3 Steps Guide In Handling Employee Retrenchment

Employer Feb 07, 2021

Inside the circle of employment, at some point employer will have to deal with the employee's RETRENCHMENT. As a simple term, retrenchment is an employee dismissal action.

From this article, Seekers will be sharing 3 steps guide in handling employee retrenchment following insight from the Labour Department of Malaysia.

Step 1: Pre retrenchment

Before deciding on retrenchment, the employers shall reorganize the human resource management and plans cost-cutting. Employer may refer to the below table Action Plans:

Disclaimer: This is a suggestion. Employer may plan and use their own Action Plans.

Step 2: Retrenchment

Indeed, not all cost-cutting methods will be sufficient which will lead the employer to take further action on retrenchment.

Therefore, following the retrenchment process, the employer may follow this Guideline from Labour Department:

i. Perform discussion between the selected retrenchment staff. The employer shall perform FWFO (Foreign Worker First Out) and FILO (First in, last out) following Labour Office guideline.

ii. Offer the affected employees with suitable compensation accordingly following working contract or Employment Act 1955/ Labour Ordinance Of Sabah/Labour Ordinance Of Sarawak.

iii. Giving official retrenchment letter which includes reason of retrenchment, effective period of retrenchment and compensation payment.


1. FWFO (Foreign Worker First Out) is referring to the action in terminating foreign worker first.

2. FILO (First in, last out is referring to the action in terminating new employees and sustain the senior staff as their working experience is more crucial to company.

Step 3: Reporting to Labour Office

As a dutiful employer, reporting on retrenchment to Labour Office is required following Employment Act 1955/Labour Ordinance Of Sabah/Labour Ordinance Of Sarawak.

This PK form (Retrenchment Form) can be pick up in any nearby Labour Office and  available online:

i. Jabatan Tenaga Kerja Semenanjung  Malaysia

ii. Jabatan Tenaga Kerja Sarawak

iii. Jabatan Tenaga Kerja Sabah

PK form (Retrenchment Form)

In addition, the employers must note the Submission Period of this PK form (Retrenchment Form):


1. The above procedures are for references purposes for now. There may be changes of procedures and new regulations by Labour Office Malaysia along the way.

Source: Department of Labour Peninsular Malaysia

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