I have been employed as a General Manager for four and a half years. I have recently been informed by Management that as part of their cost-cutting measures, my position is being made redundant.

What kind of severance package am I entitled to? I've heard that the standard practice is one month's salary for each year of service. Can anyone confirm this or inform me as to what my company's actual legal obligation might be?

2. If they were to hire someone to fulfill the same job scope in the future, would they be in violation of any labour laws?


I appreciate any feedback or input you can provide.

IMHO, the standard you mention 1 month salary for each year of services is just standard, not rule.

Question 2 answer, that will be constructive dismissal. Should have case there.

depending on how you were made redundant. VSS? MSS? MSS also can be referred to as a severance or redundancy package. Depending on how it is worded, it may not necessarily be an "unfair dismissal". But if you think it is unfair (ie releasing you because they just want to change people and not due to performance), you can bring it up to the Industrial Court (since you are a GM level employee). If the court finds it unfair then it is a totally different story which no one can predict the outcome.

There is no real rule covering employees earning RM1,500 and above. Malaysian Employment Act basically covers employees earning below RM1.5k. I cannot remember the exact numbers, but there is a tiered system in place. IE if you work less than 2 yrs, you get 10 days worth of wages per year of service as termination benefit. If >2 yrs but less than 5yrs, then it is 15 days and more than 5 yrs is 20 days. Something like that. Again this is based on employees covered under Employment Act 1955.

If you are earning > RM1.5k the amount can also be mutually agreed and signed off. There is no minimum or maximum for employees if I recall correctly. In any case, the company will still need to pay you for your notice period, balance of annual leave and etc. But a lot of companies will still refer back to the Employment Act for the termination benefits.

Companies can choose to pay more (ie we always hear the 1 or 1.5 month per year of service as standard) but there is no real rule (unless you are bound by the Employment Act). Companies must also adhere to a long list of other things (ie cut OT, cut costs, internal transfer offers, help find work for to be terminated employee etc).

All the best to you.

This post has been edited by kslian: Mar 17 2015, 05:27 PM

Manager level usually will be half month for each completed year worked.

Thanks for sharing. From the way you reply I guess you are an expert in IR matters

Thanks for your input and well-wishes, kslian.

It's a small company, so they tend to do things in an ad-hoc fashion, rather than following proper processes and procedures. So when I say that I'm being made redundant, I mean that they want to terminate my employment to save costs; ideally, they want me to tender my resignation.

Of course, I would only do so if I'm satisfied with the severance package they propose. I've heard inside information that they plan on hiring someone for much cheaper to perform the same job function. I'm not interested in going after the company - I just want fair compensation for the termination of my employment.

They will likely push for two weeks for every year of employment. I'm hoping that we can meet halfway and settle on three weeks' salary for every year of employment.

Employment Act: Between 2 to 5 years 15 days salary for each year of your service. (One could argue that since you're not technically covered under EA, the company could possibly even not bother giving you anything more than just your 1-3 months in-lieu as written in your contract).

In practice, 1 month per full year of service is pretty standard compensation.

On a technicality, if they are offering you a severance package, you need not "resign". You will be signing on the dotted line of the termination offer. Also, if you are at the 4.5 year mark, most companies may do a 15 days offer for every year of service. Do take note that there is a difference between 2 weeks and 15 days. The calculations will be on days based on 365 days. Depending on your notice period etc, you may be offered 4-5months pay out or more. However, as I pointed out, there is no real rule here for your level. As deodorant mentioned, you are technically not bound by EA1955, your company could easily not offer you anything more than your notice period plus your balance annual leave. Most bigger MNCs will offer the EA standard or the general 1month per year or service.

It is not that I have a lot of experience in this or in the HR line, but I have been thru such exercises. And I do empathize with your current situation as I know it is not a fun thing to experience. My personal thought is that you are at the 4.5 years mark, 6 mths more and you will be at the technical 20 days mark. Your company will probably be inclined to accept negotiations or discussions if the atmosphere is non-fervent. Stay calm and negotiate wisely as remember, it must be mutually agreeable by both sides.

To me, if a company chooses to let people go, there is no point to head towards unnecessary conduct or finding ways to stay put. If the offer is fair, by all means go for it and look for a greener pasture. GM level may not be easy of course subject to the level of your current package, but am sure you can go thru this and end up a stronger person in a better position somewhere else.

Also do remember that termination benefits are taxable, but you are able to claim this back in your next tax return. If I recall correctly you should be able to claim a relief of RM10k for every year of previous employment. This may have changed. Do check.

Again, all the best and stay calm.

This post has been edited by kslian: Mar 18 2015, 07:25 AM

For service up to 2 years: 10 days wages per year of service
Service between 2-5 years: 15 days wages per year of service
Service of more than 5 years: 20 days per year of service

Thanks for sharing this Mr. Kslian A very good input. I learn a lot from your reply

Thanks again kslian.

You've raised some very good points - whether my departure will be due to my resignation or due to termination of employment.

I know for a fact that they will request me to resign, rather than formally terminating my employment. Like I mentioned before, I don't want to make it a legal issue, or refuse to resign/demand a termination letter.

The challenging part will be in negotiating an agreeable package. I'm sorry I confused the issue by calling it a "severance package." It's more of a "what can we pay you to make you go away" package.

No worries. I have been thru it, so I know it is painful. No harm sharing.

If you want to "go into the company on good terms and leave on good terms" then you have to decide what kind of amount you are willing to be compensated in order to leave. My advise is to base it on EA. You should have the minimums which in this case your notice period or EA notice period whichever is higher plus your 15 days over 4 years plus your balance annual leave. Then look at the maximum which will be based on the 20 days over 5 years. If the figure end up being a fair amount, you can then make your decision based on that.

Just a reminder, make sure that money is banked in prior to signing anything.

Dear all,

I just want to tumpang understand, I thought the following :

a)For service up to 2 years: 10 days wages per year of service
b)Service between 2-5 years: 15 days wages per year of service
c)Service of more than 5 years: 20 days per year of service

only applies to workers covered under EA? Which covers >

1. Any person, irrespective of his occupation, who has entered into a contract of service with an employer under which such person’s wages do not exceed RM2000 a month.

2. Any person who, irrespective of the amount of wages he earns in a month, has entered into a contract of service with an employer in pursuance of which

(1) he is engaged in manual labour including such labour as an artisan or apprentice; Provided that where a person is employed by one employer partly in manual labour and partly in some other capacity such person shall not be deemed to be performing manual labour unless the time during which he is required to perform manual labour in any one wage period exceeds one-half of the total time during which he is required to work to such wage period;

(2) he is engaged in the operation or maintenance of any mechanically propelled vehicle operated for the transport of passengers or goods or for reward or for commercial purposes;

(3) he supervises or oversees other employees engaged in manual labour employed by the same employer in and throughout the performance of their work;

(4) he is engaged in any capacity in any vessel registered in Malaysia and who:

(a) is not an officer certificated under the Merchant Shipping Acts of the United Kingdom as amended from time to time;

(b) is not the holder of a local certificate as defined in Part VII of the Merchant Shipping Ordinance, 1952; or

(c ) has not entered into an agreement under Part III of the Merchant Shipping Ordinance, 1952; or

(5) he is engaged as a domestic servant.



So since fatfuzzybear is GM level, isn't he not covered under EA and the termination formula doesn't apply to him, and instead he need to refer to Industrial Relation Dept for unfair dismissal?

Thanks

Yes on a technicality GM level is not under EA. But there is no law that cover employees above RM2k (sorry, I thought it was still RM1.5k). So generally most companies will use EA as a base to compute any payable benefits. Anyone who is not covered under EA should be on a mutually agreed basis.

If it is unfair dismissal then yes, it will go to Industrial Courts. But in a typical "severance" or "termination" and if you do not want to make it a big hoo-haa and just want to "come in good and leave good" then the thing to do is to accept or negotiate the offer.

Just to provide an update:

I spoke with a lawyer specializing in Employment law this morning, and thoseeyes is absolutely correct: the Employment (Termination and Lay-Off Benefits) Regulations Act 1980 to which I've been referring only applies to those covered under the Employment Act.

The lawyer's advice was not to tender my resignation, but to force the company to issue a Termination of Employment letter. If there is any case of unlawful dismissal, the company would have to pay back salary for as long as the case drags on, plus they can be forced to reinstate employment. In lieu of reinstatement of employment, the company can pay one month's salary for every year of service.

Thanks again for everyone's input. You've been a great help.

thanks kslian..

I learnt a lot from you..

I hope the mods can pinned this thread.

Different company different way of disposing staffs.
Some are giving while some are not. Like Shell are forcing its IT staffs to relocate to India or leave the company.
So pinning a thread that means nothing for what?

At least ada general guidance bro. Itu jer.

How many cases has he won todate?
A company has a group of lawyers that give ideas or strategies to protect a company's interest.
They can use "no such post" or vacant your post directly which you can't do much.
Send the employer to court is not a problem, let you win after 21 years also can. But for these 21 years you will suffer. And even if you win the case at the end, you are losing on your time and money.
I still remember there's a company with a very strong union of 4++ to 5++. A HR manager that knows IR well played his game and almost send the union to trash. No doubt union win the case at the end, but left with <130 of members. That manager just use "no such post" for his dirty job.
Now this manager are sitting at very high post in that company.

There's no such thing as general guide to begin with.

Oklah bro.