On 18 March 2020, the Government of Malaysia imposed the Movement Control Order (“MCO”) which entailed a partial lockdown of the citizens and the temporary closure of businesses nationwide as the country took measures to prevent the spread of COVID-19. The MCO took many employers (and employees) off-guard and businesses scrambled to implement work from home initiatives. Companies that were not so fortunate as to be able to have their employees work remotely were left with fewer options to keep their operations up and running. The MCO has since taken various more “relaxed” forms such as the Conditional Movement Control Order (“CMCO”) and the Recovery Movement Control Order (“RMCO”) but its impact on businesses remains.
We sought direct feedback from businesses and employers on how they were dealing with the sudden changes and what mechanisms were being used to help them cope, especially from an employment and human resources perspective.
- More than 60% of our survey participants were employers with less than 50 employees
- An overwhelming 82% of respondents said they had to implement cost-cutting measures to cope with the impact of the MCO
- When we asked what were the measures taken to cut costs in the company, a high percentage responded that they had elected for suspension or cancellation of allowances, bonuses and increments, opted to use other forms of reducing operation expenses, as well as initiated salary cuts
- Temporary lay-offs appear to be the least used measure by employers
- Majority of employers sought consent of their employees before implementing certain cost cutting measures like salary reduction. Interestingly enough, the survey results also revealed that where consent was sought, most employees were willing to provide their consent and support the cost cutting measures undertaken by their employers
- Despite the above, more than 70% of our respondents however, felt that the biggest challenge faced when initiating cost-cutting measures was in managing their employees. Lack of government support or incentives also proved to be a challenging factor
- 64% of the respondents had applied for relief measures under the Malaysian Government’s PRIHATIN and PRIHATIN PLUS initiatives. This could be because not all respondents would have the workforce that qualifies for the initiatives
- When asked to name the difficulties faced during MCO, cash flow proved to be the biggest problem. An overwhelming 81% of respondents had issues with receiving payments and/or having to chase for payments. More than 50% shared that they also faced regulatory hurdles in operating and had difficulty in contacting and getting support from local authorities
- Despite work from home initiatives being implemented, less than 50% (48%) of respondents found difficulty in tracking and managing employee productivity
Here are some additional comments from survey participants. We asked respondents to share their thoughts on the relief measures announced by the Malaysian Government:
- “I think it’s good that we still receive some sort of support from the Government.”
- “The initiatives by the government lack long-term sustainability.”
- “For highly skilled industries where we pay our employees more, there is little wage subsidy available. The wage subsidy is only applicable for employees earning below RM 4,000.”
- “We need more assistance from the government as it is hard for us to get financial assistance elsewhere. Loans require personal guarantee from all directors, which is impossible for VC backed start-ups.”
Another question we posed in the survey was to find out what companies have planned:
- “We have a business continuity plan in place, following all necessary precautionary measures to support our employees and customers.”
- “We will be undergoing cost-cutting measures along with constant monitoring on collection and sales.”
- “We are improving our warehouse systems, accounting reports and online presence to improve our business efficiency.”
This article was written by Donovan Cheah and Lorrine Xavier, the firm’s Business Development Manager. Donovan has been named as a Recommended Lawyer for Labour and Employment by the Legal 500 Asia Pacific 2017, 2018, 2019 and 2020, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.