On 25th March 2020, the Prime Minister has announced the extension of the MCO. Subject to further changes, the entire period of MCO has been extended from the initial 14 days to 28 days. In light of the extension, what can be done to mitigate the impact of the MCO on the corporate entities, and how to prepare for the storms after the MCO? In this article, we are going to discuss on how to prepare for the difficult times ahead, particularly in human resource management.
The pandemic outbreak is unprecedented in Malaysia. It is hence a challenge to our current legal framework. Under these circumstances, the guidelines issued by the Ministry of Human Resources (MoHR) are helpful.
Without expressed revocation or issuance of new guidelines, one has to assume that the guidelines continue to apply throughout the MCO period. The guidelines are available on MoHR website. A write-up on the guidelines could be found on our website.
It is interesting to see how other countries deal with the employment issues during the restrictions period. The table below provides an overview of the interim measures in place in some of the affected countries:
|Country||Status||Interim worker-related measures|
|United Kingdom||3-week restrictions in place (until April 13)||
The government introduced a job retention scheme. Under the scheme:
|India||21-day restrictions in place (until April 15)||The government advised businesses to ensure no deduction on salaries or resort to layoffs of the workers|
|Spain||15-day restrictions in place (reported to be extended until April 9)||
The government introduced Royal Decree- Law 8/2020 which allows:
|Italy||Restrictions in place until April 3||
|China||Regional restrictions in place (until April 8)||The government allowed the employers to temporarily suspend workers, as long as workers give consent and those affected receive 70% of the minimum wage|
The impact of the MCO is expected to hit the businesses’ bottom-lines. Thus, on 27th March 2020, the Prime Minister announced an economic stimulus package known as package prihatin or caring package valued at RM250bil that is expected to benefit the Rakyat.
In light of the caring package, the Prime Minister appealed to the employer not to dismiss the workers. The Government put in place amongst others a wages subsidy program. This program is applicable to employers whose income has been reducing for more than 50% since 1st January 2020. Under this program, the Government will pay RM600 per month for a period of 3 months in relation to employees who earn below RM4,000 per month and registered under the Employment Insurance Scheme, provided that the employers agree not to terminate or instruct them to take unpaid leave for a period of 3 months after the execution of the program. The employers are not permitted to reduce the employees’ monthly salary.
The caring package received some criticisms from the employers. Some doubt to what extent the economic stimulus package could ease the burden of the employers.
What if the employer still experiences substantial loss in business which then led to surplus of manpower? Under the pressure, cutting cost measures are almost inevitable. There are however some safeguards under the current legal system before the employer can resort to retrenchment.
What is retrenchment and when can retrenchment happen?
Retrenchment refers to termination by the employer of those workers found to be surplus to his requirements. There is a surplus of workers or redundancy when the workers’ job function ceases to exist.
Appropriate measures before retrenchment
Under the Code of Conduct for Industrial Harmony (“Code”), before the employer take the drastic measures of retrenchment, the employer should take positive steps to avert or minimize reductions of workforce by adoption of appropriate measures such as:
- Limitation on recruitment
- Restriction of overtime work
- Restriction of work on weekly day of rest
- Reduction in number of shifts or days worked a week
- Reduction in the number of hours of work
- Re-training and/or transfer to other department/ work.
The Code also requires consultation to be made with the workers or their trade union representatives on the intended reduction of the size of the workforce.
Further measures before retrenchment
If, having taken appropriate measures, retrenchment is still necessary, the employer should take the following further measures:
- Give a warning as early as practicable, to the workers concerned;
- Introduce schemes for voluntary retrenchment and retirement and for payment ofredundancy and retirement benefits;
- Retiring workers who are beyond their normal retiring age;
- Assist, in co-operation with the MoHR, the workers to find work outside theundertaking;
- Spread termination of employment over a long period;
- Ensure that no such announcement is made before the workers and their representatives or trade union has been informed.
Regard must also be had to the generally accepted principle of retrenchment, that is, LIFO (last in first out), when the employer decides to embark on a retrenchment exercise.
Re-engagement after retrenchment
After the retrenchment, the employer should give priority of engagement/ re-engagement to the retrenched employees when he engages workers.
Industrial jurisprudence of retrenchment
The failure to adhere to the Code cannot vitiate a genuine retrenchment unless the collective agreement between the employer and the employees requires adherence to the Code. Nevertheless, it serves as a guideline and has been taken cognizance of by the courts.
Despite the MCO, when there is an unfair dismissal representation being made to the Industrial Relations Office, it is ultimately the Industrial Court that decides whether there is a genuine situation of redundancy that necessarily leads to the retrenchment exercise.
It is well-settled that the employer is entitled to organise his business in the manner he considers best, nevertheless the managerial power has to be exercised in good faith. Thus, the retrenchment must be justifiably grounded, such as acute financial loss and downsizing of workforce.
Should you have any doubt in regard to redundancy and/or retrenchment benefits, please feel free to speak to us.
Your key contacts:
Gan Khong Aik
Kang Mei Yee
This article is for general information only and should not be relied upon as legal advice. The position stated herein is as at the date of publication on 31st March 2020. For any enquiries on this article, please contact Gan Khong Aik (firstname.lastname@example.org) or Kang Mei Yee (email@example.com).