Downsizing is part and parcel of any business operation, but a labour expert has urged bosses to observe proper procedures and act according to the law when doing so.
Datuk T. Thavalingam, a lawyer who co-wrote Employment and Industrial Relations Law Malaysia, said firms had undertaken such exercises during economic downturns for the purpose of rationalising its manpower.
“Retrenchment is justifiable in any business operation as the court recognises that it is a management prerogative to re-organise its business, as long as it is done in good faith,” he said.
He was responding to a statement by Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan that more workers could face the chop this year due to the current economic challenges.
Thavalingam, a former honorary secretary of the Malaysian Employers Federation (MEF), said if the basis for retrenchment was the financial or economic state of the business, employers must be shown to have first carried out other cost-cutting measures.
“The company must take several measures such as limiting its recruitment, restricting overtime, reducing shifts or days worked in a week or the number of hours of work.
“Employers also need to give prior and sufficient notice to affected workers.
“It will be good industrial relations practise to engage in consultations, discussions and agreements on selection criteria and payment of retrenchment benefits.
“You cannot retrench workers and then buy luxury cars for top level management. It won’t look favourable if the matter is brought to court,” said Thavalingam.
In the long run, he added, retrenchment of key employees may result in the company losing talent and paying hefty compensation and benefits.
“Justifications in such a process must be in accordance with acceptable, established legal principles,” he said.
Malaysian Trades Union Congress (MTUC) president Abdul Halim Mansor said the Government should consider enacting the Insurance Scheme Act, specifically to protect those who are retrenched, before they looked for another job.
He added employees should be given an alternative job or retrained to further improve their talent as this will boost the performance of the company before it considers introducing a Voluntary Separation Scheme (VSS).
According to the Human Resources Ministry, a total of 37,699 workers were terminated last year. Of these, 39.4% (14,848 workers) involved VSS while 60.6% (22,851 workers) were laid off.
The bulk of terminations reported to the Labour Department involved locals at 32,552, with foreign workers totalling 5,147.
The highest terminations last year were in the manufacturing sector, namely 45.9%, followed by the wholesale and retail sectors (20.7%); finance and insurance (12.1%) and mining and quarrying (6.6%).
The ministry said it was compulsory for bosses to inform the department a month ahead if they wanted to terminate their workers.
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