All Rights Reserved HRM Principles & Practices (Second Edition) © Oxford Fajar Sdn. Bhd. (008974-T), 2011

HRM Principles & Practices (Second Edition)
Oxford Fajar Sdn. Bhd. (008974-T), 2011
All Rights Reserved
Chapter 9 1
CHAPTER
TERMINATION OF SERVICE

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Chapter 9 2
PREVIEW
Effective systems for taking disciplinary action.
The problems relating to transfer of workers.
The criteria to be used in promoting workers.
Methods for handling employee grievances.
Dealing with absenteeism.
The role of the Industrial Court in termination of an

employees contract.

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Chapter 9 3
PREVIEW (cont.)
Expiry of a fixed-term contract.
Resignation and retirement.
Causes of redundancy and recommended procedures

for retrenching workers.
Appropriate dismissal procedures to be used in cases of

misconduct and poor performance.

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Chapter 9 4
DISCIPLINARY SYSTEMS
A disciplinary system must be fair and just.
In a fair disciplinary system, employees know the

rules, and know what they can do and what they
cannot do.
When employees behave in an unacceptable

manner, they are punished.
The purpose of punishment is to change the

employees behaviour and to send a warning to
other employees that unacceptable behaviour will
not be tolerated.

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Chapter 9 5
PENALTIES
When employees commit misconduct, they
may be penalized. Penalties that may be
imposed include:
Oral warning
Written warning(s)
Suspension without pay
Demotion or downgrading
Dismissal

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Chapter 9 6
POTENTIALLY PROBLEMATIC
ISSUES
Transfer
Transfer is a lateral move of an
employee from one job to another,
or from one department to another,
or from one site to another.

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Chapter 9 7
TRANSFERS (cont.)
Employers transfer employees:
To fill vacancies for experienced workers

To solve people problems
To provide training to employees
Employees may request transfers:
For personal, non-work related reasons

To have an opportunity to learn
To overcome boredom

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Chapter 9 8
TRANSFERS (cont.)
Transfer is a managerial prerogative.
Employers have the right to transfer an
employee, but the right is subject to:
Any express clause in the contract of employment.

The reason for the transfer must be a legitimate business
reason.
The reason for the transfer must not be for the purpose of
harassing or victimizing the employee.
The transfer must not be to the detriment of the
employees terms and conditions of employment.

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Chapter 9 9
PROMOTION OF EMPLOYEES
Promotion is reassignment of an
employee to a job at a higher level in
the organization.
Promotion opportunities motivate
employees, providing the promotion
system is perceived as being
fair and transparent.
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Chapter 9 10
PROMOTION OF EMPLOYEES
(cont.)
Criteria for Promotion
Seniority
Merit
An effective performance appraisal

system is required to identify which
employees are suitable for promotion.
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Chapter 9 11
GRIEVANCE HANDLING
Effects of Unresolved Grievances
Resignation of employees
Depression amongst employees
Poor quality and quantity of work
High accident rate
High rate of illness
Complaints from customers
Complaints to the Department of Labour and other bodies
Aggressive unionism
Reduced output
Lowered productivity
Lowered profitability

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Chapter 9 12
GRIEVANCE PROCEDURES
A grievance procedure is a formal process

for hearing and resolving employees
complaints.
A grievance procedure will establish

deadlines for each stage at which a
grievance is heard.
Grievances should be settled at the lowest

level possible.

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Chapter 9 13
GRIEVANCE PROCEDURES
(cont.)
Managers must be trained on how to handle
grievances.
Grievance handling requires:
Listening skills
Understanding of rights of employees and

employers
Counselling skills
Problem-solving skills

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Chapter 9 14
ABSENTEEISM
Workers who are regularly absent from work
without permission granted in advance cause
problems.
Employers must have systems in place to
reduce unauthorized absences.
Keep records
Have clear procedures
Take disciplinary action, when necessary

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Chapter 9 15
ABSENTEEISM (cont.)
Employers may encourage
full attendance by offering
incentives.

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Chapter 9 16
PENALTIES FOR ABSENCE

Employees may be punished for absence.
Employees within the scope of the
Employment Act or Sabah/Sarawak Labour
Ordinances:
Absence without leave for more than 2

consecutive days is a breach of contract for
which the employee may be dismissed.
Prior to any dismissal, proper procedures must

be followed.

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Chapter 9 17
THE INDUSTRIAL RELATIONS ACT

AND TERMINATION OF
EMPLOYMENT
All employees in the private sector have the
right to challenge the termination of their
contract of employment by taking the
following steps:
1. File request for reinstatement at the nearest
Department of Industrial Relations (IR).

2. Attend a conciliation meeting with the exemployer, called for by the Department of IR.
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Chapter 9 18

AND TERMINATION OF
EMPLOYMENT (cont.)
3. As a result of conciliation:
the employer may agree to reinstate the

employee, or
the employee may agree to withdraw their claim,

or
the employer and employee may agree on a

compensation package to settle the claim, or
the employer and employee may not reach any

agreement.

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Chapter 9 19

AND TERMINATION OF
EMPLOYMENT (cont.)
4.
Where no agreement is reached, the DirectorGeneral of Industrial Relations will inform the
Minister of Human Resources who will decide
whether or not to refer the dispute to the
Industrial Court.
5.
If the dispute is referred to the Industrial Court,

an arbitration hearing will be held.

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Chapter 9 20

AND TERMINATION OF
EMPLOYMENT (cont.)
6. The Industrial Court will decide whether the
employee was dismissed with or without just
cause or excuse.
7.
If the dismissal was without just cause or

excuse, the court will either:
order the employer to reinstate the

employee, or
order the employer to pay compensation to
the employee for loss of his employment.

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Chapter 9 21
COMPENSATION FORMULA FOR

DISMISSAL WITHOUT JUST CAUSE
OR EXCUSE
The Industrial Court has the power to decide
on how much compensation should be paid to
the employee by the employer.
Typically, the formula followed is:
back wages from the date of dismissal up to the

date of the court decision, with a maximum of 24
months, and
one months wages for every year of the employees

service.

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Chapter 9 22
COMPENSATION FORMULA FOR

DISMISSAL WITHOUT JUST CAUSE
OR EXCUSE (cont.)
The formula is frequently

varied depending upon the
circumstances of each case.

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Chapter 9 23
FIXED-TERM CONTRACTS
Fixed-term contracts expire at the end of the
agreed time period.
Fixed-term contracts are acceptable to the
Industrial Court if they are for genuine
business reasons.
An employee on fixed-term contract may file
a claim under the Industrial Relations Act if
his contract is not renewed.
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Chapter 9 24
FIXED-TERM CONTRACTS
(cont.)
The Industrial Court will not
interfere with an employers decision
not to renew a fixed-term contract if
the employer has an acceptable
reason for the decision.

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Chapter 9 25
RESIGNATION
Employees have the right to resign without
assigning any reason.
Prior to resigning, an employee must give
notice to the employer as required by his
contract of employment.

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Chapter 9 26
RETIREMENT
What should the retirement age be for

employees?
How can an employer help employees

prepare for retirement?

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Chapter 9 27
REDUNDANCY AND
RETRENCHMENT
Redundancy occurs when an employer has
excess employees.
Redundancy may be caused by:
Mergers and acquisitions
Restructuring
Financial problems
Changes in technology

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Chapter 9 28
REDUNDANCY AND
RETRENCHMENT (cont.)
Redundant employees may be retrenched.
Because of the negative consequences of
retrenchment to employees and society,
employers are expected to avoid
retrenching employees,
if possible.

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Chapter 9 29
REDUNDANCY AND
To avoid retrenchment, employers could:
Freeze external recruitment and redeploy

employees into any vacancies which arise.
Conduct a voluntary separation scheme

(VSS).
Reduce costs.
Reduce wages if employees agree.

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Chapter 9 30
REDUNDANCY AND
Procedures for Retrenchment
Consult the trade union and inform the

workforce
Choose who to retrench
Provide outplacement services
Inform the Labour Department
Pay termination or retrenchment benefits

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Chapter 9 31
DISMISSAL FOR
MISCONDUCT
Misconduct is any behaviour which is in
conflict with the employers interests.
Employers have the right to punish an
employee for misconduct.
Major misconduct may be punished by
dismissal.

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Chapter 9 32
DISMISSAL FOR
MISCONDUCT (cont.)
Before dismissing an employee on grounds
of misconduct, an employer must:
Carefully record any complaint of alleged

wrongdoing.
Investigate the complaint thoroughly.
Charge the employee.
Hold a domestic inquiry.

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Chapter 9 33
DISMISSAL FOR POOR

PERFORMANCE
Before dismissing an employee on grounds
of poor performance, an employer must:
Warn
the employee.
Assist
Give
him to improve his performance.
him adequate time to improve.

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Chapter 9 34
FRUSTRATION OF
CONTRACT
Frustration of contract occurs when an
employee is unable to perform the work for
which he was employed because of reasons
beyond his control.
For example:
Detention by the authorities for a lengthy period

of time
Serious illness or medical incapacity
Withdrawal of license required for the job

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Chapter 9 35
CONSTRUCTIVE DISMISSAL
Tests for Constructive Dismissal
The employer must have breached the employees

contract of employment.
The breach of contract must be a breach of a major

or key element in the contract.
The employee must leave his employment in a

timely manner.
The employee must leave his employment as a

result of the breach, and not for any other reason.

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Chapter 9 36
REVIEW
Effective systems for taking disciplinary action.
The problems relating to transfer of workers.
The criteria to be used in promoting workers.
Methods for handling employee grievances.
Dealing with absenteeism.
The role of the Industrial Court in termination of an

employees contract.
Expiry of fixed-term contracts.

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Chapter 9 37
REVIEW (cont.)
Resignation and retirement.
Causes of redundancy and recommended procedures

for retrenching workers.
Appropriate dismissal procedures to be used in cases

of misconduct and poor performance.

All Rights Reserved
Chapter 9 38

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HRM Principles & Practices (Second Edition)

Oxford Fajar Sdn. Bhd. (008974-T), 2011