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The dust has settled on the right of an employee to pay during the RMO. What remains to be seen is the impact of the turbulence caused by COVID–19 to the financial health of the employer.

One week into the RMO, employers hit hard by cessation in business and productivity are exploring ways to cut down their operational expenses and as history has proven, manpower requirement has always been the first to be assessed, unavoidably so due to its impact on the overall operational costs. Every employer has the right to decide on the optimum headcount, nevertheless reliance on the losses suffered during the RMO would not in itself justify the decision to retrench.

Financial position of the Company prior to RMO and post RMO would be scrutinised by the Industrial Courts in determining whether the retrenchment was in good faith. Cost cutting measures undertaken by the employer prior to the exercise would be called into question. Whilst subjecting the employees to unpaid leave during the RMO to reduce cost is no longer an option, cost cutting exercise post RMO could avert reduction of workforce or minimise the number affected to safeguard the livelihood of the workforce at large. Limitation in recruitment and overtime, shorter work week and flexible working hours are some of the positive measures to be exercised in conformation to the Code of Conduct for Industrial Harmony. If all fails, then retrenchment may be the only option for the employer, but this exercise of the employer’s prerogative ought to be the last resort. Nonetheless, the fall in the profit during the RMO must not be exploited for collateral purpose to victimise or remove selective headcount under the guise of retrenchment.

Please do not hesitate to contact us for further advice.