Key Performance Indicators and Employment Contracts in Malaysia: A Legal Analysis

Abstract

Key performance indicators (KPIs) are considered as measurable values used by for companies, institutions, or organisations in order to estimate the success rate of their set objectives. Therefore, it is important to select appropriate indicators that will be used for the measurement. In Malaysia, the KPI came into the spotlight when the Prime Minister introduced it for measuring the performance of the cabinet ministers in 2009. Since then, KPIs became the focus in the private and the public sectors in Malaysia. Thus, this article attempts to examine the values behind KPIs and its function within the contract of employment. The article further examines whether non-performance of KPIs can be categorised as poor performance, which could open employees to termination or disciplinary actions. This article is mainly based on the analysis of existing literature, journal articles, books, information obtained in online news portals and judicial decisions. The article finds that non-performance of KPI can be used as a basis to terminate or dismiss an employee from employment.

INNOVATION-ENHANCING HIGH-PERFORMANCE WORK PRACTICES IN MALAYSIAN R&D ORGANIZATIONS: MYTH OR REALITY?

“…Despite the low levels of HPWP implementation, four HPWP dimensions were significant predictors of R&D project performance: employee recruitment, performance appraisal, reward and compensation, and employee participation. The work culture in Malaysian public and private organizations puts great emphasis on key performance indicators (KPI) as a tool in performance management (Jamaluddin et al, 2019). This KPI culture might explain why performance appraisal is a significant component of innovation-enhancing HPWP.…”