Covid-19: Options for Employers in Malaysia
Covid-19: Options for Employers in Malaysia

Covid-19: Options for Employers in Malaysia

The Government of Malaysia has just announced that the Movement Control Order (‘MCO’) will be extended until 14th April 2020. This means that the MCO currently in force in Malaysia will be as long as 4 weeks from the initial starting date.

This is needed as an attempt to break the chain of Covid-19 infections currently happening in the country.

During this period, business premises will continue to be closed (including restaurants, cafeterias, cinemas, theatres, electronics, clothing shops and even legal firms), except for the ones listed as an ‘essential services’, for detailed particulars, refer to FAQs Relating to Movement Control Order.

This situation is difficult not only for the employers, but also the workers as well.


Before we proceed, it must be noted that retrenchment should be the last resort.

This is the law and it was highlighted by the Ministry of Human Resource in their FAQs Relating to Movement Control Order No. 2 (“the Guidelines”), issued on 20th March 2020.

It is necessary to acknowledge the Code of Conduct for Industrial Harmony 1975 (‘CCIH’), that prior to retrenchment, the employer should have taken positive steps to avoid it by reducing the number of hours of work, to stop recruitment, to restrain overtime work, to restrain work for the rest day, to reduce salary, and/or to propose temporary lay-offs.

Here are some practical options in line of the CCIH for businesses that are planning ahead, subject ALWAYS that proper guidance is sought in carrying them out.

  1. Reduction of Salary

This is justifiable by reducing the employees contracted hours of work.

However, it must not be carried out unilaterally.

It is important that the employers talk to their workers, in particularly provide business-related reasons of doing the reduction.

Employer may also refer to the relevant flexibility clauses in the employment agreement.

The bottom line is this: unless the employment agreement allowed for such unilateral alteration of the hours of work or it is agreed otherwise, the employer will still need to pay their employees in full for this time.

  1. Unpaid Leave

Compare to just a reduction of the contracted hours of work, employers may need to ask the employees to go on unpaid leave during the MCO period.

This may be due to the impossibility to work from home for certain businesses, for example, hotel and airlines staffs, and travel bus drivers or guides.

The law in this regard will be the same as that of reduction of salary.

  1. Temporary Lay Offs

This might be another option when there is a substantial reduction in work due to a downturn in the business since the Covid-19 infections started around the globe.

The employer may need to ask the employees to go on unpaid leave longer than the MCO period, but this is expected to be temporary and not permanent.

In this situation, both employer and employee may agree to alter the terms of the employment agreement so that the lay-off is by mutual agreement, unless there is specific term in the employment agreement allowing the employer to do so.

When an employee is temporarily laid off without pay for more than a month, they may be entitled to a claim for financial assistance of RM600 per month under the Employment Retention Programme (ERP) for up to 6 months.

  1. Annual Leave

Throughout this MCO period, should the employers decide everyone has to use their annual leave entitlement.

The employers should talk to the workers as soon as possible.

If it affects a planned holiday on the employee’s part, it is advised that all parties try to reach an agreement so that pre-planned holidays would not be impacted.

Likewise, unless the employment agreement expressly allowed the employers to do, both parties should have a settlement in this respect.


Most importantly, these steps are in line with the CCIH and must be documented.

This is the time where finding an alternative as well as staying flexible is the key in managing employment relationships.

Lastly, we wish all Malaysian employers and employees stay happy, positive and healthy.


About the Author: 

This article was written by Chia Swee Yik, Partner of this Firm, who endeavors to provide practical advice on employment law.

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