Question

Case 1: Can employer use financial difficulties as a reason for retrenchment?

What are the factors to be considered when assessing whether cost-effectiveness or financial reasons are sufficient to constitute a genuine reason for retrenching employees? The Industrial Court considered this in Mohd Azhan Ariffin v. Ranhill Berhad (Award No. 920 of 2017). The claimant (Employee) was retrenched, and paid retrenchment benefits, on the basis that the respondent (Employer) could no longer sustain him in the business due to financial constraints.

The Employee was served with a notice of retrenchment by the Employer, informing him that the Employer could no longer sustain the employee in its establishment due to its financial situation. The Employer paid the Employee retrenchment benefits. The Employer claimed that the serious financial problems faced by the employer entity and two of its subsidiaries had caused the Employer to review and reorganize its operations in all three companies, and made the retrenchment of the Employee a genuine necessity.

1. Assume that Mohd Azhan Ariffin latest salary is RM1900 per month and works with Ranhill Berhad for 5 years already. Calculate the retrenchment benefits that he entitled to get.

2. Based on question b, if Mohd Azhan Ariffin received the notice of retrenchment today, 6 July 2020, according to Employment Act 1955 pertaining notice period of retrenchment, assume what will be his last date of working. Explain your answer.

Answer 1

Answer:

a)

Calculation of Retrenchment benefits:

Privilege 5 weeks, at that point 0.5 week's compensation as per the age class under 22; multi week's compensation under 22-41 age group; 1.5 weeks' compensation more than 41 age group.

Pay topped is RM525per week.

Length of the administration topped is 20 years

The legitimate least legal compensation that the business should pay is RM 2192(tax-fee).

b)

A conservation or retrenchment notice time of a representative/employee who has worked between the 2-12multi year gap is multi week's notification period.

Therefore, the easing or relieving date will be thirteenth of July 2020.