COVID-19: Employment and Industrial Relations Update (Economic Stimulus Package)

[Update: The Wage Subsidy Program referred to in this article has since been superseded by the Wage Subsidy Program which was announced on 6th April 2020.  

The full text of the Prime Minister’s statement on the “Langkah Tambahan bagi Pakej Rangsangan Ekonomi Prihatin Rakyat (PRIHATIN)” is available at https://www.pmo.gov.my/2020/04/langkah-tambahan-bagi-pakej-rangsangan-ekonomi-prihatin-rakyat-prihatin/]

As many businesses are already facing turbulent times due to the economic meltdown arising from trade wars and sharp decline in oil prices, the COVID-19 pandemic has raised serious questions in respect of the sustainability of businesses. 

In our earlier article entitled “Business Rationalisation Measures During Uncertain Times”, we discussed the issues to be considered when decisions are made to implement certain measures in response to changes to business landscapes.

Recognising the impact of the COVID-19 pandemic on the economy, the Prime Minister on 27th March 2020 unveiled an Economic Stimulus Package (“Pakej Rangsangan Ekonomi Prihatin Rakyat”). 

The full text of the Prime Minister’s statement is available at https://www.pmo.gov.my/2020/03/pakej-rangsangan-ekonomi-prihatin-rakyat-prihatin/

Wage Subsidy Program

The most important announcement applicable to certain categories of employers and employees is the introduction of a Wage Subsidy Program.  Under this Program, the government will provide a wage subsidy of RM600.00 per employee for a period of 3 months, subject to both the employer and employee meeting the stipulated requirements.  

Based on the announcement, this Program is applicable to employees earning RM4,000.00 and below per month and employers who have experienced a decline in revenue of more than 50% since 1st January 2020.  Such employers must not terminate the employment of these employees or instruct them to go on no-pay leave or reduce their salaries for a period of 3 months after the Program is implemented.    

Other measures

Apart from the above, the following were also announced : 

1. The Employees Provident Fund (“EPF”) will introduce the Employer Advisory Services program on 15th April 2020.  This will include the option to defer, restructure or reschedule payments of an employer’s EPF contributions.
2. Exemption of payment of Human Resources Development Fund (“HRDF”) levies for all industries for 6 months commencing April 2020.
3. Salaries of employees of service contractors that perform services such as cleaning services and food catering at schools, public universities and colleges as well as other government agencies including statutory bodies will be paid until the end of the MCO although they are not required to be present for work. In addition, there will be a 1 month extension of those service contracts as a trade-off to make up for the length of service lost due to the MCO.

The effect of the Economic Stimulus Package on business rasionalisation measures

It is advisable for employers to consider the available options provided via the Economic Stimulus Package, for instance, the Wage Subsidy Program (if applicable), before embarking on other business rationalisation measures.  

If a business rationalisation measure is still necessitated, the various considerations set out in our earlier article entitled “Business Rationalisation Measures During Uncertain Times” should be taken into account.

Contributed by the Employment and Industrial Relations practice group. 

R. Ravindra Kumar (Partner)
(E): ravindrakumar@rdl.com.my
(T): +603-2632 9863

Tham Li Vyen (Partner)
(E): livyen@rdl.com.my
(T): +603-2632 9875

Prasath Thanaraju (Associate)
(E): prasath@rdl.com.my
(T): +603-2632 9935

Lam Jia Jun (Associate)
(E): jiajun@rdl.com.my
(T): +603-2632 9956