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EMPLOYEES, EMPLOYERS AMD WAGES DURING "MCO"IN MALAYSIA


1. Do employers have to close down the places of employment during the entire MCO period?

No, the MCO only requires “Non-Essential” businesses to close their business or office premises. This means that these businesses should not service their customers/clients at the premises and should not permit their employees to work on the premises. However, this does not mean that the business has to shut down or stop running, Employers can require employees to continue to work remotely and employers can implement work from home measures including:-

  • Attending online meetings & conference calls;

  • Require employees to attend to client queries and requests by email and other forms of communication; and

  • Require employees to be contactable for work at home during regular office hours

For "Essential Services". Download here for further particular of essential service. Please note that the Government has also imposed a limitation on operating hours for essential services such as eateries and supermarkets, i.e. from 8 am to 8 pm and during the Period are required to provide their employees with letters of authorization (see Regulation 4(1)(d) of the New Regulations). Employers in essential services are advised to formulate employee rotation plans into (i) the need to work from the workplace;and (ii) work from home to smooth running of the essential services to minimize the number of employees attending the workplace at any one time.

Premises of "critical manufacturing businesses" may continue to operate during the entire Period if approval from MITI has been obtained subject to conditions imposed by MITI.  Businesses in the food supply chain and e-commerce, including logistics and transportation services (confined to the provision of essential services as provided for under the New Regulations) may also operate subject to conditions imposed by KPDNHEP. 


2. Can employers force their employees to go on unpaid leave or paid annual leave during this MCO period?

The Ministry seems to be of the opinion that employees are entitled to full wages during this period and that they cannot be compelled to utilize annual leave. Unless stated in employment Contact otherwise, the law does not permit annual leave entitlement to be set off or for employers unilaterally require their employees to take unpaid leave during this MCO Period.

The government has issued FAQs (Part 1Part 2Part 3)  stating that salaries and allowances for all employees must continue to be paid in full during the entire period. This practice is also encouraged from a risk management, practical and even humanitarian perspective. 

3. What if the Employers's business will not survive if he/she has to pay the employees’ salaries in full during MCO period?

In the case of Viking Askim Sdn Bhd v National Union of Employees in Companies Manufacturing Rubber Products (1991) 2 MLJ 115 where the learned judge of the High Court stated as follows:

"...Under common law, if an employee is ready to perform his services during the period covered by his contract of employment, which provides for payment of wage at certain times, he is entitled to the wages although the employer has no work for him..."


Therefore, the basic fact is that the employee would not be entitled to wages during this MCO period where companies have to fully close down and the employee unable to ready to perform her/his services 


However, it is recommended that companies make some arrangements to compensate employees during this period such as:-


1. To utilize their annual leave who have sufficient annual leave be required;  2. To consider the entire period of the shutdown as paid unrecorded leave; 3. To consider 50% of the shutdown period as paid leave and the other 50% as unpaid.

In the case of Lim Ban Leong v Gold Bridge Engineering & Construction & Construction Bhd, the Industrial Court held as follows:-


“...Traditionally, any salary cut to an employee’s pay can be used as a ground by the employee to plead constructive dismissal. However, if the company is facing losses and is trying to fight off closure of its business or retrenchment of its employees, the company can appeal to the employees to ride through the rough times with it and take a salary cut which can then be reinstated and increased when the business picks up again … The Court notes that there should have been much more engagement by the Respondent with its employees in order to maintain industrial harmony...”


4. What if my business is an ‘essential service’ under the MCO but my employee refuses to come to work?

An employee’s failure to turn up at work would amount to absenteeism.

5. How should employers deal with Malaysian employees who return from overseas during this period?

Employees are required to undergo a health examination upon arrival and undergo quarantine at a designated quarantine area for 14 days (see Regulation 8 of the New Regulations). During this period of quarantine, the employers may not require the relevant employees to attend the workplace regardless of whether it overlaps with the Period.

6. Can employers retrench, temporarily lay-off and/or impose pay cuts as cost-cutting measures?

COVID -19 pandemic may not a sufficient ground but its implication to each business would have to justify consciously whether any business can conduct any retrenchment exercise.

in Court of Appeal in William Jack & Co. (M) Sdn Bhd v. S. Balasingam [1997] 3 CLJ 235 stated:-


"... Whether the retrenchments exercise in a particular case is bona fide or otherwise, is a question of fact and of degree depending for its resolution upon the peculiar facts and circumstances of each case. IT is well-settled that an employer is entitled to organize his business in the manner he considers best. So long as that managerial power is exercised bona fide. the decision is immune from examination even by the Industrial Court..."


Employers are advised to adopt the mitigation scheme which employees that have consented to such scheme are not allowed to then renege on their acceptance and claim unfair dismissal as per Zainon bt Ahmad & 690 other v. Padiberas Nasional Berhad [2012] 8 CLJ 29, Federal Court such as:-


1.Mutual Separation Scheme;

2. Voluntary Separation Scheme


7. Who entitled to withdraw their EPF savings as a result of the Covid-19 pandemic?

The Government announced on 23 March 2020, beginning 1 April 2020, all employees below the age of 55 may withdraw the maximum amount of RM 500 per month for 12 months from their respective EPF Account 2.

8.  The Government providing any relief to employers during this time?


Separate from the MCO, the government announced on 16 March 2020 that employees with salaries under RM4,000 who are forced to take unpaid leave due to the Covid-19 pandemic will be provided financial assistance of RM600 per month for a maximum of six months. Employees who are given the notice to take unpaid leave beginning 1.3.2020 will be eligible for financial assistance. he application forms may be downloaded here. Employers who qualify are those who have experienced a loss of income of at least 50% from 1 January 2020. In consideration for this subsidy, employers are not allowed to terminate the employment of their employees and/or reduce their salaries and/or require them to be on unpaid leave for three months after this program is implemented;

Secondly, employers may choose to defer, restructure or reschedule contributions to the Employees Provident Fund. Finally, all sectors are exempt from paying the Human Resources Development Fund levy for a period of 6 months beginning April 2020.


Download here for further and particular of the Wage Subsidy Programme


9. What liabilities may employers be exposed to if they unilaterally impose a pay cut or unpaid leave on their employees?

A person who fails to comply with the Director General’s decision commits an offense and may be liable to a fine not exceeding RM10,000.

The affected employee may lodge a complaint to the nearest Department of Labour where the Director-General may inquire into and decide on the dispute between the employer and the employee in respect of the unpaid wages due to the employee. However, this remedy is only open to complaints made by employees who earn more than RM2,000 but not exceeding RM5,000. 


For an affected employee earning more than RM5,000, he or she may commence a civil suit against the employer for breach of the employment contract and to claim for the unpaid salary sum.


All employees (whether or not subject to the Employment Act 1955) have the right to file a representation under Section 20 of the Industrial Relations Act 1967 if they consider that the pay cut or forced unpaid leave is a serious breach of their employment contracts and amounts to constructive dismissal by the employer. 


 **Please note though that the above FAQs do not constitute legal advice and as the situation remains fluid, the legal position may change in the near future. 

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