What you need to know about the law on retrenchment of employees

the law on retrenchments
Will the last one to leave please turn off the lights?

There has been a wave of retrenchments in Malaysia, which started last year and looks to continue through 2016. Malaysia’s Human Resources Minister says that his ministry expects retrenchments to continue into 2017.

According to the Malaysian Employers’ Federation (MEF), more than 20,000 employees were retrenched in 2015 (as at September 2015). Comparatively, the figure for the entire 2014 was 10,000 employees. The MEF predicts that it will only get worse in 2016.

Although the steepest increase in retrenchment numbers are in the oil and gas industry, the banking industry has also seen several retrenchment exercises or voluntary separation schemes being implemented. The legal industry has also been affected, with many medium and big law firms either downsizing or freezing hiring.

Let’s take a quick look at the law related to retrenchments. As an employer, when can I retrench employees? Am I free to choose which employees to let go? How much do I have to pay them as severance? As an employee, what are my rights? Can I challenge a retrenchment?

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Handing employee dismissals properly under Malaysian law

04 - dismissals

In this series, we have addressed the general employment law backdrop in Malaysia, legal issues when hiring employees, and how to ensure good employee management. This post will discuss the end of the employment life cycle — the termination of the employment contract, or dismissal.

Whether an employer is sacking someone on the spot, or terminating an employee’s employment contract by serving the contractually-agreed notice period, the employer must be able to show that the dismissal or termination was with just cause or excuse.

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Ensuring proper employee management from a legal perspective


This post is the second in a three-part series on employment law. Flowing on from the introduction (What employers need to know about employment law in Malaysia) and the first part (Legal considerations when hiring employees in Malaysia), this post considers the issues involved in managing employees.

Over the course of an employment relationship, a plethora of situations can arise. Establishing clear human resource principles and guidelines will help minimise the ripple effect of any negative incident.

The management of employees is not an impersonal science, and legal threads will have to be weaved in with aspects which are personal to each employee and situation.

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Legal considerations when hiring employees in Malaysia


Employment contract

Following the previous post — What Malaysian employers need to know about employment law — which was an introduction to this series, this is the first in a three-part series on employment law. This post focuses on hiring employees.

Many employers see the key to optimising productivity and success as having employees with the appropriate qualifications, personality, and ultimately the practical application to get the job done well.

Often, when a company finds the right candidate, employment documentation is seen as a mere administrative formality.

However, even the sweetest of relationships, can be soured by time and circumstances. By the time things go wrong, it is too late for an employer who realises he is insufficiently protected by a shoddily-prepared employment contract.

This post highlights the key issues an employer should bear in mind when hiring employees.

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