What Can I Do With My Employees?
Published on 20 April 2020 by Irene Wong & Yap Yoon Jan
The Movement Control Order (MCO) was in place since 18 March 2020, was extended from 31 March 2020 to 14 April 2020 and further extended to 28 April 2020. MCO may very well be extended again to curb the spread of Covid-19. While the general consensus is that drastic measures have to be undertaken to break the chain of infection, many are worried about the economy. Afterall, the closure of business premises (except for essential business) affects the viability of businesses. Here we list down the most frequently asked questions by employers on employment.
Q : Can employers stop paying contributions to Employees Provident Fund?
A : No. But following the Prime Minister’s announcement on 27 March 2020, an employer can decide to defer, restructure or reschedule contributions to the EPF.
Q : Can employers force employees to take unpaid leave?
A : No. Whilst you cannot force an employee to go on unpaid leave during or post MCO, you may persuade the employees to agree to take unpaid leave in exchange for continued employment. Another possible option is to have all employees on rotation to take unpaid leave. This way, you can reduce the obligation without laying off any of your employees. However, employees’ consensus is necessary as it may give rise to a claim for constructive dismissal.
Q : What is the Employment Retention Programme (ERP)?
A : It is a newly introduced scheme to encourage employment retention. For employees earning under RM4,000.00 per month who took a minimum of 30 days unpaid leave within 6 months from 1 March 2020 and is registered and contributing to the Employment Insurance Scheme (EIS) with Perkeso, they are entitled to receive RM600.00 a month for a maximum of 6 months from Perkeso under the ERP. The application is to be made by the employer. Payment will be made to the employer and must be disbursed to the employee within 7 days of receipt. Please note that the ERP is only applicable for those who are qualified as stated above.
Q : What is the Wage Subsidy Programme (WSP)?
A: The WSP is an extension to the ERP. All businesses with no more than 75 employees are eligible to apply. For businesses with more than 75 employees, only those who suffered a decline in revenue of more than 50% since 1 January 2020 are eligible to apply for this subsidy.
Perkeso will pay companies with the following number of employees a fixed sum for 3 months:-
- ≥ 200 employees – RM600.00 per employee (maximum 200 employees only)
- 76 ≥ 200 employees – RM800.00 per employee
- ≤ 75 employees – RM1,200.00 per employee
This only covers employees earning less than RM4,000.00 per month who are registered with and contributing to the EIS. After receiving this subsidy, employers would not be allowed to terminate the employees for a period of 6 months, i.e. 3 months during and 3 months after.
Q: Can I reduce my employees’ working hours and salary?
A: Yes, but only if the employees or trade union if they are represented by one agree to it. Normally, this is done to avoid retrenchment.
Q : Whan can an employer do with the surplus labour or redundant employees?
A retrenchment exercise would have to conducted to let go surplus labour or terminating redundant employees. The Employment Act 1955 and Employment (Termination and Lay Off Benefits) Regulations 1980 govern the retrenchment exercise of employees who earn less than RM2,000.00 monthly and manual workers irrespective of their monthly income.
Although the employer has the liberty to run his or her company as he or she thinks fit, yet the exercise of retrenchment is subject to challenge in Court. Should such a challenge arise, the Company bears the burden of proving that the exercise is done in good faith or in other words, bona fide.
In short, retrenchment should only be carried out as a last resort in the event of a genuine redundancy or surplus of labour. The MCO may not be used as an excuse to exercise retrenchment.
Employers are advised to comply with the Code of Conduct for Industrial Harmony (The Code) in the exercise of retrenchment which provides a checklist and guide as to how it should be carried out.
One of the most important factors to be considered under the Code is the principle of LIFO (Last in, First Out). The LIFO principle simply means that the most junior employee must be retrenched first.
However, it is not the case where the most junior employee must necessarily be retrenched first. The fundamental principle of redundancy needs to be adhered to first. For example, it may not be the most junior employee in the entire company which has to be retrenched first, but the most junior employee in the relevant department of the company which has become redundant.
Ideally, it is advisable for the employer to consider offering a Voluntary Separation Scheme or Mutual Separation Scheme before resorting to a retrenchment exercise.
Q : What is a Voluntary Separation Scheme (VSS) or Mutual Separation Scheme (MSS)?
It is a scheme where the employer offers the employees (whose positions are redundant) to participate voluntarily in a separation agreement with mutually agreed terms for them to leave employment.
In the case of voluntary or mutual separation, the applicable legal principle is that the employee must accept it voluntarily where there must be genuine and free consensus between the employer and the employee.
Most importantly, pursuant to case law, there must not be any coercion or duress or any unfair labour practice caused to the employees.
Q : What can disgruntled employees do?
An unfair dismissal claim may be litigated either in the civil court for common law wrongful dismissal or in the Industrial Court for dismissal without just cause or excuse. The latter is the more common redress sought wherein the aggrieved employee can be reinstated to his position pursuant to Section 20 of Industrial Relations Act 1967 (“the Act”).
The employee must first lodge his complaint to the Industrial Relations Department (“the IR Department”) within 60 days from his dismissal. Thereafter, the IR Department will initiate the process of conciliation between the employee and employer.
Should conciliation fail, the matter would then be referred to the Industrial Court for an award under Section 20(3) of the Act. The Industrial Court may give an award to reinstate the employee to his former employment with no loss of benefits or privileges and for back wages to be paid from the date of dismissal to the date of the award and this may include any contractual bonus. Alternatively, the Industrial Court may award compensation in lieu of reinstatement.
The compensation formula usually applied by the Industrial Court is one month’s wages for every year of the employee’s services and back wages from the date of dismissal up to the last day of the court hearing, capped with a similar maximum period of 24 months.
However, if it is found that the employee had been dismissed without just cause or excuse but he had contributed in some way to his dismissal and/or has been gainfully employed since the dismissal, the Industrial Court may reduce the compensation sum accordingly.
With the uncertainty as to when the MCO will be lifted to allow business to resume, it is best for all business owners to know more of their options in dealing with their employees.
We understand that different natures and sizes of business may need different all-rounded solutions, therefore we are ready to provide a bespoken legal solution to expand your options and minimize your risks.
The contents of this article are not intended to constitute legal advice on any specific matter and should not be relied upon as a substitute for specific legal advice on matters or transactions.
For further information, please contact the authors of this article.