Aug 14, 2020
What HR Needs to Know About Retrenchment Procedures in Malaysia
A company has the power to organise and reorganise its business in the way it considers best for better
business management. This includes the restructuring or reorganising through retrenching surplus labour.
However, the company must act bona fide (in good faith) and not with motives or unfair labour practices.
To prove retrenchment, there must first be redundancy. In proving redundancy, there must be a surplus of
labour or the requirements of the job functions of the employee have ceased or diminished to the extent that the job no longer exists.
Retrenchment Procedures
(A) Providing the Employee Notice
The Employment Act 1955 and the Employment (Termination and Lay-Off Benefits) Regulations 1980 govern the retrenchment procedures of employees who earn not more than RM2,000 monthly and manual workers irrespective of the number of their monthly salaries. For employees who fall within the Employment Act, the length of notice period depends on the employees' length of employment.
For employees who are not a part of the Employment Act, the length of notice period would be in accordance with their employment contract.
(B) Compliance with Code of Conduct for Industrial Harmony 1975
If it is determined that there is redundancy, the Industrial Court has advised for retrenchment procedures to be carried out, in accordance with the accepted standards of procedure and guidelines such as the Code. Clause 22(a) of the Code states that if retrenchment becomes necessary despite having taken appropriate measures, the employer should take among others, the following measures:-
i. Provide early warning to the employees concerned;
ii. Introduce voluntary retrenchment and retirement benefits schemes;
iii. Retire employees who are above the normal retiring age;
iv. Help in co-operation with the Ministry of Human Resources, the employees to find jobs;
v. Spread termination of employment over a longer period;
vi. Make sure that no such announcement is made before the employees and their representatives or trade union have been informed.