What is managing discipline & performance?
Managing discipline & performance means using a written, traceable process to deal with two different problems: employees who do not meet the required standard, and employees who break the company's rules. Performance management sets clear expectations, gives feedback and a fair chance to improve. The disciplinary procedure investigates specific misconduct and gives the employee a fair hearing before any penalty. Both must leave evidence that stands up in the Industrial Court.
How is poor performance different from misconduct?
Poor performance is about ability or results falling short; misconduct is about behaviour that breaks a rule or duty, so each needs its own process.
- Poor performance: a salesperson missing target month after month, reports full of errors, work constantly behind schedule. The key question is whether the standard was made clear and whether the employee was given a real chance to improve.
- Misconduct: repeated lateness after warnings, refusing reasonable instructions, theft, harassment, breaking safety rules. The key question is whether there was an investigation and whether the employee was given the chance to explain and be heard.
The most common mistake: an employee underperforms, the boss issues a show cause letter and dismisses them for "misconduct". When the charge does not match the facts, the Industrial Court can easily find the dismissal was without just cause or excuse.
The performance route: from JD to final review
To handle poor performance properly, set the standard first, measure it, give feedback and an improvement period, and only then assess the outcome.
- Job Description
- KPI
- Performance Review
- Written Feedback
- PIP
- Final Review
- Job Description: the employee must first know what they are responsible for.
- KPI: turn "doing a good job" into measurable targets, acknowledged in writing by the employee.
- Performance review: compare actual results against KPIs at regular intervals, not by impression.
- Written feedback: when you see a gap, put it in writing with specific examples.
- PIP (Performance Improvement Plan): set out improvement targets, the support provided, review dates and a deadline, giving the employee a genuine chance to improve.
- Final review: decide on the PIP outcome (met, extended or further action) and record the reasons in writing.
How should you review performance during probation?
Probation is not a period in which you can simply decline to confirm anyone at will; we recommend written reviews at months 1, 3, 5 and 6.
- Month 1Confirm the employee understands the JD and KPIs; record early performance.
- Month 3Mid-point review; point out shortcomings and the direction for improvement in writing.
- Month 5Early-warning review: if standards are still not met, state the possible outcome clearly.
- Month 6Decide before probation ends: confirm, extend or not confirm.
In Award 1580/2026, the company only carried out the appraisal after probation had ended and was ordered to pay RM173,400. Read the full analysis in our article on probation and poor performance.
The disciplinary procedure in Malaysia: investigation, show cause and Domestic Inquiry
To handle misconduct, establish the facts first, let the employee explain, hold a Domestic Inquiry where needed, and only then decide on a proportionate penalty.
- Investigation
- Show Cause Letter
- Domestic Inquiry
- Proportionate Penalty
1. Investigation
Gather evidence and record witness statements. If needed, the employee may be suspended pending inquiry for up to 2 weeks under EA s.14, with at least half pay.
2. Show cause letter
Set out the specific charge in writing (date, place, conduct and the rule breached) and give the employee reasonable time to reply in writing.
3. Domestic Inquiry
If the explanation is not accepted and a serious penalty is being considered, an impartial panel should hold a Domestic Inquiry where the employee hears the evidence, questions witnesses and presents a defence. See Domestic Inquiry in Malaysia for the full procedure.
4. Proportionate penalty
The penalty must fit the offence: a warning letter, downgrading, suspension without pay of up to 2 weeks, or dismissal in serious cases.
In Award 1671/2026, the company carried out a drug test, issued a show cause letter and held a DI, and the dismissal was upheld. In Award 1630/2026, the company investigated 27 people but still lost, with RM358,400 awarded, because the evidence and charge particulars fell short. See the Ketum case and the BFM Media case.
What is the legal basis in Malaysia?
Disciplinary action rests mainly on section 14 of the Employment Act 1955, while the fairness of any dismissal is tested under section 20 of the Industrial Relations Act 1967.
- EA s.14: after due inquiry, an employer may dismiss, downgrade or impose a lesser punishment for misconduct (including suspension without pay of up to 2 weeks); pending inquiry, suspension is limited to 2 weeks with at least half pay.
- IRA s.20: a dismissed employee (including probationers and managers) may file a representation of unfair dismissal within 60 days. It goes to conciliation and, if unresolved, may be referred to the Industrial Court, which can order reinstatement or compensation in lieu plus back wages.
- IRA s.30(5): the Industrial Court decides by equity, good conscience and the substantial merits of the case, so both procedure and evidence matter.
Which documents should the company keep?
- 1. Job Description and KPIs
- Duties and measures, acknowledged by the employee.
- 2. Performance / probation review forms
- A written, signed record of every review.
- 3. Written feedback and PIP
- Specific gaps, improvement targets, support given and review outcomes.
- 4. Investigation records
- Evidence, witness statements and any suspension letter.
- 5. Show cause letter and the employee's reply
- The charge particulars and the original explanation.
- 6. Domestic Inquiry notes and penalty letter
- Hearing record, the panel's reasons, and the warning letter or penalty notice.
How does JP Asia help you build this system?
We help bosses turn performance and discipline into a process HR can follow every time, so problems run on autopilot instead of being handled in a panic.
- KPI and performance management system: from organisation structure and JDs to KPIs and review forms.
- PIP templates: targets, support, review dates and the final review record.
- Warning letter and show cause letter templates: how to word charges, reply deadlines and filing.
- Manager training: giving written feedback, running reviews and handling misconduct (HRDC Claimable).
- HR Legal Advisor: help reviewing evidence, documents and next steps on specific cases.
If your company rules are not yet written into an employee handbook, disciplinary action has little to stand on. See Employee Handbook & HR Policies.
Frequently asked questions
Can I issue a show cause letter for poor performance?
Generally not recommended. Poor performance should go through performance management: KPIs, written feedback and a PIP that give the employee a chance to improve. A show cause letter is mainly for misconduct, and treating a performance issue as misconduct often leaves the charge not matching the facts.
Is a PIP required in Malaysia?
The law does not prescribe a PIP format, but the Industrial Court will look at whether the company made the standard clear and gave the employee a fair chance to improve. A written PIP is the most direct evidence of that.
Can I decline to confirm a probationer at any time?
Not at will. Probationers can also file an unfair dismissal representation under IRA s.20. Hold written reviews during probation and make your decision before the probation period ends.
Can I suspend an employee during a disciplinary investigation?
Yes. Under section 14 of the Employment Act, an employee may be suspended pending inquiry for up to 2 weeks with at least half pay. Give the suspension in writing and state the reason.
How many warning letters before I can dismiss an employee?
There is no legal minimum number of warning letters. What matters is that each incident was investigated and recorded, the employee had a chance to explain, and the final penalty is proportionate. Serious misconduct should normally also go to a Domestic Inquiry.
Is a dismissal invalid without a Domestic Inquiry?
Not automatically, because the Industrial Court rehears the case. However, a properly conducted Domestic Inquiry gives the employer strong evidence and greatly reduces the risk of losing.
Book a business diagnosis and we will review your current performance and disciplinary documents.
Disclaimer: This page is general information, not legal advice for a specific case. The law is stated as at October 2026.