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In recent months, there has been an extensive amount of discussions on Business impact and losses suffered in lieu of the Covid19 pandemic. Many companies are forced to restructure their workforce, downsize and considering retrenchment of their staff.

Retrenchment simply means “the discharge of surplus labour or staff by the employer for any reasons whatsoever otherwise than as a punishment inflicted by way of disciplinary action”. Normally retrenchment is done as a last resort where a company finds ways to cut their operations cost or potentially face winding up. It goes without saying that retrenchment is subjected to scrutiny by the Industrial Court of Malaysia.

While companies are allowed to do retrenchment, it must act "bona fide" (in good faith) and not make excuses to simply get rid of their staff by taking advantage of the current situation. It’s best to apply what's stipulated in the Employment Act regarding retrenchment benefits for those earning RM2000 and below and the employment contract for all other staff.

To learn more about Employment Laws and Retrenchment, contact:


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