By Chee Jo-Ey
THE Covid-19 pandemic that has put a halt to economic activities has forced employers to implement cost-saving measures like cutting salaries to keep the business going.
Many employees who have managed to keep their jobs during the crisis are getting paid less. Although it started with CEOs and top executives at large corporations, the pay cuts are now trickling down organisation levels.
For example, Genting Bhd is proposing a salary cut of as much as 20% as a temporary measure while it is up to a 50% cut for those holding vice-president positions or higher at Genting Hong Kong Ltd.
Grab Singapore’s senior management is reportedly taking a 20% pay cut amidst the pandemic crisis. Sapura Energy Bhd’s top management has also decided to take a 50% pay cut.
Tan Chong has announced salary cuts of between 20% and 30% for senior management executives while non-senior management staff will have their salary cut between 3% and 15% depending on grade level.
According to SME Association of Malaysia president Datuk Michael Kang, quite a number of small to medium enterprises (SMES) have started discussing with employees the possibility of cutting pay as well.
Even though some companies are allowed to operate at full capacity, they might need to adapt their operational models to the new normal of social distancing through digital transformation and there might be changes to the workforce as well.
Kang says that around 60% of its members are considering pay cuts in order to survive the crisis with the scale of the cut ranging from 30% to 50%.
As more companies are implementing pay cuts as a temporary measure to tide over the crisis, some might wonder if there is any guidance on reverting employees to previous salaries after the pandemic ends.
“Due to uncertainties, it is difficult for employers to promise when they can revert their employees to previous salaries as no one can predict when the Movement Control Order (MCO) would be lifted.
“Right now, we’re taking matters on a step by step basis and as far as I know, most companies don’t have a policy or clause stating when companies can reinstate salaries,” Kang adds.
He advises employers and employees to work hand in hand towards keeping businesses afloat and it would benefit all parties if they are able to sail through the crisis together.
Dispute resolution lawyer Yee Jun Hong at JH Yee & Co says that companies usually resort to pay cuts when they are facing extreme financial constraints.
As it may be difficult for them to gauge how soon they can revive their businesses, they would generally forgo putting in place terms and conditions for reinstating salaries.
However, it must be noted that any pay cut offer leading to change of terms in employment contract would require the express consent or agreement of the employee.
He advises that should a pay cut be proposed, employees could negotiate with employers to shorten work hours/scopes on reduced pay rather than asking for a time limit on how long they would take the reduced pay.
Notwithstanding that, it does not mean that employers are obligated to consider such requests.
The MCO has entered its fourth phase, from April 28 to May 12, and there has been a relaxation of rules with sectors that were permitted to operate during earlier phases being given the green light to operate at full capacity. And more economic sectors have been allowed to resume business activities.
However, whether the MCO will be further extended is still anyone’s guess and it is expected that it would take between 12 and 18 months to produce a vaccine for the Covid-19 virus. – May 4, 2020
