimes as long as two or even three months in duration. There may, however, be exceptions in some industries and certain key positions for the imposition of a long notice period.

“In my experience, when you have three-month notice periods for resignations, there can be potential problems because the employee has already demonstrated they wish to leave the company,” Mr Kumar said. “So employers are potentially placed in a situation where an employee can damage the reputation of the company, they can destroy documents and other things. Sometimes this period is too excessive.”

Mr Kumar, who is also the chairman of the Human Resources Committee with the European Union-Malaysia Chamber of Commerce and Industry (EUMCCI), said that as soon as an employee resigns, it was often best that they leave their jobs with immediate effect, and for all outstanding monies to be paid to them. This was true for both employees who had secured new work, or for employees who were actively seeking new job opportunities.

“If a sales manager resigns, for example, I would be very concerned about them serving the notice period because they are privy to a lot of things such as client lists and various other confidential information,” he said. “Confidentiality clauses [to protect companies] … are not really reassuring because if you allege that the employee breached confidentiality, then the onus is on the company [to prove that in court].”

“Generally most contracts have a one-month notice period, which is a fair imposition as it cuts both ways – an employee may need to groom somebody before they leave, finish a project, those sorts of things,” he said. “But three months is too long. It is human nature that once a person resigns they are not going to be focused.”

Mr Kumar said there were also instances where companies demand that certain key executives serve out their full notice periods. This caused problems for businesses that often needed executives to start as quickly as possible, with some companies offering to pay out on the notice periods, he said, adding that this was also problematic.

“If you don’t settle issues pertaining to the notice period, the parties may have a right to recourse before the Civil Courts for failure to serve the notice period and to make payment of salary in lieu of notice.”

Monica Viladot, managing director of recruitment company Monroe Consulting Group Malaysia, said the prevalence of “job hopping” was rising in Malaysia as the demand for professional executives increased and salaries continued to climb.

“To combat this phenomenon, some companies are requiring that new employees sign contracts with extended notice period requirements, sometimes up to three months,” Monica said. “This is clearly too long and really is of little benefit to the employer, in most cases, in the long run.”

She said it was easier to source motivated new talent than to force an existing employee to remain at a company to finish projects they had already begun, even for companies that were relying on the employee to finish an ongoing project.

“Yes it can be hard to take, but my advice is to cut your losses and start afresh. Unmotivated or even vindictive employees can cause real harm to a business, both in terms of reputation and the bottom line.”

Monica said her “strong advice” to employers and employees tied into resignation periods exceeded one month was to “always negotiate a deal that will allow the employee to leave the business in the shortest time-frame possible, without causing any damage.”