Redundancy Termination

An employment relationship in Malaysia may be terminated for redundancy. Special provisions under the 1980 Regulations govern termination by retrenchment or the take-over or cessation of a business, and mandate that retrenched EA employees are entitled to specific termination indemnities. In a retrenchment situation, employers should select the employees of the same category to be retrenched based on objective criteria. The Malaysian Code of Conduct for Industrial Harmony, which is not legally prescribed by legislation (but is taken note of by the Industrial Court), provides guidelines for the selection of affected employees. The guidelines specify the following criteria:

• (i)  The need for the efficient operation of the organization; 
• (ii)  The ability, experience, skill and occupational qualifications of workers; 
• (iii)  The consideration for length of service and whether employees are casual, temporary or permanent; 

• (iv)  The age of the employee; 
• (v)  The employee’s family situation; and 
• (vi)  The “last in, first out” principle (i.e., the last person employed should be the first person retrenched).