Can You Terminate an Employee During Probation Without Paying Anything?
Not automatically, and this is one of the most common misunderstandings among Malaysian SME owners. Probation is not a trial period free of legal consequence. If the employee is covered under the Employment Act 1955, monthly wages of RM4,000 and below following the 2023 amendments extending coverage, you still need just cause or excuse to terminate, and proper notice or payment in lieu, even during probation. For employees above that threshold, the employment contract itself usually sets the real terms, and many SME contracts are silent or vague about probation termination, which becomes the actual dispute. A poorly worded probation clause has cost SME owners RM20,000 to RM80,000 in unfair dismissal claims that were entirely avoidable.
Five mistakes we see most often
- 1.Assuming still on probation means you can end things with zero notice and zero reason.
- 2.Not specifying the probation notice period in the actual employment contract.
- 3.Confirming an employee's permanent status by accident, through conduct or a verbal promise, before the paperwork catches up.
- 4.Giving no documented reason for termination, leaving nothing to point to if the employee later disputes it.
- 5.Not checking whether the employee actually falls under Employment Act coverage before deciding how to proceed.
Check your own position
Quick answers
Does probation mean I can dismiss someone with no reason at all?
No. Even during probation, dismissal without just cause or excuse can be challenged, particularly for employees covered under the Employment Act 1955. Probation shortens some administrative steps, it does not remove the requirement for a genuine reason.
What counts as a valid reason to terminate during probation?
Genuine performance issues, documented and communicated to the employee beforehand, are the strongest ground. Termination without any documented reason is the most common weak point we see challenged.
Can I extend someone's probation instead of confirming or terminating them?
Usually yes, if your contract allows it and you communicate it properly, but repeated extensions with no clear resolution can itself become a point of dispute.
Not sure if your probation clauses actually protect you?
Start with a free 2 minute risk check to see your overall exposure, or WhatsApp CF Lee directly to talk through a specific termination.
Related guide: New Employee Onboarding and Statutory Registration Checklist Malaysia