Notice Period in Malaysia: How Long It Is and How to Calculate Pay in Lieu of Notice

In Malaysia, your notice period is whatever your written contract says. If the contract is silent, the Employment Act 1955 sets a minimum of 4 weeks (under 2 years' service), 6 weeks (2 to under 5 years) or 8 weeks (5 years or more). If you can't serve it, either side can end the job early by paying wages for the unserved part of the notice. This is called pay in lieu of notice, or *bayaran ganti notis*.

This guide covers how long your notice is, how to count the days, how to work out the pay in lieu in RM, and how EPF, tax and your final gaji are handled. It follows the Employment Act 1955 (Act 265), which covers Peninsular Malaysia and Labuan. Sabah and Sarawak have their own Labour Ordinances.

How long your notice period is (section 12)

Section 12 lets either the employer or the employee end a contract of service by giving notice. Three rules decide how long it is:

• The contract decides first. If your contract has a written notice clause (for example "one month" or "three months"), that length applies.
• Same length both ways. The notice must be the same for the employer and the employee (s.12(2)). A contract can't require you to give three months while your employer only gives you one.
• Statutory minimum if there's nothing in writing. The Act sets a floor, shown below.

If no written notice term exists, the notice can't be shorter than:

• Less than 2 years of service: 4 weeks
• 2 years to under 5 years: 6 weeks
• 5 years or more: 8 weeks

Service is counted on the date the notice is given, not the date you leave.

Either side can waive its right to notice (the proviso to s.12(2)). So if your employer agrees in writing to let you go early with no buy-out, that's lawful.

Retrenchment and closure: the minimum can override your contract

Section 12(3) adds a protection that many people miss. If you lose your job wholly or mainly because the business is closing or moving, your type of work is no longer needed, you refused a transfer your contract doesn't require, or the business has changed owners, your employer must give at least the statutory 4, 6 or 8 weeks, regardless of anything to the contrary in your contract. A "one month" clause doesn't cut a 4-year employee's retrenchment notice below 6 weeks.

It applies whatever your salary

Since the 2023 amendments, the Act's First Schedule covers anyone under a contract of service. Employees earning more than RM4,000 are excluded only from specific overtime, rest-day and holiday-pay provisions, not from sections 12 and 13. So a manager on RM9,000 still has the equal-length rule and the right to pay in lieu.

How to count the notice days

Section 12(4) says notice must be in writing, can be given on any day, and the day you give it counts as day one. A "week" in the Act is any 7 continuous days, so weekends and public holidays inside the notice period are counted.

To find your last day, add the notice length to the day you hand in your letter and subtract one day. Example: 6 weeks (42 days) from Monday 2 November 2026 ends on Sunday 13 December 2026.

If your notice is in months, the Act doesn't say how to count a month, so check how your contract or HR handbook words it and confirm your last day with HR in writing.

How pay in lieu of notice is calculated (section 13)

Under s.13(1), either party can end the contract without notice, or before the notice runs out, by paying the other an indemnity equal to the wages the employee would have earned during the notice period, or during the part of it that's left.

Pay in lieu = wages for the unserved notice period

What counts as "wages" here follows the Act's definition in section 2: basic pay plus other cash payments for work done, such as a fixed monthly allowance. It excludes travelling allowance, payments to cover special work expenses, annual bonus, gratuity, and employer contributions to EPF or other funds.

The Act doesn't set one formula for converting weeks into RM. Two common methods:

• Weekly rate for notice in weeks: monthly wages × 12 ÷ 52 = one week's wages. Multiply by the number of weeks, or divide by 7 for single days.
• Calendar days for a part month: monthly wages × days left ÷ days in that month, the same way a part month accrues under s.18A.

If your contract states notice in months, pay in lieu is simply that many months of wages.

Worked example 1: resigning and buying out part of your notice

Nurul has worked for 3 years. Her gaji is RM4,200 a month with no allowances, and her contract has no notice clause. So her statutory notice is 6 weeks.

• She hands in her resignation letter on Monday 2 November 2026.
• Her notice ends on 13 December 2026.
• Her new job starts on 1 December, so she wants her last day to be 30 November.
• Unserved notice: 1 to 13 December = 13 days.

Pay in lieu she owes, by the calendar-day method: RM4,200 × 13 ÷ 31 = RM1,761.29. By the weekly method: RM4,200 × 12 ÷ 52 ÷ 7 × 13 = RM1,800.00. Agree on the method with HR before you sign anything.

Her options:

1. Ask her employer to waive the last 13 days. If they agree in writing, she owes nothing.
2. Use annual leave. Under s.60E(2A), an employee whose contract is ending can take the paid leave due before the termination takes effect. If HR agrees the dates, her unused leave covers part of the gap.
3. Pay the indemnity. Her employer can deduct it from her final wages, because s.24(2)(b) allows deductions for the indemnity an employee owes under s.13(1).

Worked example 2: retrenched with a "one month" contract

Hafiz has worked for 4 years and 3 months. He earns RM3,500 basic plus a fixed RM300 monthly allowance (not a travelling allowance), so his wages are RM3,800. His contract says one month's notice. His employer is closing his department and tells him to leave today.

• Because this is a retrenchment, s.12(3) applies. With 4 years' service, his minimum notice is 6 weeks, which is longer than the one month in his contract.
• One week's wages: RM3,800 × 12 ÷ 52 = RM876.92
• Pay in lieu: RM876.92 × 6 = RM5,261.54

This is on top of his termination benefits and any unused annual leave pay. See how to calculate termination benefits for that part. Under s.21(1), his wages to date and the indemnity must be paid no later than the day his employment ends.

EPF: KWSP lists payment in lieu of notice of termination as a "non-wage", so there's no EPF on the RM5,261.54. His normal salary for the days he worked is still subject to EPF. Pay for unused annual leave is treated as wages by KWSP.

Income tax: LHDN's Public Ruling (Ketetapan Umum) No. 1/2012 lists wages paid by the employer in lieu of notice as compensation for loss of employment. That's taxable employment income, but up to RM10,000 for each completed year of service with the same employer (or group) is exempt. With 4 completed years, Hafiz can have up to RM40,000 of compensation exempt. That exemption is shared with his termination benefits.

Worked example 3: a long contract notice on a higher salary

Kumar is a manager on RM9,000 a month. His contract says 3 months' notice for both sides. He resigns, but wants to leave after one month.

• Unserved notice: 2 months
• Pay in lieu he owes: RM9,000 × 2 = RM18,000

He can serve the full 3 months, negotiate a waiver, or pay the RM18,000. If he pays, his employer can set it off against his final salary under s.24(2)(b). Because s.12 applies regardless of salary, his employer would equally owe him 3 months' notice or 3 months' wages if it ended his job without cause.

When your final pay is due

• You resign and serve the full notice: wages earned must be paid no later than your last day (s.20).
• The employer ends your job without notice under s.13(1): wages up to the day before termination, plus the indemnity, must be paid no later than the termination day (s.21(1)).
• You leave without notice under s.13(1): your employer must pay your wages earned up to the day before you leave within 3 days (s.21(2)), less lawful deductions such as the indemnity you owe.

Run your final month through the salary calculator to check EPF, SOCSO, EIS and PCB on the salary part. PERKESO's published contribution pages don't specifically mention pay in lieu of notice, so ask your payroll team how they've treated it on your final payslip.

Common mistakes

• Assuming notice is always one month. If your contract says nothing, it's 4, 6 or 8 weeks depending on service.
• Counting from the day after your letter. The day you give notice is day one (s.12(4)).
• Skipping weekends and public holidays. Notice runs in calendar days, not working days.
• Accepting a short retrenchment notice because of your contract. Section 12(3) sets the 4/6/8-week floor regardless of the contract.
• Leaving fixed allowances out of pay in lieu. Fixed cash allowances for work done are usually wages under s.2. Travelling allowance and annual bonus aren't.
• Deducting EPF from pay in lieu of notice. KWSP treats it as a non-wage.
• Walking out without serving or paying notice. Your employer can deduct the indemnity from your final wages (s.24(2)(b)).

Related guides

• Termination benefits in Malaysia: retrenchment pay at 10, 15 or 20 days a year
• Annual leave in Malaysia: leave proration and payout when you resign
• Salary deductions: what your employer can lawfully deduct from your final pay
• Prorated salary: how a part month is paid