What is Retrenchment, Voluntary Separation Scheme (VSS) and Mutual Separation Scheme (MSS)

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What is Retrenchment, Voluntary Separation Scheme (VSS) and Mutual Separation Scheme (MSS)

November 12, 2020 Public Interest Disputes 0

In this article, we will briefly discuss the ways in which an employee can be laid off, namely, retrenchment, voluntary separation scheme (VSS), and mutual separation scheme (mss).

Retrenchment 

Retrenchment occurs when a company discharges surplus labour or staff. It can be done in six situations (as shown in section 12(3) of the Employment Act), namely when: 

  1. The employer ceases/ intend to cease his business which the employed was employed;
  2. The employer ceases/ intend to cease his business at the place which the employee is situated;
  3. The need for the work done by the employee ceases/ expected to cease or diminished;
  4. The need for the work done at the place which the employee is employed ceases/ expected to cease or diminished;
  5. The employee refuses to other places of employment unless his contract requires him to accept the transfer; or
  6. There is a change in the ownership of business.

Voluntary Separation Scheme

A voluntary separation scheme (‘VSS’) is a scheme/ offer where an employer invites and offers the employee to resign voluntarily without the implications of a retrenchment while still receiving fair compensation from it. 

Mutual Separation Scheme

A mutual separation scheme (‘MSS’) is a scheme/ offer where both the employer and employee comes to an agreement to mutually override and terminate the employee’s current contract, whereby both parties come together to negotiate the benefits and compensation for accepting the scheme.

What is the differences between retrenchment, VSS and MSS

Retrenchment 

VSS

MSS

Voluntariness

Employee does not have a choice as to whether he can continue in the employment. Employees can choose to remain in the employment or part ways with their employer. Employees mutually agree with the employer to part ways.

Consideration on who to dismiss

Employer has to comply with the industrial law principle of last in first out (‘LIFO’) i.e. the order of retrenchment depends on the duration of an employee’s employment in the company- the one with the least working experience will be the first one to go, regardless of their seniority in the company. 

Employer can depart from this principle if is reasonable to do so.

The offer is opened to everyone. Employees who accept the offer will still need to go through an interview process with their employer. Successful applicants will be allowed to part ways. The employer can also choose to reject the employee’s application if they choose to retain the employee.  The offer is not opened to everyone- both parties will have to come to a consensus to part ways.

Justification

Requirements under section 12(3) of the Employment Act. Streamlining its workforce. Both parties decided that it is time to part ways.

Can claim for unfair dismissal?

Yes if the requirements under section 12(3) of the Employment Act are not met, the decision was capricious, mala fide, or the employee is a victim of unfair labour practices. Cannot, unless the employee can show that there are vitiating factors (such as coercion, threats, and inducement) in agreeing to VSS. Cannot, unless the employee can show that they are vitiating factors in agreeing to MSS.

 

What are the remedies for unfair dismissal

The employee can file a complaint with the Director-General of Industrial Relation within 60 days of their dismissal.

The department will then attempt to settle the matter between the employer and employee. If it fails, the department will then notify the Minister in charge of human resources and the Minister may refer the matter to the industrial court. If the court favours the employee’s case, the court can either order that the employee be reinstated or be compensated, based on the factors laid down in the act. Either party can still appeal to the high court if they are not satisfied with the outcome.


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