Redundancy, VSS, lay offsRedundancy, VSS, lay offsK. Somasundram Malaysian Trades Union Congress

What is redundancy and What 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).

Accepted reasons for Accepted reasons for redundanciesredundanciesSimply 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.

What's a genuine What's a genuine redundancy?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.

RIGHT SIZING & RIGHT SIZING & REDUNDANCY 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:

Consulting with employees Consulting with employees about major workplace about major workplace changeschanges• 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.

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.

Give the minimum notice Give the minimum notice periodperiod

• 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.

The law on retrenchment or The law on retrenchment or VSSVSS• 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.

Voluntary separation Voluntary separation schemes (VSS)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.

Consequences of an Consequences of an involuntary voluntary involuntary voluntary scheme 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.

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.

To Offer VSS or to To Offer VSS or to RetrenchRetrenchWith 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.

Redundancy and RetrenchmentIn 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: 

Difference between Difference between retrenchment & VSS, Its Pros retrenchment & VSS, Its Pros and Consand ConsRETRENCHMENT 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

COC COC

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.

ConclusionConclusionIs 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.

THANK YOU THANK YOU