Termination Benefit for Poor Performance
TOPIC: Does an employee entitle to termination benefit if his services terminated due to poor performance?
Who entitle for termination benefits?
By reference to the amendment to Employment Act 1955 effective 1 January 2023, employees' wages not exceeding RM4000 and regardless of total wages those employees in the occupation category of manual labor, supervising manual labor, engaged in the operation or maintenance of any mechanically propelled vehicle and vessel crew are entitle to termination benefits.
Employees earning exceeding RM4000 and not in the occupation category mentioned above are not entitle to termination benefits as provided in Employment (Termination and Lay-Off Benefits) Regulations 1980. Part-time employees are also not entitled for termination benefits.
Regulation 4(1) of Employment (Termination and Lay-Off Benefits) Regulations 1980 states an employee is not entitle for termination benefit under the following circumstances: (a) Retirement (b) Terminated due to misconduct after due inquiry (c) Voluntary resignation by the employee
Does an employee entitle to termination benefit if his services terminated due to poor performance?
In the case of NXP MALAYSIA SDN BHD v NURSHAKILA BINTI SAHLAN, the Labour Court made a decision that the employee who had been dismissed due to poor performance after performance improvement plan conducted by the employer entitled to termination benefit. This is because poor performance not stated in Regulation 4(1) of Employment (Termination and Lay-Off Benefits) Regulations 1980. The company was not satisfied with the decision of Labor Court appealed to High Court.
The High Court allowed the appeal by the Company to reject the termination benefit ordered by Labor Court. According to the High Court, the Company had fulfilled the requirement for termination of employment under section 14(1) of Employment Act 1955. The employee had been warned, given opportunity to improve and yet the employee failed to improve performance. Hence, it justifies dismissal without termination benefit.