JOB loss due to redundancy has both financial repercussion and psychological effects on the affected worker. Besides depriving him of his source of income, the employee loses accumulated benefits, such as seniority and pension rights.
The effects would be more devastating during an economic downturn, during which unemployment would be common and the retrenched worker would face difficulty in finding another job of similar status. More often than not, the labour market would be flooded with other jobseekers with similar skills and work experience.
The effects of job loss would be more felt when the worker had been in service for a long time and further, when it involves only specific skills, which may be of little use to potential employers.
Workers who managed to secure new employment but are unable to use their skills in their new job are likely to experience psychological adjustments while employed.
Coping with all of these problems can create physical and mental stress, which may contribute to social and psychological disorders.
Redundancy in an organisation that necessitates retrenchment of workers would expect the employer to take measures that go beyond payment of retrenchment benefits and compliance, with basic legal requirements to demonstrate corporate social responsibility.
Options to avert retrenchment may include freezing new hiring, reducing work-hours and overtime, eliminating temporary labour, transfer of workers and considering alternative employment in the organisation.
Adequate notice must be given to the affected employees before retrenchment to prepare them and for them to look for suitable alternative employment.
It must contain information such as reasons for retrenchment, number of employees likely to be affected and their job categories, selection criteria, when the retrenchment is likely to take place, the assistance the employer will offer, such as time off to attend interviews, early release should a new job be found, issuing letters of reference and psychological counselling.
Prior notice is a good industrial practice to minimise the traumatic impact of retrenchment on the workers and their families.
Consultation with the employees likely to be affected by the retrenchment or the representatives from the trade union must be carried out.
The discussion could focus on finding ways, for example, to avoid retrenchment, ways to reduce the number of people retrenched, ways to limit the harsh effects of retrenchment, and the method and criteria for selecting workers to be retrenched.
Although the company has no legal duty to offer alternative employment to the affected employees, efforts must be made to avert retrenchment by exploring alternative employment within the organisation.
Workers should not be retrenched until all options to place them elsewhere in the organisation are exhausted.
The Industrial Court has held inter alia, that terminating the employee without looking into the possibility of transfer, re-designation or alternative employment may constitute a dismissal without just cause and excuse.
A significant part of any retrenchment plan is a strategy to help these workers find new employment. The employer could assist the retrenched workers to secure alternative employment through submission of names to labour exchange organisations or programmes and to local companies known to be recruiting new employees.
Another commonly used alternative to retrenchment is the early retirement scheme or “voluntary separation scheme” (VSS).
The scheme is an attractive retirement package, which is better than the statutory minimum for retrenchment. It is done on a voluntary basis without the employee being forced into retirement.
The VSS should be offered
to an employee who has been advised that his position has been declared redundant, after all possible redeployment, retraining, relocation or transfer options available in the organisation have been explored.
It is important that the employer adhere to proper procedure before retrenching its workers. The guidelines are what a prudent employer must follow to ensure that the termination on grounds of redundancy is bona fide and in accordance with established principles and procedures of industrial jurisprudence.
Professor Dr Ashgar Ali Ali Mohamed
Ahmad Ibrahim Kulliyyah of Laws,
International Islamic University Malaysia