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Job security is priceless. It is important to ascertain whether you’re protected by law. There are two types of employees – those who are covered under the Employment Act 1955 and those who aren’t. Those who are earning RM1,500 and below are automatically covered by the Employment Act 1955. The Act also applies to manual workers who earn more than RM1,500. Those who do not fall into any of these categories are not protected under the Act.
However, a contract service or `job-offer letter` serves up some protection and is legally binding if brought before the Industrial Court.Syed Shahir Syed Mohamud, president of the Malaysian Trades Union Congress says the contract of service has conditions. They include the right of the employee to work and the right of the employer to terminate his services. And when the employer wants to terminate the services of the employed, certain conditions or terms must be followed.
Justification for retrenchment
Employees cannot be retrenched at the whim of the employer. Only certain reasons can be accepted. One could be that the company is facing financial hardship, or is being reorganized or restructured. This is justifiable even if it is making profits at that point of time. Retrenchment could also be warranted if there are surplus employees due to a merger of two or more companies. Other reasons include the outsourcing of tasks to sub-contractors, the introduction of automation that reduces the need for manpower, and the closing of certain departments or unit that may be unprofitable in a bid to save costs.
You should be given notice
In Malaysia, Under the Employment Act, a four-week notice must be given to the employee if he has been working for less than two years and an eight-week notice for those who have employed for more than five years.
Employers who are not covered by the Act must follow the notice period stipulated in the contracts of service with employees. A reasonable period should be given. Generally, the more senior the employee, the more the notice should be given. Syed Sharir says, based on case law, a reasonable period is about 30 days.
Benefits payable upon termination
If you have been retrenched and are covered by the Employment Act, a minimum wage must be given to you as part of your termination benefits. Under the Employment Termination and Layoff Benefits Regulations 1980, the benefits payable are 10 days’ wages for every year of employment under a continuous contract of service if you have been employed for a period of less than two years, 15 days’ wages if you have been employed for more than two years but less than five years, and 20 days wages if you have been employed for more than five years.
Sometimes, the employment contract will stipulate a higher amount, which is alright. However, if it’s less, then the terms of the Act must be complied with.
If you are a member of a trade union, the collective agreement (CE) made between the union and you will spell out the scope of benefits. The CE will usually provide benefits that are better than those [provided for] under the Employment Act.
If you are not covered by the Employment Act, your employer is not obliged to pay any termination benefits unless they are provided for in your contract of service. If it is not stated in the contract, then the benefits will depend on the goodwill of the employer. If he does not want to pay, there is nothing the employee can do. He can request [for some benefits] but the employer is not obligated to [provide them], although in most cases, they usually do.
The standard practice is to give about a month’s wages for every year of service. Some employers pay more.
What you can do if you are not given termination benefits pursuant the Act or your contract o service? You can submit a complaint to the Director-General of Labour and an inquiry will be conducted. He has the power to order the employer to pay [benefits], whether under the Employment Act or the contract of service.
The contract of service is an important document. Retrenchment benefits should be discussed before you sign it. Usually, the benefit amount will be stated. If it’s not, raise the matter with your [prospective] employer. However, this is not common practice.
For those who are uncomfortable with raising the issue, you can phrase is as a question. For example, ask `When I was with a former company, these were the benefits I received. What about this company?` We ought to push these ideas so that employees understand their rights in terms of employment.
Voluntary separation schemes and pay cuts
Before retrenching, employers should introduce voluntary separation schemes (V.S.S) which describes as `schemes offered to employees to leave the company on their own with payment separation benefits that are normally more favourable than [those of] retrenchment.` However, in this case, the employee will have to apply for it and it is up to the employer to accept the application. Usually, the aim is to induce those who are in senior management to leave. Benefits usually include payment for indemnity in lieu of notice, ex-gratia payment and also a bonus.
For companies implementing salary cuts, the consent of employees must be obtained. The employees have to be informed in advance and agree to the reduction in pay. If not, they can claim constructive dismissal.
When Your Services Can Be Terminated
There are several situations in which an employee's contract of service can be terminated. They include the employee's resignation, his reaching retirement age, being unable to perform his work, detention by the police for long periods, or suffering from a long illness. The employer can terminate the contract when the employee is deemed incompetent in his work [but must have been given the employee several warnings], has committed a misconduct or has become redundant.
However, before the employer resorts to retrenchment, the Code of Conduct for Industrial Harmony stipulates that certain measures must be taken by the employer, such as limiting recruitment, restricting overtime work, restricting work on rest day [because extra wages have o be paid], reducing working hours or days, and transferring redundant employees to other departments.
Two additional measures that are recommended by the code that employers can adopt are implementing temporary shutdowns and introducing pay cuts.
Certain principles have to be followed if only selected employers are to be retrenched, as laid down in the code. You must have legal basis to carry out reorganisation of the company and the employee's position must be made redundant. The principle of `last in, first out` applies here to protect those who have put in more years of service. This principle should strongly adhered to, as has been decided by the Industrial Court.
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