The Story

Kamal had been working at the same company for 15 years. He started as a junior clerk and worked his way up to an administrative officer. He wasn’t the highest paid, but he was loyal and hardworking.

One morning, management called everyone into a meeting. The announcement was made in cold corporate language: “As part of our restructuring exercise, some positions will be made redundant.” Kamal’s heart sank. A week later, he received a letter: his role was no longer required.

The company insisted it was not “firing” him but merely “restructuring.” To Kamal, it didn’t matter what label was used—he had lost his job. With a family to support and bills to pay, he asked himself: What does the law really say about restructuring? Do employees have any protection when companies use this term to mask retrenchment?

The Law

In Malaysia, “restructuring” often refers to retrenchment—a legitimate form of termination when roles become redundant due to business reorganisation. But the law requires employers to act fairly and reasonably.

1. Employment Act 1955 (Act 265)

• Section 12 requires notice of termination according to the contract, or the statutory minimum (4 weeks for <2 years’ service, 6 weeks for 2–5 years, 8 weeks for >5 years).
• Section 14 allows termination for misconduct after inquiry, but retrenchment is different—it is not about fault, but redundancy.

2. Industrial Relations Act 1967 (Act 177)

• Section 20 allows employees who believe they were dismissed “without just cause or excuse” to file a representation at the Industrial Relations Department.
• The Industrial Court examines whether the retrenchment was genuine or a disguise to get rid of certain employees.

3. Employment (Termination and Lay-Off Benefits) Regulations 1980

• Employees with at least 12 months’ continuous service are entitled to termination benefits if retrenched, unless excluded (e.g., dismissal for misconduct, resignation, retirement).
• Benefits are calculated based on years of service:
  • 10 days’ wages per year (<2 years’ service),
  • 15 days’ wages per year (2–5 years’ service),
  • 20 days’ wages per year (>5 years’ service).

4. Code of Conduct for Industrial Harmony (1975)

• Although not legally binding, the Code guides fair retrenchment. Employers should:
  • Consider alternatives before retrenchment (pay cuts, redeployment).
  • Use fair selection criteria (e.g., “Last In, First Out”).
  • Consult with employees or unions.
  • Notify the Labour Department at least 30 days before retrenchment.

5. Case Law Principles
The Industrial Court has ruled that:

• Retrenchment must be genuine, not a cover for victimisation.
• Employers must prove financial or organisational need.
• If the company hires new staff while retrenching others, the retrenchment may be ruled unfair.

The Gap Between Words and Reality

Employers often use terms like “restructuring,” “right-sizing,” or “streamlining” to soften the blow. But for workers, the reality is the same: loss of livelihood. The law does not prohibit restructuring, but it demands fairness, transparency, and compensation.

Lessons

For Employees:

1. Know your rights. If you are retrenched after more than 12 months’ service, you are entitled to termination benefits under the 1980 Regulations.
2. Ask questions. Request evidence of restructuring. Was your role genuinely redundant, or were you unfairly targeted?
3. File a claim if necessary. If you suspect unfair dismissal, lodge a representation under Section 20 of the Industrial Relations Act within 60 days.
4. Plan ahead. Even if retrenchment is genuine, prepare financially and emotionally. Upskilling and networking can ease the transition.

For Employers:

1. Be transparent. Explain clearly why restructuring is needed. Employees deserve honesty, not jargon.
2. Follow fair process. Apply selection criteria consistently. Do not victimise individuals under the guise of restructuring.
3. Pay benefits promptly. Retrenchment without termination benefits is unlawful.
4. Consider alternatives. Explore redeployment, reduced hours, or voluntary separation schemes before compulsory retrenchment.

For HR Practitioners:

1. Document decisions. Keep evidence of business justification, financial records, and criteria used. This will be vital if challenged.
2. Support affected staff. Provide career counselling, references, or job placement assistance.
3. Maintain trust with survivors. Remaining staff often feel insecure after restructuring. HR must reassure them of stability.
4. Avoid discriminatory patterns. Retrenching only older workers, union members, or outspoken employees may be ruled as bad faith.

Conclusion

So, when companies say “restructuring,” what does it really mean for employees? In practice, it often means retrenchment—the painful reality of job loss.

The law in Malaysia recognises the employer’s right to reorganise, but it also protects employees by requiring notice, compensation, and fairness. The Employment Act 1955, the Industrial Relations Act 1967, and the Termination and Lay-Off Benefits Regulations 1980 together ensure that restructuring is not abused.

For employees like Kamal, the lesson is to know your rights and not to accept jargon at face value. For employers, the lesson is to treat restructuring not just as a financial exercise but as a human issue—one that demands compassion, fairness, and transparency.

At its heart, restructuring should not be a mask for injustice. It should be a genuine measure to save the company while still honouring the dignity of its workers. Words like “right-sizing” or “streamlining” may soften the announcement, but for the individual, it always means the same: the end of a job, the loss of security. The law’s role is to make sure that even in loss, fairness prevails.

In short: Employers may call it restructuring, but for employees it is retrenchment. And while the law allows it, the law also insists it must be done with fairness, benefits, and dignity.