Moratorium on forced retrenchment possible, but unlikely

The govt can impose federal laws to strictly avert mass layoffs, but it would put companies in a very difficult position


THE government can impose a moratorium on forced retrenchments during the coronavirus pandemic period, but it will likely cause more damage to businesses and the economy in the long run.

While the government can impose federal laws to strictly avert mass layoffs, lawyer Lim Wei Jiet said it would put companies in a very difficult position.

“If the law forces companies to continue paying wages and hiring workers if they can’t, it would just force companies to wind up and it may have greater long-term consequences. I don’t think any country has enacted such legislation,” he told The Malaysian Reserve.

The Malaysian Trade Union Congress (MTUC) has recently called for more government intervention to protect workers from outright dismissals. The union said an Emergency Employment Regulation can be enacted, barring employers from retrenching their staff for an identified period.

Its secretary-general J Solomon recently told an English daily that companies have begun to eliminate their workers despite having accepted the benefits in the stimulus packages introduced by the government. He said at least two workers have been pushed to suicide after being laid off. Solomon was quoted as saying:

“If the government is unwilling to deal with this problem, it will be seen as if it is pandering to the demands of the business community.” The Malaysian Employers Federation (MEF) admitted that some companies had to reduce the size of their workforce.

With no end in sight, layoffs and furloughs are piling up as businesses struggle to bear the cost of the coronavirus outbreak. It is estimated that 660,000 people lost their jobs in March, just two weeks after the Movement Control Order (MCO) was enforced on March 18.

Recent figures by the Statistics Department showed that the unemployment rate has risen by 17.1% over the short period. The sudden jump in Malaysia’s unemployment rate to 3.9% in March — the highest since 1986 — point to impending damage to the job market.

MEF ED Datuk Shamsuddin Bardan expects the number of companies that will be shuttered to triple in the coming months. He said most companies are also expected to suspend recruitment.

The government has so far announced three stimulus packages worth a total RM260 billion — nearly a fifth of the country’s GDP — which included cash handouts, wage subsidies, tax rebates, discounts on utility bills and a six-month moratorium on existing bank loan repayments.

A total of RM13.8 billion has been allocated for the wage subsidy programme. Successful applicants will receive a monthly subsidy of RM600 for three months for workers with a monthly income of less than RM4,000. The programme targets companies where income has declined by 50% since Jan 1.

During the period, employers are not allowed to dismiss employees or direct them to take unpaid leave for three months. Most of these businesses, however, are struggling for survival.