Layoff means the termination of a service contract due to company closure and redundancy. Redundancies can arise as a result of a number of reasons such as company reorganization, production reduction, company mergers, technological changes, company takeovers and others. This does not include types of termination of service contracts due to disciplinary action and dismissal of employees.

When there is an excess of workers, the employer must first take appropriate measures to avoid the dismissal of workers as suggested in the Procedures for Industrial Harmony, namely :-

2.1 Freeze the hiring of new employees except for critical areas;

2.2 Limiting overtime;

2.3 Limit work on weekly rest days and public holidays;

2.4 Reduce the working days in the week or reduce the number of shift work;

2.5 Reducing daily working hours;

2.6 Organize retraining programs for employees;

2.7 Identify alternative work and change to another department/work within the same company;

2.8 Implement lay-off for example in the form of temporary shutdown by offering reasonable wages and helping them find temporary work elsewhere until operations can resume. If the employer implements a temporary layoff, information on the duration of the temporary layoff must be reported to the Sarawak Manpower Department for the purpose of monitoring whether the employee is rehired or offered Voluntary Redundancy (VSS) or permanent layoff in the future; and

2.9 Reducing employee wages (Pay-Cut) made fairly at all levels can also be implemented as a last step after other cost-saving measures have been implemented.

The steps in details 2.7, 2.8 and 2.9 must be implemented with the written consent of the employees or the trade union representing them.

If the termination of employees needs to be carried out even though the steps in paragraph 3 have been taken, the employer must try to implement the following measures to alleviate the negative impact on the employees involved:-

3.1 Inform and hold discussions with the employees or the Trade Union representing them as soon as possible about the layoffs;

3.2 Offer a voluntary severance / retirement scheme with the best possible compensation rate;

3.3 Pay compensation or severance benefits to eligible employees;

3.4 Retiring employees who are over the normal retirement age;

3.5 Give notice of service termination as stipulated in the service contract. If there is no provision about it in the service contract, the employer must give notice as stated under the following Employment Act 1955;

a) 4 weeks notice if the employee has been employed for less than 2 years;

b) 6 weeks notice if the employee has been employed for 2 years but less than 5 years; or

c) 8 weeks notice if the employee has worked for more than 5 years.

3.6 Helping employees find work in other workplaces before layoffs are made in collaboration with the Sarawak Department of Manpower under the Ministry of Human Resources;

3.7 Carry out layoffs in stages over a longer period;

3.8 Implement the principle of ‘FWFO’ (Foreign Worker – First Out) in the same job category in dismissing employees, ie foreign workers are dismissed first than local workers; and

3.9 Implement the ‘LIFO’ (Last – In – First – Out) principle if layoffs involve local workers and in the same job category. However, employers can also terminate employees based on certain criteria after consulting and getting approval from the employees or the trade union that represents them.

4.1 Employers are required to report to the nearest Sarawak Manpower Department at least 30 days before any of the actions mentioned below are carried out using the Termination Form (JTKSWK19), according to the type of termination to be carried out by the employer:-

4.1.1 Termination of Employees (Rentrenchment);

4.1.2 Voluntary Termination of Employees (Voluntary Separation);

4.1.3 Lay-Off; or

4.1.4 Pay-Cut.

4.2 This Termination Form can be obtained free of charge from any Manpower Office throughout Peninsular Malaysia or can be downloaded from the Acts & Forms section.

4.3 This Termination Form has been gazetted as P.U.(B)205 dated 26 June 2009 and any employer who fails to comply with this is committing an offense under section 2(2) of the Employment (Termination) Notification 2009, and if convicted may be fined not more than RM10,000 for each offence.

Retrenched employees are entitled to minimum termination benefits if they are covered under the Labor Ordinance (Sarawak Chapter 76) or Collective Agreement.

5.1 Labor Ordinance (Sarawak Chapter 76)
Generally, employees who are protected under the Labor Ordinance (Sarawak Chapter 76) and involved in layoffs are eligible to claim the following statutory benefits:

5.1.1 Wages in lieu of notice

Employees who are dismissed without being given a sufficient notice period of termination of service, can claim payment of notice compensation wages (Indemnity). Notice severance pay must be paid no later than the last day the service contract is terminated.

5.1.2 Termination benefits

The payment of severance benefits shall be in accordance with the service contract, but shall not be less than the rate set under the Labor (Sarawak) (Termination and Temporary Termination Benefits) Rules 2008 which are:-

a) 10 days’ salary for each year of service if the employee has served less than 2 years;

b) 15 days salary for each year of service if the employee has served for 2 years but less than 5 years; or

c) 20 days’ salary for each year of service if the employee has served 5 years or more and is calculated pro-rata over the odd period of a year, according to the nearest even month.

The formula prescribed under the Employment (Termination and Temporary Employment Benefits) Regulations 1980, namely:

5.1.3 Employees are entitled to written details of the amount of the total termination benefits and how the calculation is made. Termination benefits must be paid no later than 7 days from the date the employee is terminated.

5.1.4 Payment in lieu of remaining annual leave, if any.

5.1.5 Salary Balance.

5.1.6 Employees involved in layoffs can refer to the nearest Labor Department for more information.

5.2 Industrial Relations Act 1967

5.2.1 If the employee involved in the layoff is a member of a trade union and signed a Collective Agreement, the employee is entitled to those things;

i) Compensation as specified in the Collective Agreement; or

ii) Restoration of Work under section 20 of the Industrial Relations Act 1967, if the employee is not satisfied with the dismissal action taken by his employer

5.2.2 For workers who are not protected under the Labor Ordinance (Sarawak Chapter 76) or Agreement.

Together, they are subject to the terms and conditions under the service contract or the employer’s discretion regarding the amount of compensation to be received.

5.2.3 Employees can seek further advice from the Industrial Relations Department that is close to the workplace.

The steps to be taken by the dismissed employee are:

i. Report the proposal or Termination action that will be or has been taken by their employer to the nearest Manpower Office.

i. Register either at the nearest SOCSO office or online at the MyFutureJobs portal.

iii. Ensure that severance pay or benefits have been received (if eligible).