WEEK 9:
DISMISSAL
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LEARNING OUTCOME
The students will be able to;
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•Discuss the issue ofdismissal andretrenchment(C4,P2, LL,)
RETRENCHMENT
Retrenchment occurs when an employer terminate theservices of one or more employees because there is nowork available, or insufficient work for these personsin the organisations.
The reason for termination not due to quality of hiswork.
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Reasons for retrenchment
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•Loss of orders leading to reduction in organization income
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•Changes in technology
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•Mergers and acquisitions
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•Restructuring and reorganising
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•Periodic financial crises at national or international levels.
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The laws recognize the right of employers to retrenchemployers.
However, the employers are expected to take allpossible measures to avoid retrenching workers. Thisis a social obligation than a legal one.
There is no legal requirement that an employer needto consult the employees affected by a retrenchmentexercise.
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CODE OF CONDUCT FOR INDUSTRIAL HARMONY
Parliament has never passed a law on retrenchment.
However, a guideline which is known as Code ofConduct for Industrial Harmony was passed in 1975.
It lays down the principle that the retrenchmentshould be the last resort . It outlines steps to be takenwhen the employer becomes aware of a redundancysituation. Where the outline is not followed, the courtwill find that the retrenchment to be without justcause or excuse.
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The steps taken;
Take positive steps to avert or minimise reductions ofworkforce by the adoption of appropriate measuressuch as:
(a) Limitation on recruitment
(b) Restriction of overtime work
(c) Reduction in number of shifts or days worked aweek
(e) Reduction in the number of hours of work
(f) Re-training and/or transfer to otherdepartment/work.
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STEPS TAKEN
If retrenchment becomes necessary, despite having takenappropriate measures, the employer should take the followingmeasures:
(i) Giving as early a warning, as practicable, to the workersconcerned
(ii) Introducing schemes for voluntary retrenchment andretirement and for payment of redundancy and retirementbenefits
(iii) Retiring workers who are beyond their normal retiring age
(iv) Assisting, in co-operation with the Ministry of HumanResources, the workers to find work outside the undertaking
(v) Spreading termination of employment over a longer period
(vi) Ensuring that no such announcement is made before theworkers and their representatives or trade union has beeninformed.
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Notice of retrenchment
When employees’ services are terminated on the groundsof redundancy, they must be given appropriate notice.
The length of the notice must depend on the status of theemployee.
Less than 2 years of service – 4 weeks
2- 5 years – 6 weeks
Employees with more than 5 years’ service 8 weeks.
Sometimes, the employer can pay wages in lieu of notice.
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Voluntary Separation Scheme
Workers can be encouraged to leave voluntarily by offeringthem sufficient inducement – a monetary incentive.
VSS has the following characteristics;
a)An offer letter is issued to all employees inviting theme toapply the scheme.
b)Explanation are provided as tom why the VSS is necessaryand the benefits each applicant will receive.
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C) The dateline or closing date for applications to besubmitted is established.
d) A date for informing applicants whether they havechosen to join the scheme or not is set.
e) An advisory-counselling service for all employees tohelp them make decisions concerning their future isprovided.
F) Any employer intending to implement a VSS mustinform the nearest Office of the department of labour,at least one month before the exercise takes place.
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CHOOSING WHOM TO RETRENCH
1. Foreigners out first.
Section 60N of the Employment Act;
“Where an employer is required to reduce his workforce byreason of redundancy necessitating the retrenchment ofany number of employees, the employer shall not terminatethe services of a local employee unless he has firstterminated the services of all foreign employees employed byhim in a capacity similar to that of the local employee.”
However, it does not include a foreign employee who is apermanent resident of Malaysia.
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2) Last in, First out
An employer must choose the most junior employees,i.e. The ones who have most recently joined theorganisation, the more senior must be retained.
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RETRENCHMENT BENEFITS
Employees are entitled to termination benefits if they havecompleted one year of service with the employer.
According to the Employment Act, the amount of thebenefit depends upon their length of service;
0ne to two years’ service – 10 days’ wages for each year ofservice
More than two years, but less than five years- 15 days’wages for each year of service
More than 5 years’ service - 20 days’ wages for each year ofservice
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The formula under the Employment Act;
The annual earnings in the previous 12 monthsshould be divided by 365 to arrive at a day’s wages. Thisamount is then multiplied by the appropriate figure.
The termination benefit provided by the EmploymentAct is a minimum benefit.
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THE EMPLOYEE IS NOT COVEREDBY THE EMPLOYMENT ACT
If an employee is not within the scope of EA, he is onlyentitled to a retrenchment benefit if his contract ofemployment includes a clause to this effect.
The amount is at the discretion of the employer. Therehave been decisions by the Industrial Court that theemployer should pay a reasonable benefit to aretrenched employee.
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Doctrine of estoppel
Acceptance of retrenchment benefits does not operateas estoppel to bar him from raising further claim.
Having accepted the payment and signed theacceptance letter, they are still free to make a claimagainst the employer.
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INDUSTRIAL COURT DECISION
When dealing with a termination on the grounds ofredundancy, the Court will want evidence that agenuine redundancy situation existed. It is not enoughfor a company and assert that there was a problem ofsurplus labour, he must provide proof.
If not, the court will declare the retrenchment to bewithout just cause or excuse.
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PRIORITY OF RE-ENGAGEMENT
According to the Code of Conduct, the retrenchedemployees should be give the priority of engagementby the employer when he engages workers in thefuture even though the employees had not applied forthe said post.
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