More Layoffs in Malaysian Companies: Understanding VSS and MSS

In a move to strengthen its position in the market, Astro Malaysia Holdings Bhd becomes the latest company to trim down its workforce to reduce operational expenses amid challenging economic landscape. According to The Star, Astro is undertaking a voluntary separation scheme (VSS) for its employees. It is known that it will be offered purely on a voluntary basis.

Astro CEO designated, Henry Tan said in a statement that the VSS exercise will allow the group to further simplify the organisation, enhance operational efficiency and reduce annual operating expenses.

Astro Malaysia Holdings' headquarters.

Astro said it has put in place a transition programme for employees who opt for the VSS. The program will provide the right support, including coaching and skills upgrading training programmes. Astro said the media and entertainment industry is currently operating in an environment that is experiencing an unprecedented rate of disruption.

Astro’s VSS mirrors Utusan Melayu. Classed as a PN17 company in August, Utusan bade farewell to 800 of its 1,500 employees as a part of its restructuring exercise. That marked the publisher’s first time undertaking the VSS exercise for its employees in 80 years of its establishment.

Other media companies such as Media Prima Bhd and Star Media Group Bhd have also implemented a similar exercise, with at least 1,000 staff offloaded. Media firms are expecting more layoffs in the future. 

Understanding retrenchment, VSS and MSS

Although the end result for retrenchments, VSS and MSS are the same (employee layoffs), there are a few differences:

Retrenchment

Retrenchment refers to the dismissal of employees who are regarded as surplus to requirements. The company is not closing, however, a chosen group of employees are retrenched. Not all employees will be retrenched.

In Malaysia, companies that carry out retrenchment are required to abide by the legal provisions of the Employment Act 1955 and the general rule of LIFO (Last In First Out).
 

Voluntary Separation Scheme (VSS)

This happens when a company that is not officially retrenching but still wishes to get rid of some employees.

Usually, the company will make an announcement to the employees, they will then say that they are not dismissing anyone, but will welcome applications from employees to be considered for VSS.

The company will also talk about the terms and conditions of the VSS (compensation terms, qualifications and requirements). The nature of VSS means that it is more difficult for employees who have left the company on VSS to challenge this in the Malaysian courts.

Mutual Separation Scheme (MSS)

This is when both parties agree to terminate the employment relationship, hence the word “mutual”/ Both parties agree to a settlement that is a win-win scenario for them.

Section 20 IRA 1967

According to this blog, the employer has the burden of proving just cause in dismissing the employee(s).

If the company is retrenching and their purported reason is, for example, losses for the preceding xx number of years, then they must be able to show the losses by way of the profit and loss account, etc.

It’s tougher for the employee to argue about VSS unless they can show that they were coerced into it, or there existed the elements that may render the VSS void or voidable.

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