With the worldwide outbreak of the coronavirus disease (“COVID-19”) reaching the shores of Malaysia, the Malaysian government undertook certain measures to contain the outbreak, which included the imposition of what is described as a Movement Control Order (“MCO”). The effect of this MCO, among others, served to limit the movements of everyone and of the operation of businesses in Malaysia (subject to certain terms and conditions). The MCO was progressively fine-tuned and tweaked as the days /weeks passed. It was initially for a period of two (2) weeks from 18th March 2020, but has since been extended to 14th April 2020, and as of the date of this article, further extended to 28th April 2020. It remains uncertain if the MCO will be extended beyond 28th April 2020, and if so, for how much longer.

The government on its part has attempted to address the issues faced by Malaysians and by businesses. This included introducing certain measures, such as the Bantuan Prihatin Negara. We will not delve into the various efficacy of the measures – this has been well-documented with various parties debating, discussing and giving their opinions on this. This article will focus on two (2) employment law-centric measures that were introduced by the government during this period of MCO and the Malaysian law relating to retrenchment. This article will discuss –

– the Employment Retention Program,

– the Wage Subsidy Programme, and

– the Malaysian law on retrenchment.

◊ Employment Retention Program(“ERP”)

  • PURPOSE- it is an immediate financial assistance for employees who have been instructed to go on unpaid leave by their employers who have been economically affected by COVID-19.
  • WHAT IS IT- it is a form of assistance of RM600 a month per employee for up to a period of 6 months.
  • DATE OF ERP AND FOR HOW LONG- it commences from 20th March 2020 for a period of between 1 to 6 months, depending on the length of the unpaid leave

– Applies to all private sector employees, including temporary employees, who have registered and are contributing to the Employment Insurance System (“EIS”)

– Employee earns monthly income of RM4,000.00 and below

– Employers who have placed employees on unpaid leave (30 days minimum) for a period of 1 to 6 months, with unpaid leave notice issued beginning 1st March 2020.

  • HOW TO APPLY– Employers shall make the application on behalf of their employees by using Form ERPC-19. This can be obtained from the Perkeso website. Online applications can be made via the link https://prihatin.perkeso.gov.my/
  • PAYMENT METHODThe ERP payment will be credited into the employers’ account. Thereafter, the employers are required to credit payment directly to the affected employee’s account within 7 days upon receipt of payment from SOCSO.

◊ Wage Subsidy Programme

  • PURPOSE- The Wage Subsidy Programme was initiated by the government to encourage and provide assistance to employers to retain their employees.
  • WHAT IS IT– it is a payment to employers for each of their employees earning a salary of RM4,000.00 and below for a period of 3 months. Depending on the size of the business enterprise, the Wage Subsidy Programme envisages payment of RM1,200, RM800 or RM600 per employee per month: –
  • DATE OF SUBSIDY AND FOR HOW LONG- The Wage Subsidy Programme commences from 1st April 2020, for a period of 3 months.
  • TERMS OF WAGE SUBSIDY- Employers receiving this subsidy must not terminate, reduce pay or force unpaid leave on their employees during the period of the subsidy (3 months), and a further 3 months. In such a case therefore, the period of subsidy being 3 months, i.e. April to June, employers cannot terminate, reduce pay or force leave for a further 3 months after that, i.e. from July to September.

– The employer is registered with the Companies Commission of Malaysia (SSM) or relevant local authorities, and is operational before 1 January 2020;

– Both the employer and employees must have registered and contributed to the Employment Insurance Scheme (EIS) with SOSCO / Perkeso, SUBJECT TO THE REQUIREMENT that the employer has registered with or is contributing to SOCSO or EIS before 1 April 2020;

– Employer has to declare that they have suffered a 50% decrease in revenue by comparing revenue for January 2020 with the following months [PLEASE NOTE THAT THIS REQUIREMENT DOES NOT APPLY TO BUSINESS ENTERPRISE OF 75 EMPLOYEES OR FEWER];

– Employee earns monthly income of RM4,000.00 and below, and is limited to 100 employees only per employer from any sector.


– Employers and employees who did not register / contribute to the EIS

– Employee who is receiving the ERP assistance in the same month

– Employees with salaries of more than RM4,000.00 per month

– Employees who have been terminated

– Employees of public sector / statutory bodies / local authorities

– Self-employed persons, including freelancers

– Foreign workers and traders

  • HOW TO APPLY- Employers shall make the application on behalf of their employees. This includes a declaration known as PSU50 which can be obtained the Perkeso website. Online applications can be made via the link https://prihatin.perkeso.gov.my/

– List of the relevant employees (limited to 100 employees)

– Copy of the employers’ panel bank registration / MyCOID

– Copy of the employers’ Companies Commission of Malaysia (SSM) /ROS/ROB registration

– Copy of the employers’ bank statement

– Declaration of announcement of PSU50. A sample copy can be obtained from the Perkeso website.

– Other supporting documents eg financial statements / sales reports that have been verified by the management.

PLEASE REFER TO THE CIRCULAR ISSUED BY PERKESO TITLED: – PEKELILING MAJIKAN BIL. 5 TAHUN 2020. At present, the circular can be found at this link: –



ERP is payment that is made as a result of unpaid leave notice agreed upon by an employee and his or her employer;

Wage Subsidy is an initiative to help employers continue with their companies’ operation and reduce the risk of employers taking actions such as slashing salaries, cutting down work days, deducting annual leave of employees or taking more drastic action such as firing employees.


With the economic uncertainty resulting from the MCO, businesses are mulling the possibility of retrenching their employees. What is the Malaysian employment law on retrenchment?

We will first need to understand that “retrenchment” is a termination of surplus employees of a business enterprise. This typically arises from a reorganization or restructuring of a business enterprise, which can be due to, for example, losses suffered in the preceding years, consolidation of business functions, change in the way business is effected (due to technological advancement), etc.

The general requirements for a retrenchment exercise are as follows: –

1) There must be a legal basis and justification to carry out the reorganization or restructuring;

2) The position of the employee(s) affected must be redundant as a result of the reorganization; and

3) The retrenchment exercise must be carried out in accordance with the principle of Last-In-First-Out (LIFO) or other accepted standards of industrial relations practice.

An employee can challenge their retrenchment by bringing an action for unfair dismissal under Section 20 of the Industrial Relations Act 1967. In such a case, the employer has the burden of explaining, justifying and proving 1), 2) and 3) above and that it was effected fairly and justly in accordance with the law. Mere verbal explanation is usually insufficient and the Industrial Court will look for documented evidence to support the employer’s explanation.

Can employers retrench their employees for the purported reason of the COVID-19? This has been well-documented by circulars / opinions issued by the Ministry of Human Resources and various legal firms. Generally speaking, this is an unprecedented event and there are no specific case laws on this. Reading the FAQs issued by the Ministry of Human Resources, the general stance appears to be that employers should continue to keep their employees. In considering whether the retrenchment is carried out fairly, it is likely that the Industrial Court will look for evidence of past losses over a longer period of time, instead of only during the MCO period, unless the employer is able to explain/ demonstrate / provide documentary evidence to justify the retrenchment.


In addition to the above, the employer has to ensure that the legal obligations are performed. They are: –

a) Notice of termination– This is either the statutory notice as per the Employment Act 1955, in Sections 12(3) (NOTE- this only applies to those who are covered by the Employment Act 1955), or for those outside the coverage of the Employment Act 1955, in accordance with the employment contract.

b) Termination benefits– For employees who are covered by the Employment Act 1955, the Employment (Termination & Lay-Off Benefits) Regulations 1980 would apply.

Regulations 3 and 4 provide that an employee is entitled to termination benefits calculated in accordance with the Regulations if his employment is terminated for any reason other than attainment of the age of retirement, on grounds of misconduct or on a voluntary basis by the employee (resignation).

For those outside the coverage of the Employment Act 1955, there are no specific legal provisions for it and it will depend on factors which may include- whether there is a specific contractual provision for this, eg in the employment contract or handbook, or policy. Otherwise, other factors such as the prevailing market rate, past practices of the company, etc may be taken into consideration.

c) Written statement on termination benefits- In Regulation 12 of the Employment (Termination & Lay- Off Benefits) Regulations 1980 states that an employer has to issue written particulars or statement to the employee stating the amount of termination benefits and manner of calculation.

Although there is no such requirement for those not covered by Employment Act 1955, it is nonetheless a good practice to provide a written statement.

d) PK formThe employer fills up and completes a termination form known as the PK form. This requirement was gazetted as P.U. (B) 430/2004 on 11 November 2004 and any employer who fails to comply is guilty of an offence under Section 63 of the Employment Act 1955, and if found guilty could be fined not more than RM10,000.00.


We trust that you have gained some information from this article. If you have any specific questions related to this article, please contact us at askdonny@dwc.com.my.

The article posted is for general information purposes only and should not be construed as legal advice. Facts and circumstances differ from case-to-case. Please consult your lawyer for specific legal advice and action to be taken.

This is article is brought to you by Justin Lee and is copyrighted accordingly. Justin is an employment law specialist who can advice, draft and train your human resource managers.