Quantum of termination benefits

Quantum of termination benefits

His lordship Gopal Sri Ram in the case of William Jacks & Co(M) Sdn Bhd V S Balasingam stated that “Retrenchment means the discharge of surplus-labour of staff by the employer for any reason whatsoever otherwise than as a punishment inflicted by way of disciplinary action” 

The Employment(Termination and Lay-Off Benefits) Regulations 1980 is applicable to employees who come within the scope of the Employment Act 1955 when their services are terminated or laid- off. 

An employee shall be entitled to termination or lay-off benefits provided that the employee was employed under a continuous contract of employment for at least 12 months before the termination. Hence, an employee with service less than a year is not entitled to termination and lay-off benefits as per regulation 3 (1).

Regulation 6 laid down that the amount of termination and lay-off benefits that an employee is entitled to be not less than that:

Length of Service Termination benefit for every year of service
2 years and less10 days of wages 
More than 2 years less than 5 years 15 days of wages 
5 years and more 20 days of wages 

One day wage is calculated by computing the employees’ wages over the previous 12 months period and dividing this by 365.

12 months’ wages/365 X No. of years of service X Eligibility (10/15/20)

It is important to keep in mind that when an employee is retrenched, he must be given a minimum notice period of four/six/eight depending upon his length of service. In the event his contract allows for a longer notice period, then this requirement must be followed. Alternatively, the employer may pay an indemnity in lieu of wages. 

For a non-EA employee, the payment of any retrenchment benefits would be in accordance with their employment contract if applicable. 

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