The Industrial Law and Right to Retrench in Malaysia from a Human Resource Management Perspective

This paper explores the legal right to retrench employees from a human resource management perspective in Malaysia. The paper is based on the analysis of the relevant statues on retrenchment such the Employment Act 1955, The Industrial Relations Act 1967, the Employment (Termination and Lay-Off Benefits) Regulations 1980 and the Code of Conduct for Industry Harmony 1975. The author has also used criterion based sampling of the Industrial Court and Superior Court awards to analyze retrenchment cases and to provide recommendations to human resource management practitioners. Findings from these cases analyses reveal that many of the retrenchment awards were made against the employers due to poor selection of workforce for retrenchment, and the handling of the retrenchment exercise itself which violated the relevant statutes and the established procedures. The author suggests that retrenchment should not be viewed as a reactive but a proactive exercise, which begins with effective human resource planning aligned with the organizational strategic plan. The retrenchment exercise should also need be seen as a last resort when limiting recruitment, reduction in working hours, helping the employees (workmen) to find alternative employment, encouraging early retirement, offer of voluntary separation scheme (VSS) and other measures have been exhausted. The author hopes with many proactive measures, taken by employers in the management of retrenchment, the number of unfair retrenchment claims made to the Industrial Relations Department will be reduced.