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HRM Principles & Practices (Second Edition)

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

All Rights Reserved

Chapter 9 1

CHAPTER

TERMINATION OF SERVICE

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

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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

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

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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

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

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

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

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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

HRM Principles & Practices (Second Edition)


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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.

HRM Principles & Practices (Second Edition)


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

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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

HRM Principles & Practices (Second Edition)


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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

HRM Principles & Practices (Second Edition)


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

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Chapter 9 15

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

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

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

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Chapter 9 18

THE INDUSTRIAL RELATIONS ACT


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.

HRM Principles & Practices (Second Edition)


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Chapter 9 19

THE INDUSTRIAL RELATIONS ACT


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.

HRM Principles & Practices (Second Edition)


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

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Chapter 9 20

THE INDUSTRIAL RELATIONS ACT


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.

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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

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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

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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?

HRM Principles & Practices (Second Edition)


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

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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

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

Chapter 9 29

REDUNDANCY AND
RETRENCHMENT (cont.)
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.

HRM Principles & Practices (Second Edition)


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

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Chapter 9 30

REDUNDANCY AND
RETRENCHMENT (cont.)
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

HRM Principles & Practices (Second Edition)


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

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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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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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.

HRM Principles & Practices (Second Edition)


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

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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

HRM Principles & Practices (Second Edition)


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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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

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.

HRM Principles & Practices (Second Edition)


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

All Rights Reserved

Chapter 9 38