RETRENCHMENT DURING COVID-19 IN MALAYSIA

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It is a settled law that a company has the right to organise and reorganise its business in the manner it considers best for better business management and efficacy.

Currently, we are facing an unprecedented situation. The global coronavirus pandemic is affecting our social, personal & professional lives. Business leaders are having to deal with the hard task of letting go off employees, many of whom have most likely been with the company for years.

As Propay Partners belongs to the HR fraternity, we have been asked by our clients how they can avoid a retrenchment wave during this time. They are presently not economically or operationally functional and the need for reliable information with respect to employment and labour law is important before they make any move.

However, before one veers off into the direction of retrenchment, you might want reconsider the decision and wonder if retrenchment can really solve the issue at hand. This lockdown is not going to stay forever, so employers need to be mindful of this fact. While it is always wise to err on the side of caution, temporary solutions should be sought and considered first and foremost. These solutions could include utilising annual leave, placing employees on a shorter work time and amendment of their current salary to the new number of hours agreed to. However, employers should be mindful that this cannot be unilaterally imposed on their team. Both sides must be in agreement or this could result in labour disputes later.

After avenues are exhausted and no other path is visible except retrenchment, then there are a couple of things employers should know. When you need to manage a complex layoff situation, the first step is to contact the HR consultant who needs to make sure:

  1. You have the information and support you need to develop and implement an effective staff reduction plan.
  2. You have a communication plan that will provide staff with information that is timely, geared to their needs, and sensitive to the dynamics of the workplace.
  3. Employees have the information they need about the options and resources available to them.
  4. The layoff process is properly administered.
  5. HR needs to consider the organisation’s future business needs and assess if the employee in question has the necessary skillset.

For further information regarding retrenchment, please click on the link below. Written by MECA, this article attempts to demystify the complexities in a retrenchment exercise and address such situations as much as possible.


Understanding how the process works will prepare you for any layoffs that your unit must initiate. Adequate planning and communication will have a significant effect on the employees being laid off, the remaining staff, and on clients who work with your employees.

The fact of the matter is that it affects every one of us making those changes. Employers are better off understanding the valid or invalid reasons for retrenchments, and how the law will not only determine if the reasons put forth by employers are valid or not, but will also offer effective measures to minimise the deleterious ‘side effects’ of any retrenchment.
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