The Scenario

In October, your boss proudly announces that the company will be paying a bonus to staff in January. Excited, you plan ahead and count on the extra income. But come December, you tender your resignation. Your last day falls at the end of January—after the announced payout. When you ask about your bonus, your boss replies: “Bonus is only for those who stay with the company. Since you resigned, you are not entitled.”

This leaves you puzzled. The bonus was announced, you worked the whole year, and your last day is even in the same month the bonus is delivered. Is it legal for the company to withhold it? Can you claim your bonus?

The Law

1. Employment Act 1955 (Act 265)
The Act defines “wages” as basic pay and certain allowances, but it does not explicitly regulate annual bonuses. Bonuses fall into two categories:

• Contractual Bonus (Guaranteed Bonus)
  • If your contract of service, collective agreement, or company handbook states that you are entitled to a specific bonus (e.g., “13th month salary” or “one-month bonus each year”), then it becomes a contractual right.
  • Under Section 7 of the Act, any attempt to deny a contractual entitlement is void. Employers must pay once conditions are met.
• Discretionary Bonus
  • If the announcement says “management will decide based on performance or company results,” then the bonus is discretionary. Employers may set conditions, such as requiring employees to remain in service on the payout date.
  • Courts generally uphold the employer’s discretion if clearly stated.

2. Industrial Relations Act 1967
If an employee is denied a contractual or promised benefit, they may bring a claim of unfair labour practice to the Industrial Relations Department. The Industrial Court often examines whether:

• The bonus was truly discretionary, or
• The employer created a legitimate expectation by making a public announcement.

3. Past Industrial Court Awards
Case law shows that:

• If the bonus is contractual or guaranteed, resignation before the payout does not automatically forfeit entitlement (unless the contract expressly says so). The employee can still claim pro-rated or full payment.
• If the bonus is discretionary and expressly tied to being in service on the payout date, the Court usually sides with the employer.

Analysis of Your Situation

1. Announcement in October
   • When the boss announced a bonus in October, this may have created an expectation that employees who had worked the year would receive it. But whether it is enforceable depends on the wording.
2. Resignation in December, Last Day in January
   • Since your last day is at the end of January, you are still in employment at the time of payout. If the company’s condition is that only employees “still in service” get the bonus, you appear to meet that condition.
3. Key Question: Contract or Discretionary?
   • If your contract says “bonus subject to company’s discretion,” then legally the boss can deny it to resigning staff.
   • If your contract (or company practice) provides a guaranteed 13th month bonus, then you can claim it as part of your wages.

Lessons

For Employees:

• Check your contract. Only a contractual bonus is enforceable under law.
• Look for conditions. If HR policies say you must remain employed until payout date, you need to time your resignation carefully.
• Document announcements. If your boss made a clear promise to “all employees,” you may argue that it created a binding obligation.

For Employers:

• Be precise in announcements. Always state conditions clearly (e.g., “Bonus is discretionary and only for staff in service on 31 January”). Vague promises can lead to disputes.
• Respect contractual obligations. Denying guaranteed bonuses is a breach of contract and may attract complaints to JTK or the Industrial Court.
• Consider pro-rata. Some companies pay a proportionate bonus to resigning staff as goodwill. This is not legally required unless written in policy, but it promotes fairness.

For HR Practitioners:

• Update handbooks. Clearly define “contractual bonus” versus “discretionary bonus.”
• Communicate transparently. Employees should know whether resignation affects their entitlement.
• Avoid inconsistent practice. Paying some resigning staff but not others may expose the company to claims of unfair treatment.

Conclusion

So, can your boss legally withhold your bonus because you resigned in December even though your last day is end of January?

• If the bonus is contractual (e.g., 13th month salary): You are entitled to it, since you were still employed at payout date. Denial would be unlawful.
• If the bonus is discretionary and conditional: The boss may lawfully restrict it to employees who remain with the company, even if you worked almost the whole year.

The law in Malaysia does not guarantee annual bonuses unless they are contractually promised. The critical issue is whether your company’s announcement in October was a binding promise or merely a discretionary statement.

For employees, the lesson is to understand the fine print before resigning. For employers, the lesson is to communicate bonus policies transparently and apply them consistently.

At the end of the day, bonuses are meant to reward contribution, not create disputes. Clear contracts and fair practices ensure that both sides—employer and employee—can part ways with dignity and respect, even during bonus season.