What employers should do to sustain businesses?
To sustain businesses and save jobs, employers should consider the following – in order of priority:
Second, tap on government support to offset business and wage costs, and press on with business and workforce transformation.
Third, trim wage costs.
Fourth, if it is necessary to retrench or lay-off workers as a last resort, ensure it is done in a responsible manner.
Are employees entitled to the same salary and benefits during MCO?
Yes, the employees need to be paid by the employers as per their contract of employment.
Can employers make any deduction to the employees’ annual leave entitlement or enforce unpaid leave during MCO?
Under the law, any set off of annual leave entitlement is not permitted unless the contract of employment provides otherwise. It is further not permitted for employers to unilaterally require their employees to take unpaid leave during MCO.
Are employers required to pay the full salaries of their employees who cannot work from home?
MOHR has issued FAQs (Part 1, Part 2) [http://jtksm.mohr.gov.my/images/novel_coronavirus/soalan_lazim/FAQ KSM English Version.pdf] stating that all salaries and allowances must continue to be paid in full during the period of MCO.
For employers whose businesses are severely impacted by the MCO and are unable to pay employees their full salaries during the Period, employers may need to consider other cost cutting measures.
Can employers impose pay cuts or reduction of wages as cost-cutting measures?
Yes, employers facing financial difficulties as a result of the Covid-19 pandemic and MCO may find it necessary to reduce its business costs and expense by amongst others imposing pay-cuts or reduction of wages.
The reduction of salary of the employees must be bona fide and justified in view of the financial situation of the employers and the predicament it is intended to be a win-win for both the employees and the employers instead of retrenching the employees or dismissing them.
Salary deduction or pay cut may be permissible under the law under certain circumstances, especially when it is the only option to prevent termination or retrenchment of employees but must be done with the necessary consent from the employees.
Is the Government providing any relief to employers during this time?
In the PM’s announcement on 27 March 2020, the following reliefs will be granted to employers:-
The Government will introduce a Wage Subsidy Program (Program Subsidi Upah) to assist employers to retain employees. The Government will provide a subsidy of RM 600 a month to certain employers for each employee earning less than RM 4,000 for a period of 3 months.
Employers who qualify are those who have experienced a loss of income of at least 50% from 1 January 2020. In consideration for this subsidy, employers are not allowed to terminate the employment of their employees and/or reduce their salaries and/or require them to be on unpaid leave for three months after this program is implemented.
Employers, in consultation with the Employees Provident Fund, may choose to defer, restructure or reschedule contributions to the Employees Provident Fund.
All sectors are exempt from paying the Human Resources Development Fund levy for a period of 6 months beginning April 2020.
Can an employer affected by Covid-19 and MCO take actions by retrenching or lay-off employees?
Yes. Retrenchment should be in accordance to the general principles of industrial law, and retrenchment benefits may be payable. In general, retrenchment is under the prerogative of an employer. However, to ensure that the process is done fairly, there are three (3) factors that must be met by the employer, namely:
the employer must have taken steps to ensure that the termination is being avoided such as reducing an employee’s working hours, limiting or freezing new hires, limiting overtime, limiting work during weekends or public holidays, or performing a temporary lay-off;
Thirdly, if retrenchment is inevitable, foreign employees should be terminated first. If the retrenchment involves local employees, then the ‘Last In First Out’ principle should be adhered to.
Temporary Lay-offs may only be done after consultation and with the consent of the employees.
Permanent Lay-off may be subjected to necessary benefits payable under the Employment (Termination and Lay-Off Benefits) Regulations 1980.
For further advice on the above, you may contact Encik Imran at 03-2171 1484 or at mail@azamlaw.com.
