Speech by K.Somasundram, Assistant Secretary from MTUC, given in Labour Law Seminar held by Legal Plus Sdn. Bhd (www.legalplus.com.my) on Apr 10, 2015.

1. Redundancy,VSS, lay offsRedundancy,VSS, lay offs
K. Somasundram
Malaysian Trades Union Congress

2. What is redundancy andWhat is redundancy and
retrenchment? retrenchment?
In simple terms, the employer makes
a position redundant when its duties
are no longer needed to be done by
anyone. Once the position is redundant,
the person doing its duties may either
be redeployed (i.e. given another job)
or retrenched (i.e. lose their job and
not be offered another).

3. Accepted reasons forAccepted reasons for
redundanciesredundancies
Simply dismissing a worker’s by paying
them in lieu, does not necessarily make it
a genuine redundancy.
Follow best practices, be fair to staffs;
Provide proof, e.g. new organisational
chart or financial records showing losses
to prove the redundancy is to avoid
unfair dismissal claims.

4. What's a genuine redundancy?What's a genuine redundancy?
• A genuine redundancy is when:
• the person’s job doesn't need to be done by
anyone
• the employer followed any consultation
requirements in the award, enterprise
agreement or CA etc.
• When an employee's dismissal is a genuine
redundancy the employee isn't able to make
an unfair dismissal claim.

5. RIGHT SIZING & REDUNDANCYRIGHT SIZING & REDUNDANCY
• Retrenchment, as a consequential effect of
rightsizing, has always been a rather sensitive
issue.
• Similar to other forms of termination and
dismissal, retrenchments is a form of
‘dismissal’ of workman and he may consider
that he has been dismissed without just
course or excuse and hence makes
representation under sec 20(1) under IRA,
which provides interalia:

6. Consulting with employees aboutConsulting with employees about
major workplace changesmajor workplace changes
• All contracts should have a consultation
process for when there are major
changes to the workplace, such as
redundancies.
• Consult with employees early when a
decision is made to restructure, M & A,
or make changes to the business that are
likely to result in redundancies due to
uncertainty in doing business.

7. Use fair selection criteriaUse fair selection criteria
This should include performance and
other transparent processes. Keep
people up to date to maintain trust and
respect by communicating properly.
HR,HC,ERM, managers must has to be a
good communicator.

8. Give the minimum notice periodGive the minimum notice period
• This is a legal requirement unless you
provide payment in lieu of notice. If you
do not advise the employee in writing or
you give them an insufficient notice
period, this may be a breach of contract
or CA.
• Negotiate quantum of payment with staff
or union.
• Give workers time to leave to fine
employment elsewhere.

9. The law on retrenchment or VSSThe law on retrenchment or VSS
• In the Industrial law of Malaysia, it does not
matter that the word used in the letter is
‘retrenchment’ or ‘voluntary separation’. Many
retrenchment and separation cases in the past
were referred to the Industrial Court.
• In two retrenchment cases awarded in 1997, the
two retrenched workmen (managers) were
reinstated with full back wages totaling in excess
of RM 1,000,000. that was certainly a hefty sum
to pay aside from having to reinstate the
workmen the jobs, which were declared
redundant earlier.

10. Voluntary separation schemes (VSS)Voluntary separation schemes (VSS)
The Government has advised companies
to adopt to voluntary separation schemes
instead of normal retrenchment of
surplus employees, which often were
hostile and conflict prone, particularly
where the workman were unionized, As
the term suggests, the employees are to
participate in it voluntarily.

11. Consequences of an involuntaryConsequences of an involuntary
voluntary schemevoluntary scheme
The consequence of case where the Ind.
Court has determined that the separation
was indeed involuntary, the separation
then becomes and unjust dismissal and
the Industrial Court may award
reinstatement of the workmen or
compensation or settlement between
parties with consent award.

12. LIFO PrincipleLIFO Principle
• It is trite law and a well-established principle
that in retrenchment of surplus employees,
the principle of LIFO must be adhered to.
• The Industrial Court has in the past cases
applies very strict scrutiny where there
were deviations.
• Only in a sprinkling of cases had the Court
accepted deviations. However, in reality,
most companies found it difficult to comply
completely with the LIFO principle.

13. To Offer VSS or to RetrenchTo Offer VSS or to Retrench
With surplus workforce that is more
than the manpower that a company
needs, there could be several options like
redeployment, re-assignments,
realignments, retrain for other jobs,
regional postings, outplacements, etc.
However, one hard and unavoidable fact
remains is that when a co. in unable to
absorb the surplus workforce, a
redundancy arises.

14. Redundancy and Retrenchment
In circumstances where redundancy is likely
an employer should, in consultation with his
employees' representatives or their trade
union, as appropriate, and in consultation
with the Ministry of Labour and Manpower,
take positive steps to avert minimize
reductions of workforce by the adoption of
appropriate measures such as:

15. Difference between retrenchment &Difference between retrenchment &
VSS, Its Pros and ConsVSS, Its Pros and Cons
RETRENCHMENT VSS
Focus on the actual surplus workers Focus on reducing the right number
Focus on the right fit May not attract the right fit to stay
Potential hostile Amicable
‘Hard approach’ ‘Soft approach’
Managers find it touch to handle Easy and less traumatic
Able to take off the right number May be difficult to achieve number
Contractual compensation or in law Needs an inducement or sweetener
Productivity can be disrupted Less disruption to productivity
Potential claims for unjust dismissals Less claims on unjust dismissals
May end in reinstatements Less exposure to reinstatements
Potential additional compensation Less exposure to more compensation
Impact on corporate image Corporate image is least impacted
Industrial actions by workers No cause for Industrial Actions

16. COCCOC
i) limitation on recruitment;
ii restriction of overtime work;
ii restriction of work on weekly day of rest;
iv reduction in number of shifts or days worked a week;
v reduction in the number of hours of work; and
vi re-training and/ or transfer to other department/work.

17. ConclusionConclusion
Is will be good for all workers to know their
rights at school level;
Move towards employability by acquiring
more skills;
Employing a competent person;
Unemployment scheme has to be in place;
Government to consider expanding SS
coverage on closure beyond Company/
workers control to formal and informal
sector.

18. THANKYOUTHANKYOU