I will be sharing the transcript of my Answers to the Questions posted to me by the Moderator (Alex Wong) in What can SMEs do to sustain and ride through COVID 19 (Part 2) that was held on 7th April 2020, 2pm (LIVE on Facebook)
JJ Phang : I am the Founder and Managing partner of Phang & Partners, a legal firm specializing in business and company restructuring activities. We help SME and Business Owners to manage their businesses effectively in accordance to the law (specially on industrial relations and employment). We also advise business owners to take proactive measures to prevent any disputes among Business to Business and to promote industrial harmony between the employer and employees.
Alex Wong: Employee and Wages remained the Biggest challenge and it is important to manage them in accordance to the Industrial Relations and Labour Law. If an employee have to work on pay cut or retrenchment, what are the steps? How can you help our SMEs if they were to engage you?
JJ Phang: It is important to note that retrenchment is not something that we want to come across, but due to difficult time like today, many SME or Business owners never foresee this situation to happen. I would like to point out that retrenchment usually happen when there is redundancy on the workers. The employer should recognize that a workman who loses his job in a genuine redundancy situation in the company has done nothing wrong and therefore, the workers will be paid with retrenchment benefit in accordance to Regulation 5 and Regulation 6 of the Employment (Termination and Lay-off Benefits) Regulation 1980. The calculation of the benefit to be paid depending on the years of service of the worker. Even the worker gets a new job straight away, the employer has to pay the said retrenchment benefit too.
Not to forget we have the Code of Conduct for Industrial Harmony which lay down the principles and guidelines to employers and workers on the practice of industrial relations for achieving greater industrial harmony.
In circumstances where redundancy is likely to happen, an employer should consult with his employees’ representatives or their trade union, as appropriate, and in consultation with the Ministry of Human Resources / Labour Departments to take positive steps to avert or minimise reductions of workforce by the adoption of appropriate measures such as:
(a) Limitation on recruitment
(b) Restriction of overtime work
(c) Restriction of work on weekly day of rest
(d) Reduction in number of shifts or days worked a week
(e) Reduction in the number of hours of work
(f) Re-training and/or transfer to other department/work.
The ultimate responsibility for deciding on the size of the workforce must rest with the employer, but before any decision on reduction is taken, there should be consultation with the workers or their trade union representatives on the reduction.
If retrenchment becomes necessary, despite having taken appropriate measures, the employer should take the following measures such as:
a) Giving as early a warning, as practicable, to the workers concerned ;
b) Introducing schemes for voluntary retrenchment and retirement and for payment of redundancy and retirement benefits; and
c) Retiring workers who are beyond their normal retiring age
In short, I would like to conclude that being SME and business owner, as an employer, if you all are facing financial difficulties as a result of this COVID-19 pandemic, retrenchment or temporary lay-off your employees might be option to reduce your operational costs. Any measures taken must be conform with reg. 5 and 6 of the Employment (Termination and Lay-Off Benefits) regulation 1980. Retrenchment must be genuine. Termination Foreign worker first as per 60N of Employment Act 1955. Applying Last in first Out principle while retrenching local employees. Not to forget also to fill up the Form PK to Labour Office at least 30 days prior to the effective date of the retrenchment or lay off.
Alex Wong: Regarding the inability to pay debts and creditors as at when it falls due, which is already happening to some businesses out there, could you tell us exactly how it works?
JJ Phang: If you are unable to pay your debts, save and except for the banking facilities (that the repayment had been postponed currently due to the moratorium of Bank Negara Malaysia), please do not to forget other liability such as our rental, overhead and also production costs. Always negotiate with the relevant parties for an amicable settlement to avoid protract litigation between parties which will incur exorbitant costs (i.e Legal fees and court fees).
It is advisable to sit down together with your accountant and your legal advisor / lawyer to study your financial standing and evaluate any possible litigation matter against your company. Please utilize the moratorium issued by the government, and always do risk evaluation and management on the credit terms between you and your supplier, and between you and your customers. Other than that, also ensure your staffs are competent to perform to avoid any liability which may arise against the public.
I believe that most of the SME and Business Owners who are currently listening to this video, perhaps you all are going through a turbulent ride ever since the implementation of this MCO. Some of us wouldn’t know what will happen in the coming days. I believe it is good for me to know some of you so that we can have some small conversation on how we can go through this difficult time together without violating any employment and industrial laws and not forgetting to preserve the industrial harmony.
Alex Wong: How would you help them if they engage you?
JJ Phang: SME and Business owners, if you are watching this video, feel free to always drop me your enquiries through email or WhatsApp, we will work our very best to help you out especially times are bad at this period. I apologise if we are unable to respond to you immediately, but we will make it as prompt as possible. I would be open to listen to your problems as I hope to provide you all with practical solutions on your problems that you might possibly face by your all with your employees, suppliers or customers.
Question from Facebook Audience (Lim Hanlun):
Alex Wong: “If I am talking to my staff for unpaid leave and pay cut, if they agree, am I still entitled to the RM1200 wages subsidy for 3 months?”
JJ Phang: For this issue, the Prime Minister had announced the first PRIHATIN scheme on 27th March 2020, and in the Prime Minister’s speech, it mentioned that for SME or Business Owners to entitle for the Wages Subsidy Program, there shall not be any pay cut or retrenchment on the worker. However, in the additional PRIHATIN scheme on 6th April 2020, the Prime Minister did not address to this issue, I would assume that this will still be the condition still applies for the applicants. It is better and safe to read the terms and conditions again while applying through the PERKESO website. Thanks.
Disclaimer: The above sharing merely for informational purpose only and shall not in any way constitute any professional / legal advice.
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