Headcount freezes, layoffs, pay-cuts, and more: Malaysian employers on the impact of the MCO

In a new survey by the Federation of Malaysian Manufacturers, 63% of manufacturers have revealed they may resort to layoffs as a result of Malaysia’s movement control order (MCO).

The survey, conducted from 6 April to 10 April this year, involved 419 companies, with a majority (89.5%) from manufacturing and manufacturing-related and support services.

Of these, 53.7% were from the non-essential product sectors and thus were not able to operate while 63.9% of those from the essential product sectors managed to obtain approval to operate during the first and second phases of the MCO.

According to the survey, more than half of the respondents said with the MCO in place, their revenue had dropped by more than 50%. Due to this, 44% indicated they would only be able to sustain their business with the current workforce for three months, while 34.1% may only be able to sustain for one month.

What employers are saying about the MCO’s impact on employment

On top of the above, the survey also found working from home to be a challenge for many companies, either because they had work processes that could not be performed remotely, or they were not prepared with the necessary infrastructure to support employees working from home.

While this was so, 30% of the firms had managed to obtain approval to continue operating, but were only able to work with a staff strength of 50% or less.

However, seven in 10 (70%) which comprised some essential product manufacturers were not granted approval to operate, while all non-essential product manufacturers were either unable to work, or faced difficulties working from home.

44% of this group had employees working from home, with slightly over three in 10 (31.7%) only having 5-10% of employees working from home; while close to three in 10 (27%) were operating with less than 5% of staff working from home. At the same time, just 17% had more than 10-20% working from home.

Close to a quarter (24%) were unable to work at all, with no employee being able to work from home.

Other likely cost-cutting measures in the next three to six months

In efforts to preserve employment, employers are likely to take the following cost-cutting measures, including:

Freezing headcount (67%);

Instituting unpaid leave (59%);

Removal of some non-contractual allowances and benefits (59%);

Forced annual leave (59%), reduction on workdays per week (39%);

Reduction in some benefits agreed in the collective agreement for the unionised companies (34%); and

Reduction in hours of work per day (29%).

As for companies that have to resort to pay-cuts, the likely implementation will be as follows:

Top management staff

37.8% of respondents are likely to cut pay in the range of >10-20%

22.7% are likely to cut pay in the range of >20-30%

Managerial-level staff

36% are likely to cut pay in the range of >10-20%

28% are likely to cut pay in the range of >5-20%

Executives

54% are likely to cut pay in the range of 5-10%

Non-executives

51.7% are likely to cut pay in the range of >5 to 20%

38.% are likely to cut pay in the range of <5%

What help do employers look forward to from the Government?

Above all, when asked for their suggestions to the Government in addressing employment-related issues as well as other issues during and right after the MCO, the following were put forth:

Wage subsidy

To extend to all employees irrespective of wage level; remove sales/revenue reduction condition; and extend the wage subsidy to at least six months.

To extend to all employees irrespective of wage level; remove sales/revenue reduction condition; and extend the wage subsidy to at least six months. Factory operations

To allow half the workforce to work with control and guidelines, and the minimal workforce, including non-essential products manufacturers, to operate with at least 50%, to cater for the export market as well.

To allow half the workforce to work with control and guidelines, and the minimal workforce, including non-essential products manufacturers, to operate with at least 50%, to cater for the export market as well. Tax/EPF/levy exemption

To complete exemption/reduction of EPF contribution from April to December; waive Year of Assessment 2020 income tax for all corporations irrespective of size and also personal income tax be fixed at 10% on the maximum scale and suspend the monthly tax deduction for a period of six months; full suspension of foreign worker levy for a one-year period.

To complete exemption/reduction of EPF contribution from April to December; waive Year of Assessment 2020 income tax for all corporations irrespective of size and also personal income tax be fixed at 10% on the maximum scale and suspend the monthly tax deduction for a period of six months; full suspension of foreign worker levy for a one-year period. Financial assistance

To ensure there is consistency across all financial institutions in the treatment of interest during the moratorium period. Banks should not compound interest but rather waive or reduce the interest during the moratorium period to further assist companies affected;

Have the Special Soft Loan scheme of RM5bn with a low 2% interest rate for companies to cover the fixed capital payments such as rents and utilities as well as administrative payments including salaries during this period.

To ensure there is consistency across all financial institutions in the treatment of interest during the moratorium period. Banks should not compound interest but rather waive or reduce the interest during the moratorium period to further assist companies affected; Have the Special Soft Loan scheme of RM5bn with a low 2% interest rate for companies to cover the fixed capital payments such as rents and utilities as well as administrative payments including salaries during this period. Overhead costs

Utility Bill: All industrial power users, irrespective of the kilowatt usage a month, to get at least a 15% discount in electricity for the next six months. In addition, to remove maximum demand charge for medium and high voltage industrial customers for cement, iron & steel, petroleum and chemicals processing industries. Also, reduce natural gas tariffs by 35% until the end of 2020 and remove the “Take or Pay” penalty clause imposed on customers given the current impact on the business as well as the overall drop in oil prices.

Other Administrative Bills: Waiver of assessment tax, quit rent, and more.

Utility Bill: All industrial power users, irrespective of the kilowatt usage a month, to get at least a 15% discount in electricity for the next six months. In addition, to remove maximum demand charge for medium and high voltage industrial customers for cement, iron & steel, petroleum and chemicals processing industries. Also, reduce natural gas tariffs by 35% until the end of 2020 and remove the “Take or Pay” penalty clause imposed on customers given the current impact on the business as well as the overall drop in oil prices. Other Administrative Bills: Waiver of assessment tax, quit rent, and more. Infrastructure support

To enhance Internet accessibility and speed with free access and enhance cybersecurity as well.

[ALSO READ: Everything HR needs to know about Malaysia’s enhanced wage subsidy programme]

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