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Employers Mandatory Obligation to Report Before Retrenchment, Cessation or Reduction.

Updated: Aug 17, 2021

The rate of retrenchment, termination, and salary reduction is rising up during the Movement Control Order. Many businesses have failed to survive this global crisis that had damaged and is continuing to damage the economy.

As such, many employers have been forced to take action in downsizing their operations by retrenching and laying-off employees or even by ceasing the business. It is pertinent to note that prior such action is taken, many employers should see if there are any regulations to adhere before they take such measures.

This article focuses on the obligation of the employers to report to the Department of Labour for any of the following, as required by the Employment (Retrenchment) Notification 2004 [P.U.(B) 430/2004]:-

(i)  Retrenchment of Employees

(ii)  Voluntary Separation Scheme (VSS)

(iii) Temporary Lay-off  

(iv) Reduction of Wages

Every employer and owner or occupier of land shall complete and submit the Employment Notification Retrenchment Form, as prescribed in the Schedule, known as PK Form (Borang PK) [click to download PK Form].

The PK Form is divided into 6 parts as follow:-

Part I - Particulars of Employer

Part II - Number of Local Employees Involved by the Action, Part II A Number of Foreign Employees Involved by the Action

Part III - Reasons For Action

Part IV - Measures Taken To Avery Action

Part V - Particulars of Payment Benefits

Part VI - Particulars of Relocation of Employees

This form must be submitted separately and to be received by the nearest Department of Labour as follows:

(i) Part I to IV- at least thirty (30) days before retrenchment of employees.

(ii) Part V-within fourteen (14) days after retrenchment of employees

(iii) Part VI-within thirty (30) days after retrenchment of employees.

(iv) Part V and VI must be submitted if the action involves Retrenchment or Voluntary Separation Scheme.

The issue arises as to whether the time period is applicable to the reduction of salary as the time of submission as shown above only refers to "retrenchment" and not a salary reduction in which both are not the same circumstances. This would mean that it is arguable that the time period above does not apply to salary reduction.

Failure of compliance to submit notification is an offence under section 99A of the Employment Act 1955 which reads as follow:-

"Any person who commits any offence under, or contravenes any provision of, this Act, or any regulations, order, or other subsidiary legislation whatsoever made thereunder, in respect of which no penalty is provided, shall be liable, on conviction, to a fine not exceeding ten thousand ringgit."



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