The voluntary separation scheme (‘Vss Malaysia’) is a common program in organisations in Malaysia. This article explains what it is, the process, and the other alternatives.
What is a Voluntary Separation Scheme (VSS) in Malaysia)?
A voluntary separation scheme (VSS) in Malaysia is a program that allows employees to resign voluntarily in exchange for compensation. It's a common way for employers to reduce their workforce.
To elaborate on the ‘vss meaning’, it is a program often used by organizations in the private sector where through the program, the employees are invited to resign voluntarily. In return, the employees will get some payments including compensation and severance benefits.
A few benefits of a voluntary separation scheme for employers include:
Reduction in workforce: This often happens due reduction in requirements for labour and there is company reorganization and restructuring.
Voluntary nature: Unlike retrenchment or termination, this program is voluntary where the employee is offered to resign voluntarily. Thus, it is unlikely the staff can say that they are forced to resign by the employer.
Some of the benefits of accepting VSS for the employee include:
Severance payment: The employee is often offered a certain lump sum of severance amount payment as compensation.
Other benefits: Some employers offer career transition support such as outplacement assistance as part of the program.
On the legal framework, the main regulations and employment law in Malaysia are the Employment Act 1955 and Industrial Relations Act 1967 (‘IRA 1967’). Employment Act 1955 states the statutory obligations of employer and employee and also the legal requirements of an employment contract.
On the other hand, IRA 1967 states that any termination of the employee must be with just cause or good reason. The voluntary separation scheme is also governed by another Malaysian law, that is Contracts Act 1950 as once the scheme is accepted by both parties, it is a binding contract between employer and employee.
Eligibility Criteria and Compensation
Those who are eligible for the voluntary separation scheme are determined by the employer. Some of these factors that may affect the eligibility are:
Length of service: Employees with a minimum period of service as determined by the employer.
Age: Employees who have reached a certain age as specified in the scheme.
Job position and department: Employees in specific job positions or departments as determined by the employer. Positions which have lesser requirements for labour are more prone to this scheme.
There are a few types of severance payments for VSS in Malaysia including:
Severance payment and compensation
The severance amount is often decided by years of service and last drawn salary. On the ‘VSS calculation’; there are no specific requirements but a good guideline is that it must be higher than the termination benefits amount under the Employment (Termination and Lay-Off) Regulations 1980 which is at least 10 days of wages for each year of completed service.
However, the employer may offer a higher rate of payment to encourage the employees to apply for the scheme.
Other statutory benefits
Apart from the severance payment, the employer may also offer to pay the employee those annual leave balance and other benefits stated in employment contracts such as bonuses which may differ based on each employee’s wages.
To prevent ambiguity and ensure the efficiency of the program, the amount of the layoffs compensations should be defined and stated clearly.
How Does a VSS work?
A VSS in Malaysia often goes through below few stages:
Notification
The employer will first inform employees that it is going to conduct a VSS by providing notices and invite the selected group of employees to apply for the VSS. At the same time, the employer will send the policy for VSS including the eligibility, compensation, and time and procedure for application.
Application
The interested employee can then apply for the scheme. If the employee does not apply within the stated time, the offer is deemed to lapse.
Decision
The employer will then evaluate each application and decide to reject or approve the employee’s application.
Once the employer accepts the VSS application, there are a few things that the employee can prepare for departure as part of the exit strategy
(a) Transitioning Out of the Company
The employee should ensure that the exit is handled professionally. That can include completing any existing work and making sure responsibilities are properly transferred over to coworkers in the same department.
(b) Managing Your Finances
Ensure that you get all the benefits according to the period stated in the VSS policy.
(c) Exploring New Opportunities
After the termination date or before that, then the employee can start looking for new opportunities. This is to ensure continued productivity and success in the same field.
Remedies for Unfair Dismissal
On the other hand, if an employee believes that he has been dismissed without a good reason, the aggrieved employee can then file a claim in the Industrial Court for reinstatement. The court, instead of awarding reinstatement can award back wages (up to 24 months for confirmed employees) as termination compensation for cases of unfair dismissal in Malaysia.
Some of the good reasons for termination include
Poor work performance and excessive absenteeism
Misconduct
Breach of condition of contract
Employers should put in a proper dismissal process including disciplinary action to ensure any termination is carried out following the law. If the employee thinks he has bas been constructively dismissed, then he can also file a case in the Industrial Court.
On the other hand, constructive dismissal in Malaysia happens when the employer acts in such a way that forces the employee to resign. If you have any questions on this and need any legal advice, do contact us and we will assist you.
Alternative to VSS: Retrenchment and Mutual Separation Scheme
These three programs: retrenchment, voluntary separation schemes, and mutual separation scheme (‘Mss Malaysia’) are different ways for termination of employment in Malaysia. After explaining Vss above, below will explain about retrenchment and MSS which are:
Retrenchment
This is when the employer terminates the workers due to reasons such as redundancies and closure of business. Before proceeding with this action, the employers need to provide a retrenchment notification to the Labour office.
The retrenchment exercise is conducted based on the Code of Conduct for Industrial Harmony which is ‘Last in, First Out (LIFO principle)’- it means the last worker to join is the first to leave. Unlike VSS, the employee has no rights and choice in deciding whether to accept or decline this retrenchment.
Mutual separation scheme
A mutual separation scheme is a program where the employer and employee agree on the mutual termination of the employment. It works like a voluntary separation scheme, however, the main difference is MSS is targeted to individuals rather than certain groups of employees.
It is advisable to engage employment lawyers to advise on the proper termination of employees in accordance with the employment laws for employee dismissal.
Conclusion
The voluntary separation scheme (VSS Malaysia) is a good program for both the employer and the employee for termination of employment. If you need any legal assistance and looking for legal advisors, do contact us and we can assist you.
Frequently Asked Questions
1. What is the voluntary separation scheme in Malaysia?
A voluntary separation scheme in Malaysia is where the employee can resign voluntarily in return for payment. This is to reduce the workforce and often occurs during an organizational restructuring.
2. What is the VSS law in Malaysia?
The main VSS law in Malaysia is the Employment Act of 1955 and the Contracts Act of 1950. Once a voluntary separation scheme is accepted, then it becomes a binding contract between employer and employee.
3. How much is the VSS payout?
The VSS payout usually depends on a few factors which include the last drawn salary and years of service of the employee. A good guideline is at least 10 days of wages for each year of completed service.
4. What is the difference between MSS and VSS?
The main difference between MSS and VSS is that MSS is catered to smaller groups of employees or selected individuals. On the other hand, VSS is offered to a larger or specified group of employees.
5. How much compensation will I get for termination?
The Industrial Court can award back wages in lieu of reinstatement up to 24 months of wages (for confirmed employees) and 12 months (for probationers) for unlawful termination. The court can also award compensation.
6. Which is better, MSS or VSS?
No one is better than the other. It depends on the terms and conditions of the scheme. Skim pemisahan sukarela atau voluntary separation scheme is targeted towards a specified group of employees while MSS is usually offered to certain individuals.
7. Why do companies offer VSS?
Companies offer VSS to reduce the workforce. It can happen due to lesser demand for labour, thus causing redundancies and company restructuring.
