He Resigned Without Serving Notice. Can I Hold His Last Salary?

Payroll closes this afternoon. An employee resigned by WhatsApp last night, said they were not coming back and still has your laptop. The natural reaction is to tell payroll to hold everything until the handover is done.

Your frustration is justified. They gave you a staffing problem and left you to clean it up.

But do not freeze the whole salary. If this is a genuine resignation without notice, calculate what they owe for the notice they did not serve, deduct the lawful amount and pay any balance. Keep the laptop and handover on a separate track.

Before payroll presses anything, settle one question: who actually brought the employment to an end, and on what date?

Can I hold an employee’s whole final salary if they resign without notice?

Before we get into the calculation, one boundary matters. This guide covers employees governed by the Employment Act 1955 in Peninsular Malaysia and Labuan. Sabah and Sarawak have separate labour laws, so please do not apply this calculation there without checking the relevant ordinance.

Under that Act, an employer may deduct the notice indemnity from final wagesLegal source: Employment Act 1955, sections 13(1) and 24(2)(b) when an employee genuinely resigns without serving the required notice. You must still calculate the deduction and pay any balance by the applicable deadline.

This is a calculation, not a punishment, so start with the notice period the employee actually owed and work out the wages that would have accrued during the part they did not serve.

The number does not become larger because the resignation was rude. The laptop, poor handover and cost of finding a replacement may be real business losses, but that does not make them lawful payroll deductions.

The simplest instruction to payroll is:

1. Fix the legal termination date.
2. Calculate all money already earned or due to the employee.
3. Calculate the notice indemnity.
4. Apply only lawful deductions.
5. Pay the balance and give the employee the breakdown.

How much notice pay can I deduct?

Check the signed employment contract first. The written notice period normally applies to both employer and employeeLegal source: Employment Act 1955, section 12(2). If the employee served part of it, calculate only the unserved part.

If the contract says nothing about notice, the Employment Act supplies minimum periods based on length of service. Do not guess from your usual company practice or copy the notice period from another employee’s contract.

The notice indemnity is based on “wages”, which usually begins with basic wages and can include other cash payments for work done under the contractLegal source: Employment Act 1955, section 2 definition of wages, read with section 13(1). The name on the payslip does not settle it. A fixed cash allowance paid for the employee’s work may count, while a travelling allowance, mileage reimbursement or payment for a special work expense falls outside the statutory definition.

A simple worked example

Suppose the contract requires one month’s notice. The employee leaves immediately without serving any of it.

• Basic wages: RM4,000 a month.
• Fixed cash shift allowance that forms part of wages: RM300 a month.
• Mileage reimbursement: RM250.
• Discretionary year-end bonus not yet earned: RM1,000.

For this example, the notice indemnity is RM4,300 because the employee served none of the one-month notice. The mileage reimbursement is an expense payment, not wages, while the unearned discretionary bonus does not enter the notice calculation either.

That does not mean you can apply this list to every payroll. A housing payment, commission or attendance allowance may need a different answer depending on why it is paid and what the contract says.

What if the employee never resigned and simply disappeared?

Do not invent a resignation for them. An employee who stops attending work without sending a resignation has created an AWOL problem first.

Check that they are safe, count their working days, write to them and give them a proper chance to explain. The full process is in our guide on what to do when an employee has been absent for more than two working days.

If there is still no answer, complete that route and issue the final termination letter. At that point, the letter should record the decision and the effective end date so that payroll can calculate final pay against the route that actually happened.

Calling it “resignation without notice” may feel like a convenient shortcut. It leaves a missing document in the file and creates an argument about when employment ended.

What if I told the employee not to come back?

If the employee gave notice and you chose to end the employment immediately, the money usually runs the other way. You may have to pay the wages for the remaining notice periodLegal source: Employment Act 1955, sections 13(1) and 21(1) instead of deducting them.

This is where a sentence such as “Fine, pack your things today” becomes expensive. The employee was ready to serve. The company brought the end date forward.

There are three clean ways to deal with this:

• Let the employee serve the notice period.
• If the contract permits garden leave, keep the employment running to the original end date, continue salary and contractual benefits, and confirm in writing that they need not attend.
• Agree in writing to an earlier release and record what each side is waiving.

If the contract is silent, do not assume you can impose garden leave. Ask the employee to agree to the arrangement in writing.

The same applies if the employee asks to leave early. Record the earlier date and what each side is waivingLegal source: Employment Act 1955, section 12(2), proviso. If both sides are settling something wider, a mutual separation agreement may be more accurate, but please do not call it mutual unless the employee actually agrees.

What must go into the final payment, and when must I pay it?

Final pay is wider than the notice calculation. Include every cash amount already earned or due under the contract, company policy or the Employment ActLegal source: Employment Act 1955, section 69(1). Then apply lawful deductions and show the result on one page.

For payroll, check each of these separately:

• Wages earned up to the legal termination date.
• Overtime, commission or allowances already earned and due.
• Payment for untaken statutory annual leave where required.
• Any contractual bonus or other cash payment that has already become due.
• The notice indemnity and any other deduction the Employment Act allows.

A performance bonus or year-end bonus is not automatically payable merely because the employee is leaving. Read the contract, bonus letter and policy. Ask whether the employee already satisfied the condition for payment. “Discretionary” on a payslip is not a substitute for checking the document that created the scheme.

The payment date depends on how employment ended:

• If the employee resigns immediately without notice, earned wages after lawful deductions must ordinarily be paid no later than the third day after terminationLegal source: Employment Act 1955, section 21(2), read with Interpretation Acts 1948 and 1967, section 54.
• If the employee serves notice normally, pay no later than the employment end dateLegal source: Employment Act 1955, section 20.
• If the employer ends the employment immediately, pay what is due on the termination day, including any notice indemnity owed by the employerLegal source: Employment Act 1955, sections 13(1) and 21(1).

Do not aim for the last permissible hour because public holidays and the statutory counting rules can affect a short deadline. If payroll can safely pay earlier, do it, since a bank delay does not become the employee’s problem simply because your internal approval took two days.

One exception is tax clearance, which can override the usual payment sequenceLegal source: Income Tax Act 1967, subsections 83(3), 83(4) and 83(5), read with HASiL tax-clearance guidance. Check HASiL’s current guide before paying if the employee is leaving Malaysia for more than three months or if payroll is required to notify HASiL of the cessation using CP22A. The guide also lists exemptions, so this does not mean every final salary must be held.

Can annual leave shorten the notice period?

Annual leave and notice answer different questions. Leave decides whether the employee attends work, while notice decides when the employment ends.

An employee is entitled to take accrued statutory leave before termination, or receive payment if it remains untaken when employment endsLegal source: Employment Act 1955, sections 60E(2A) and 60E(3A), but taking leave does not automatically move the termination date. Agree the leave dates and record them.

Leave during the notice period does not itself move the end date. If both sides want employment to end earlier, record the new date and the notice waiver separately. Also state what happens to the accrued leave. Do not hide all three decisions inside the phrase “set off annual leave”.

What if the employee still has my laptop, keys or passwords?

Protect the business now by disabling system access and changing shared passwords. Then send a written list of the items to be returned, give a return date and keep the delivery record.

But do not make earned wages conditional on returning the property, and do not deduct the laptop’s value from salary merely because you believe the employee has it. The Employment Act only permits specified wage deductions. Property loss is not automatically one of them.

You can deduct the notice indemnity allowed by the Act, but not simply add property loss to the payroll deductionLegal source: Employment Act 1955, section 24(1), (2), (8) and (9).

If the items are not returned, send a demand. A civil claim may be available. A police report should be reserved for facts that genuinely support suspected criminal conduct, not used as a standard threat in every handover dispute.

The important business point is speed. Lock the access today. Do not wait for the salary deadline to solve an IT problem.

What if the final salary is not enough to cover the notice indemnity?

The unpaid balance does not disappear. An employer may bring a claim for the outstanding notice indemnity before the Director General of LabourLegal source: Employment Act 1955, section 69(2)(iii). JTKSM lists wages in lieu of notice as a claim an employer can bring through the Labour Court process.

Send the calculation and a written demand first so that the employee can see how you reached the number.

My view is that this is where the legal answer ends and the business decision begins. You may pursue the balance, but whether you should do so depends on the amount, the chance of recovery, the management time it will consume and the message the decision sends inside the company. A claim may make sense for a senior employee with a large shortfall, while chasing a small balance for months may cost more attention than it returns.

That is not giving up a legal right. It is deciding whether using that right is good business.

JTKSM explains the employer and employee claim routes on its Labour Case page.

What should I ask payroll to do today?

Start with the document that ended the employment. Payroll cannot calculate the right number until the route and date are clear.

1. Keep the resignation, acceptance letter and employment contract together.
2. Confirm who chose the final date.
3. Check the written notice period and any part already served.
4. Separate wages from reimbursements and other payments.
5. List everything already earned or contractually due.
6. Apply the notice indemnity and any other lawful deduction.
7. Keep company property and system access on a separate recovery track.
8. Check annual leave and any HASiL tax-clearance requirement.
9. Pay early enough to meet the correct deadline.
10. Give the employee a one-page breakdown and keep the payment record.

The hard part is rarely the subtraction. It is identifying which event happened before somebody tells payroll to “hold first”.

Take ten minutes to fix the route. Then the numbers usually become much easier.

Which Malaysian laws govern final salary after resignation?

Most of this payroll route comes from the Employment Act 1955. The full Act is available from JTKSM’s official Employment Act page.

These are the provisions behind the underlined legal points and the payroll sequence:

• Notice and payment instead of notice: Sections 12(2) and 13(1) deal with the notice period, waiver and the indemnity for notice not served.
• The final payment date: Sections 20 and 21 set different deadlines for a normal termination, an immediate resignation and an employer-led immediate termination.
• What counts as wages: Section 2 defines wages by what the cash payment is for and lists the exclusions.
• Lawful deductions: Section 24 permits the notice-indemnity deduction and restricts deductions that are not authorised by the Act.
• Annual leave on termination: Sections 60E(2A) and 60E(3A) deal with taking accrued leave before termination and payment where it remains untaken.
• The employer’s claim route: Section 69(2)(iii) allows the Director General to hear an employer’s claim for an unpaid section 13(1) indemnity.
• Short deadline counting: Section 54 of the Interpretation Acts 1948 and 1967 affects how short statutory periods are counted.
• Tax clearance: Subsections 83(3), 83(4) and 83(5) of the Income Tax Act 1967 sit behind HASiL’s CP22A, CP22B and CP21 guidance.

This article gives the ordinary payroll route. A disputed resignation, an earlier complaint, a constructive-dismissal allegation or a tax-clearance case can change the answer. Stop and review the documents before treating a deduction as automatic.