Employees' Retrenchment

GENERAL QUESTIONS

1. Do I need to report to JTKSM if I want to terminate my employee?

Yes. However, termination that needs to be notified are only termination due to company closures and redundancies. Redundancies may arise as a result of several reasons such as company reorganization, production reduction, company merger, technological changes, company takeover, and others. This does not include termination due to disciplinary action and dismissal of employees.

2. How is the implementation of Retrenchment Notification?

Notification can be made through the Employment Retrenchment Notification 2004 (Borang PK  beserta Lampiran 1) which can be obtained free of charge from any JTK offices or can be downloaded from the Department's website.

3. Is it an offence if the employer does not notify JTKSM?

Yes. The Employment Retrenchment Notification 2004 (Borang PK) has been gazetted as P.U (B) 430/2004 on 11 November 2004 and any employer who fails to comply with this matter commits an offence under Section 63 of the Employment Act 1955, and if convicted may be fined not more than RM50,000 for each offence.

4. How can I avoid retrenching employees and what are the procedures if retrenchment is inevitable?

The Procedure for Industrial Harmony suggested a number of measures that can be taken to avoid retrenchments. These steps can be found in the Garis Panduan Pengurusan Pemberhentian Pekerja. This guideline also outlines procedures for retrenching employees.

5. I have been given a termination letter because my employer’s business needs to cease. Is it possible for me to claim any severance compensation?

Termination compensation or benefits is claimable if the dismissed employee is covered under the Employment Act 1955 or Collective Agreement. Generally, the employee is entitled to claim statutory benefits such as pay in lieu of notice, termination benefits, payment of annual leave balance and salary balance (if any). Employees involved in retrenchment could refer to the nearest JTK office for detailed information. More information can also be found in the Garis Panduan Pengurusan Pemberhentian Pekerja.

6. How is the termination benefit payment calculated and when is the benefit payable to the employee?

Rate of severance benefits must be in accordance with the service contract, but could not be less than the minimum rate set under the Employment (Termination and Lay-Off Benefits) Regulations 1980, Employment Act 1955 which are: - 

  1. 10 days' salary for each year of service if the employee has served less than 2 years;
  2. 15 days' salary for each year of service if the employee has served for 2 years but less than 5 years; or
  3. 20 days salary for each year of service if the employee has served 5 years or more 

and calculated prorated over an incomplete period of a year, following the nearest complete month. The formula set under the Employment (Termination and Lay-Off Benefits) Regulations 1980, is as follows: 

12 Months/365 days’ salary X Length of Service (Number of Years of Service) X Eligibility (10/15/20 Days per Year) 

Employees are entitled to receive written termination benefits amount and its calculation method. Termination benefits must be paid no later than 7 days from termination date. A termination benefit calculation calculator is available at the Calculator menu.

7. Saya telah ditawarkan Voluntary Separation Scheme ( VSS) oleh majikan, apakah yang dimaksudkan dengan VSS dan berapakah jumlah pampasan yang patut saya terima?

Pemberhentian Secara Sukarela (VSS) bermaksud majikan berhasrat untuk mengurangkan pekerja tetapi dengan cara mempelawa pekerja memohon untuk berhenti secara sukarela. Pada kebiasanya pekerja akan ditawarkan faedah penamatan atau pampasan yang lebih baik daripada peruntukan undang-undang. Walau bagaimanapun keputusan untuk membenarkan penamatan kontrak secara sukarela adalah terletak di tangan majikan.

8. Can temporary lay-offs be performed on monthly salaried employees?

According to the decision of the case of M/s. Viking Askim v. National Union of Employees in Companies Manufacturing Rubber Products & Anor. [1991] 3 CLJ (Rep) 195, Regulation 5 (1), Employment (Termination and Lay-Off Benefits) Regulations 1980, does not apply to monthly salaried employees because their remuneration under a contract of service is not based on the type of work provided.

9. My employer informed me that the business operation will be temporarily closed (shut down) and the employees will not be paid wages during that period. Can my employer do that?

Employers may do so and this action is regarded as temporary suspension of employment or lay-off. However, some conditions must be met by the employer. According to Regulation 5 (1), Employment Regulations (Termination and Lay-Off Benefits) Regulations 1980, temporary layoff or lay-off occurs when the employer does not provide work or does not pay wages for at least 12 normal working days within 4 consecutive weeks. If both situations occur, the employer must pay temporary lay-off benefits to the employee. However, if the employer does not resume operations and the service contract is terminated or not renewed, then the employer must pay termination benefits. Temporary lay-off does not occur if the employer does not meet the conditions under Rule 5 (1).

10. Adakah dalam tempoh shutdown, pekerja yang bergaji bulanan layak mendapat upah?

Ya. Mahkamah telah memutuskan pekerja bergaji bulanan yang tidak disediakan kerja di dalam tempoh shut down, berkelayakan mendapat upah penuh. Majikan perlu membayar gaji berdasarkan kontrak perkhidmatan bagi pekerja yang dibayar gaji secara bulanan.

11. How is the termination benefit payment calculated and when is the benefit payable to the employee?

Rate of severance benefits must be in accordance with the service contract, but could not be less than the minimum rate set under the Employment (Termination and Lay-Off Benefits) Regulations 1980, Employment Act 1955 which are: - 

  1. 10 days' salary for each year of service if the employee has served less than 2 years;
  2. 15 days' salary for each year of service if the employee has served for 2 years but less than 5 years; or
  3. 20 days salary for each year of service if the employee has served 5 years or more 

and calculated prorated over an incomplete period of a year, following the nearest complete month. The formula set under the Employment (Termination and Lay-Off Benefits) Regulations 1980, is as follows: 

12 Months/365 days’ salary X Length of Service (Number of Years of Service) X Eligibility (10/15/20 Days per Year) 

Employees are entitled to receive written termination benefits amount and its calculation method. Termination benefits must be paid no later than 7 days from termination date. A termination benefit calculation calculator is available at the Calculator menu.

12. Apakah kategori pekerja yang boleh diberhentikan kerja sementara atau lay-off?

Pekerja yang boleh diberhentikan kerja sementara atau lay-off adalah pekerja yang dibayar gaji mengikut jam, harian, task-work atau piece rate.

13. Majikan telah membuat keputusan untuk menutup operasi perniagaan selama satu minggu kerana cuti perayaan dan meminta pekerja memohon cuti tahunan dalam tempoh tersebut. Adakah ia boleh dianggap sebagai pemberhentian kerja sementara atau lay-off?

Menurut Peraturan 5 (1) Peraturan-peraturan Kerja (Faedah-faedah Penamatan dan Rentikerja Sentara) 1980, hari rehat, cuti am, cuti sakit, cuti bersalin, cuti tahunan, cuti yang dibenarkan dibawah undang-undang bertulis dan apa-apa cuti yang dipohon dan diluluskan oleh majikan, tidak boleh dianggap  sebagai pemberhentian kerja sementara atau lay-off.