FILING A CLAIM FOR PAYMENT IN LIEU OF RESIGNATION WITHOUT

NOTICE IN LABOUR OFFICE

Most employment contracts will have a “notice period”, whereby either employer or
employee may terminate the employment contract by providing the specified notice (or by
making payment in lieu of that notice). The notice period will vary depending on the position
and seniority of the employee. For the employer, the notice period is there to mitigate any
losses that could be incurred by the resignation of an employee – for example, the employer
may want to ensure that the resigning employee completes their outstanding matters and/or
assists with handover and transition.
However, there are also situations where an employee will resign with “immediate effect”
and stop showing up to work, despite the notice period in the contract. What happens if an
employee resigns without serving the contractual notice period? In such situations, the
employer may be able to recover a sum of money equal to the salary that the employee would
have earned during the notice period. This is often referred to as a “payment in lieu of
notice”, or an “indemnity” for the notice period.
For example:
Employee X’s employment contract states that he may terminate his employment by
providing 1 months’ notice, or making payment in lieu of notice. Employee X tenders his
resignation on 1 October 2018. Under his contract, he is therefore contractually required to
serve notice until 31 October 2018. However, in his letter of resignation, Employee X says
that his resignation is effective immediately and he does not turn up to work after tendering
his resignation.
Employee X’s monthly salary is RM 10,000.
Since Employee X has failed to serve his 1-month notice, he is required to make payment to
his employer in lieu of that notice (i.e: RM 10,000 representing 1 month of his salary).
An employer has two options to recover payment in lieu of notice from their errant
employees, i.e: through the Labour Court, or the Civil Court. This depends on the amount of
the employee’s monthly salary:
 Does not exceed RM 5,000.00 (Labour Court); and
 Exceeds RM 5,000.00 (Civil Action in Civil Court)
Labour Court
If the employee’s monthly salary does not exceed RM 5,000.00, the employer is able to
recover the payment in lieu of notice through the labour court pursuant to Section 69(2)(iii)
of the Employment Act 1955 (i.e: inquiries by the Director General of Labour).

There are no filing fees involved in recovering an amount through the Labour Court. The
procedures involved are also relatively less formal compared to legal proceedings in the civil
court. However, as there are no specific timelines under the Employment Act 1955, delays
may occur. Any decision by the Labour Court may be appealed to the High Court.