TERMINATION AND LAY-OFF BENEFITS

Prepared by: Mohamed Ahmed Abdalla Elsaied

Retrenchment may happen not only during recession but it is also relevant
when the economic situation is good. Apparently, termination of service is
permitted by law for operational reasons, which is commonly known as
redundancy. The word redundant however, is not as simple as it sound as it
is, in fact, it is very subjective. Redundancy occurs when the employee is no
longer required to work.
There are situations where a contract of employment is subject to some
inevitable change. Redundancy may happen due to several reasons such as a
downturn in production, sales or economy, the introduction of technology,
business relocation, a business merger or a business is sold or restructuring
of a company.
In exercising retrenchment, not only must the employer have good grounds
to do so, but, the law clearly provides that the employer is required to
exercise it fairly. It is the practice that the recognized trade union must be
consulted when an employer proposes to make the employee redundant.
Section 13(3) of Industrial Relations Act 1967 recognizes management
prerogatives to employ workers or to terminate them with a proper cause or
excuse. While the court generally will not interfere with the bona fide exercise
of power given to the management, it is equally important to note that the
employer must provide a proper cause or reason before terminating the
employees. Due to this reason, it is the employer who decides on the number
of employees to be employed or to be retained by considering their viability
and profitability of the business.
Relationship between employer and employee is based on the contract of the
service. Good employer employee relations are dependent upon efficiency.
Employee's efficiency may be enhanced if: they are kept informed on matters
which concern them; and their views are sought on existing practices and on
proposed changes which would affect them. Management should ensure that
each employee is given full information about his rights and obligations. This
should include information on. this terms and conditions of employment;

agreements with trade unions which affect him; what is required of him in his
job and to whom he is directly responsible; procedures for making
suggestions or taking up grievances and to whom he can go to for help or
advice on personal problems; Opportunities for promotion and any training
which is necessary to achieve it; safety rule.
Lay-off means the failure to provide paid work under the contract of
employment. Under the Employment (Termination and Lay-off Benefits)
Regulations 1980, where an employee is employed under a contract on such
terms and conditions that his remuneration there under depends on his being
provided by the employer with work of the kind he is employed to do, he
shall, for the purposes of regulations. Practicing lay-off by the employer is
necessary for industrial harmony. If the employer is moving towards a
retrenchment, he is required to practice lay-off first and if he is unable to
continue with the lay-off, then only he should choose to retrench the affected
employees.
In the absence of a collective agreement providing retrenchment benefits,
the parties have to follow the provisions contained in the Employment
(Termination and Lay-off Benefits) Regulations 1980. The amount of statutory
redundancy payment/retrenchment benefits is calculated in accordance with
the formula in reg. 6 of the 1980 Regulations. The amount shall not be less
than:
(a) 10 days' wages for every year of employment under a continuous contract
of service with the employer if he has been employed by that employer for a
period of less than 2 years; or
(b) 15 days' wages for every year of employment under a continuous contract
of service with the employer if he has been employed by that employer for 2
years or more but less than 5 years; or
(c) 20 days' wages for every year of employment under a continuous contract
of service with the employer if he has been employed by that employer for 5
years or more, and pro rata as respect an incomplete year, calculated to the
nearest month.
For purpose of the Regulations, 'a day's wages' shall be computed in a
manner giving the employee his average true day's wages calculated over
the period of 12 completed months' service immediately preceding the
relevant date.

"true days wages.." should be calculated by dividing the total numbers of

days in the month and not by 26 days and for the true day's wages over a

period of twelve month immediately preceding the relevant date should be

divided by 365 days.

In conclusion the Employment Act is a fundamental law, which provides

minimum terms of employment to those recognized as employees under the
Act. The understanding and compliance of labor laws is crucial to enhancing
good employer and employee relationships. Employment law provides the
benefit and keeps right of both. The Employment Act 1955 outlines the
mandatory employment standards for employers, failure to comply could
result in a fine of up to RM10, 000 as well as compounds.

Today the worker looks to the law for his protection. It should therefore be a
rule of thumb for every employer carrying out reorganization and
retrenchment to act on the assumption that each step and action he takes
would be analyzed in court for their property on a future date. In order to
maintain a good relationship between employer and employee, both parties
need to understand each others rights and obligations under the laws
relating to the industrial relations.