It’s not all doom and gloom during retrenchment period

815 Utusan Group employees were officially terminated on Oct 31, 2019

Ahirul Ahirudin
Written by Ahirul Ahirudin

KUALA LUMPUR – December 2, 2019: Retrenchment, just the thought of it can instil fear in the hearts of employees and rightfully so. The shock, resentment and the despair associated with the loss of steady income can be overwhelming.

According to Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan, as of September, at least 23,000 people had been laid off this year and there is no sign of the trend slowing down.

“This is happening all over the world and because of many reasons. Economic recession and digitalisation were the leading factors. The World bank predicts that the trend will continue till 2023,” said Shamsuddin.

However, the presence of policies, guidelines and provisions protecting employees also mean that those getting retrenched will not go out empty handed or caught off-guard.

Here are some of the compensation and benefits that employees should take advantage of:

  • Termination Benefits

Employees who fall within the scope of the Employment Act are entitled to termination benefits if they have been employed for at least 12 months. The termination benefits payable are as follows

Length of Service Termination Benefits
Less than 2 years 10 days’ worth of wages for every year served
2 to 5 years 15 days’ worth of wages for every year served
More than 5 years 20 days’ worth of wages for every year served
  • Employment Insurance System (EIS)

Those who had been laid off and were covered under EIS could approach any of the 54 offices of the Social Security Organisation (Socso) nationwide or apply for the benefits online within 60 days from the day they were retrenched.

The full list of benefits can be found here


However, what probably is the most enticing benefit that employees should know is that, they are eligible to claim an allowance of up to 80 per cent of their monthly assumed wage for a maximum of six months, effectively cushioning the period of unemployment.

  • Voluntary Separation Scheme (VSS) and Mutual Separation Scheme (MSS)

Considered to be an upgrade from the traditional retrenchment, both VSS and MSS usually comes with better compensation rate compared to normal compensation. VSS is open to those who want to volunteer resignation with compensation while MSS is when both the company and employee agree to terminate employment relationship.

However, it is entirely up for the company to give such benefits and they usually come with terms and conditions.  

With all the benefits mentioned above, it is not surprising that some with the intention to leave their post actually look forward to retrenchment time as they will be paid to do so. But of course, those are in the minority and even Shamsuddin acknowledges that.

“Most of those who are to be retrenched will face difficulties but some may have their own plans, and for these people, they actually look forward to retrenchment times,” he said.



About the author

Ahirul Ahirudin

Ahirul Ahirudin