International

Business
School

Individual Final Project :

Banking Made Personal

Mohd Suffian bin Mahmud

MBSA141159
Semester 2 2015/2016 Session
Leading Talent in Organizations
MBSA 1623
Dr. Normahaza Mahadi
16th June 2016

TABLE OF CONTENT

Page
1

Introduction

Methodology

Data Analysis

Socio Demographic Backgrounds

Profiles of Ex-Employer

Approach to Retrenchment

Effects on Life

Effects on Economic Situation

Post-Retrenchment

Discussion, Implication and Conclusion

Appendix

QUESTION 1

20,000 lost their jobs in 2015, worse in 2016, says employers

group. In the past months, such news headline is a common sight in
local and international media. Being retrenched has tremendous
effects on employee. For employers, retrenchment must be handled
with great care to avoid negative repercussions.
Investigate and analyze this issue with support from empirical data.

INTRODUCTION

The Global Financial Crisis in 2008 is very different from the one Malaysia
experienced in 1998. In 1998, Malaysia suffered a contraction in Gross Domestic Product
(GDP) growth due to the Asian Financial Crisis which started in Thailand. The 2008 crisis
did not start in Asia or Malaysia but is due to the weaknesses in the United State of America
(USA) financial industry which then disbursed into a severe international financial crisis and
deep slump in global trade and has created global recession by late 2008. The worlds major
economics such USA, the European and Japan are experiencing the worst economic
contraction since the Great Depression of the 1930s.
As a small open and export-dependent economy, Malaysia has not been spared from
this external shock of Global Financial Crisis. The negative impact of the crisis only started
to be seen in Malaysia in 2009. In 2008, Malaysia was relatively unaffected by the financial
turmoil. The global financial crisis is transmitted to Malaysia mainly through the financial
and trade channels (James et al., 2008). Banks and financial institution in the USA and the
West has reduced their international businesses and started to put more focus on their home
market. This has resulted to a big drop in funds flowing into Malaysia. The numbers of
financial institutions has dropped from 47 institutions in 2007 to 33 in late 2009. The
reducing numbers of financial institutions is related to the policy set by the Bank Negara in
order to bring about the economies of scale and to provide a higher level of efficiency.
The policy by the Bank Negara has resulted a major restructuring in banking industry
as banks pursue greater cost efficiency in this increasingly competitive environment. Closing
down branches and cut down the staffs have been a few measures taken by bank to make sure
the efficiency is increase with a lot of saving on their sides. Banks also invest into better
technology which has led to excess staff and justified for retrenchment. The cruelty of the
situation is that the clerks will be the first to go when the officers could do all the tasks
normally done by clerks.
I have encountered an individual who has been in this situation back when she was
retrenched by her employer back in 2014.

She has been a loyal employee with the

organization for the past 18 years before the unfortunate event happen in early March 2014. It
does taking her personally when the routine that she has been through for 18 years has
suddenly stopped. She still wondering how she end-up in the list of retrenched after all the
years of her services in that organization. I have the opportunity to get personal with her on
the issue and my findings on the issue are as reported in this assignment.

METHODOLOGY

The Respondent
The respondent has been identified through a friend in the same field of work of the
respondent. She has agreed to be the respondent with a condition that she remained as
anonymous.
The Method
I requested for a one-on-one interview with the respondent but she denied the request
since she wanted to remain anonymous. Therefore, I have to change my strategy of getting
the information from her.
I have prepared a set of question to be completed by the respondent. The question
consists of the following items:
(a) Respondents background including age, gender, race, marital status, number of
children, spouse working status, educational background and working experience.
(b) Respondents ex-employer profile including the companys profile, her last position
and the reason of retrenchment.
(c) Respondents perception of ex-employers retrenchment exercise.
(d) The effect of the retrenchment on respondents life socially and economically.
(e) Respondents plan way forward after the retrenchment.
The question has been email to the respondent and she is given two (2) weeks to
complete the question. However, the respondent only submitted her answer after three (3)
weeks but she manages to provide all the answer to the question given.
I also manage to have a phone interview with the respondent to clarify a few items on
her response to my earlier question. Even though, the respondent quite reluctant to discuss the
matter but I manage to get all the relevant information needed.
DATA ANALYSIS

Socio Demographic Backgrounds

The respondent is a female age 38 years old. She is married with two (2) children age
7 years old and a new born just a couple of months old. She is a Malay originated from
Pontian, Johor but now residing in Bandar Tun Hussien Onn, Cheras, Selangor. Her husband
is a government officer working in Putrajaya.
The respondent has started working since the age of 18 just after she got her Sijil
Pelajaran Malaysia (SPM). She began her working life in 1996 as a clerk in Multi-Purpose
Bank in Johor Bahru, Johor. She has performed banking transaction for customers including
opening account, deposit, withdrawal and remittance. She also attended to customers
enquiries about banking products or transaction.
After working for 2 years in Johor Bahru, she moved to Kuala Lumpur due to
encouragement from her peers. She was stationed as a clerk in Multi-Purpose Bank, Phileo
Damansara where she responsible to liaise with developer, insurance company, valuers and
buyers for housing loan applications.
In 1999, Multi-Purpose Bank has been identified by Bank Negara as one of the 10
anchor financial institution for merging of financial institution due to Asian Financial Crisis.
The Alliance Banking Group has been established as the result of the merging of MultiPurpose Bank with other six (6) financial institutions including International Bank Malaysia
Berhad, Sabah Bank Berhad, Sabah Finance Berhad, Bolton Finance Berhad, Amanah
Merchant Bank Berhad and Bumiputra Merchant Bankers Berhad.
In 2004, she moved to the head quarter of Alliance Bank in Capital Square, Kuala
Lumpur to join Trade Finance Department. As a clerk in this department, she was responsible
to process all transaction related to trade finance application such as Bankers Acceptance,
Contract Financing Facility, Letter of Credit (Transfer LC), Export

Bill Collection

(Negotiated & Purchased Discounted), Import Collection, Trust Receipt, Shipping Guarantee,
Bank Guarantee, Promissory Note, Export Credit Refinancing (ECR) (Pre & Post Shipment)
etc. according to UCP600 & URC522 rules.

The respondent managed to get her Executive Diploma of Islamic Management in

Islamic Banking and Financial from Universiti Utara Malaysia in early 2013. She feels the
need to have better academic qualification in order for her to upgrade her position in the
company.
Profiles of Ex-Employer
Alliance Banking Group Berhad started in Malaysia in 1958 as Banque de
LIndochine. The name of the Bank was changed to Banque de LIndochine et de Suez in
1975 and later change to Malaysian French Bank in 1982. By 1996, Malaysian French Bank
Berhad changed its name to Multi-Purpose Bank Berhad.
In 1999, Multi-purpose Bank Berhad was selected to be one of the anchor banks in the
Malaysian governments bank consolidation initiative. Multi-Purpose Bank Berhad
successfully anchored the merger with International Bank Malaysia Berhad, Sabah Bank
Berhad, Sabah Finance Berhad, Bolton Finance Berhad, Amanah Merchant Bank Berhad,
and Bumiputra Merchant Bankers Berhad. The Alliance Banking Group was established on
19 January 2001 with the successful merger of 7 financial institutions.
The Group is principally involved in the provision of banking and financial services
through Alliance Bank Malaysia Berhad. Alliance Bank Malaysia Berhad, together with its
subsidiaries, Alliance Investment Bank Berhad and Alliance Islamic Bank Berhad, provide a
wide range of financial products and services in commercial banking, financing, investment
banking, investment advisory, stock broking, Islamic banking and other related financial
services.
The respondent has been a loyal employee with the company. She has been working
with Alliance Bank for the past 18 years as a clerk. The company has been exercising
promotions on clerk position to executives in early 2013 based on the application. Many of
her friends have applied for the position of executives but she did not apply due to advice
from the National Union of Bank Employees (NUBE). Based on the information given by
NUBE, whoever accepted the promotions of executive will no longer applicable to collective
agreement between NUBE and Malayan Commercial Banks Association (MCBA).

As far as she concerned, the agreement between NUBE and MCBA has been very
beneficial for her and her peers. The agreement has guaranteed two (2) months bonus every
year and increment of at least 10% per annum for all the members of NUBE. This is the main
reason why she did not apply for the executive position.
Later in 2013, Alliance Bank has offer voluntary separation scheme (VSS) to nonexecutives. VSS gives employees the choice to decide if he/she is willing and ready to accept
his/her contract to be ceased. This type of retrenchment exercise gives both parties the
advantage. Employees can review the criteria and terms and the lay- off package offered
before they decide to apply for it. There is no compulsion or pressure to accept such lay off
and they can still choose to continue working. For employer, this sort of method can help
them to reduce manpower cost such as medical and wage bills of those who are having
continuous medical issues resulting in dip in work performance.
Approach to Retrenchment
Retrenchment in laymans term is known as reduction of workforce while in legal
terms it is regarded as termination of contract. The industrial court confined the usage of
the term retrenchment to mean a discharge of surplus labour. In human resource term,
retrenchment is defined as an activity to legally terminate any employment contract with the
employee by offering a compensation package. Such offer to retrench may come into as
mutual acceptance or forced upon by one party which of course would be the employer.
In case of the respondent, her company has offered VSS to all non-executives without
really explaining the reason why the offering the VSS. In her opinion, she saw this exercise
as an aggressive action to do away with the non-executives in the organization. The VSS
exercise only take place after those clerks who apply for the executives has been promoted to
the position.
According to the collective agreement between NUBE and MCBA, members which
have been promoted to non-clerical position will no longer eligible for benefit of the
agreement. The executive benefits are subjects to the terms and conditions that were written
in their letter offer. However, the company still has to deal with the Union because there are
numbers of non-executives still working in the company. Based on the last collective
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agreement, the usually renew the agreement every three (3) years. This may put the company
on distress because they have to fulfil the request from the Union that normally give more
benefit to the non-executives.
In early 2013, she has garnered an executive diploma in Islamic Banking and
Financial from a public university. She was hoping with the diploma she could move her
career to a new position such as executives but somehow the company did not offer the
promotion to her but insist her to apply for it. In her opinion, if the company really
appreciated her loyalty and her effort to upgrade her academic qualification, they should offer
her the executive position not that she should apply for it. If she apply for the executive
position, it really shown that she want to move out from the clerical position not that she has
been promoted to the position.
This approach has make she feel unappreciated in the company. Moreover, the
company also offer her VSS which means that the company did not want her to be with the
company any longer. She feels that her loyalty is not been recognize by the company at all.
However, upon looking at the VSS offer by the company, she chose to accept the VSS
offer. The agreement mention that she will be given a factor of 1.8 x last basic salary x years
of services. In addition, the company will also give RM1000 for medical expenses. According
to her, upon signing the VSS she received more than RM70,000 as compensation of her 18
years service with Alliance Bank. She left Alliance Bank in April 2014, three months after
accepting the VSS offer.
Effects on Life
The decision to accept the VSS offer was made by the respondent after long
discussion with her husband. Since her husband was a government officer, she knows that her
family will be in good hand of her husband. Even though her husband is just a junior officer
in the government but his earning is sufficient to meet all her family need.
She also mentioned that the decision to accept the offer was really supported by her
husband opinion towards her career path. He kept mentioning that the company is not really
appreciated her loyalty and with a diploma earned in 2013, she should have a better position
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elsewhere. The confident of her husband toward her future career in banking has convinced
her to make the decision to take the offer.
Somehow, the decision did impact her life personally in terms of social connection.
She realizes that her social life is among her peers. When she walked out of the office back in
April 2014, she started to feel that a major part of her social life was taken out. She missed
the time spent with her colleague especially during lunch hour and the always awaited
casual Friday. Those 18 years of sharing between her best buddies in the office are truly a
missing slide in her daily routines.
However, after a few months she manages to restructure her social life by engaging
new activities such sewing and gardening. She has attended sewing classes and manages to
create her own baju kurung and jubah. Her husband also very supportive especially to make
sure her life was filled with interesting activities.
Overall, her decision accepting the offer has minor effect on her life and she manage
to put her social life back in track by entering new activities of interest. She also lucky to
have a very supportive husband which did contribute to minimalize the effect of the VSS.
Effects on Economic
She has made the calculation based on the VSS package offered by the company. She
knows that she will have a big lump sum of money but somehow without permanent income,
it surely hit her expenses. She has her monthly commitment such car and personal loan.
Without permanent income, her husband has agreed to pay for her car but she has to use her
compensation money to settle her personal loan.
Besides, she and her husband have just moved to their own house back in September
2013. The house which was loan under her husbands government housing loan was secure
due it was monthly deducted from her husbands salary.
Economically, the respondent is not really affected by her decision to accept the VSS
offer because her husband has a secure job with the government. From the information given,
she only missed out on the permanent income that normally she acquired at the end of the
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month. Somehow, the allocation to meet with the expenses she needed is still supported by
the compensation she received and the extra pocket money by her husband.
Post-Retrenchment Action
Just after she left the job due to VSS offered by the company, she started to find new
job that suits her new academic qualification. Within two (2) months, she has been attending
interview in a few financial institutions and the prospect of getting new job is high This is
based on the response by the interviewer.
Lucky for her, she was offer as an executive in RHB Bank in August 2014. She started
her new career in RHB in September 2014 and now has been promoted as senior executive.
Her husband was right in terms of using her newly earned academic qualification for
good use in her career development. The decision to accept the offer has given her the
advantages in terms of monetary due to the compensation received and career development
which has promoted her to better position.

DISCUSSION, IMPLICATIONS AND CONCLUSIONS

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Based on the experience on retrenchment through VSS shared by the respondent, it is

clear that any decision on retrenchment should be considered thoughtfully by the employee
based on the advantages on their side. The respondent has choose to accept the offer after felt
that she was unappreciated by the company after all the years of loyalty she performs.
Retrenchment Exercise
Normally, downsizing the organization will create victims in the organization while
those who survive should be very thankful for remaining in their jobs and they should
respond positively by helping the organization to achieve its goal (Ann Ho et al, 2013).
However as inform by the respondent, she accepted the offer after felt unappreciated which
show that the company did not take care of their employee charity.
As for the employer, retrenchment is the popular strategy used in organization all over
the world (Lik-Jing Ung et al, 2014). The retrenchment occurs when an organization regroups
through cost and asset reduction to improve sales and profits. Therefore, it is clear that the
respondents former employee has taken retrenchment strategy to reduce it costs and achieves
more on earning managements.
The main reason of retrenchment should be genuinely redundancy (Mumtaj Hassan
and Md Rejab Md Isa, 2015). If an employer falsely labes a dismissal as redundancy, this will
be likely unfair for the employee.
The Law and Policy on Retrenchment
The respondent also mentioned about how the company has offer the VSS without
clear reason of exercising it. This is not the right way of doing the retrenchment exercise in
Malaysia. For instance, Section 60N of the Employment Act 1955 has clearly states that if
there is a situation arises for staff reduction, then the company must retrench their foreign
workers first. The Termination and Lay Off Regulations 1980 under Regulations
5(1) indicates that if an employee is not provided a minimum of 12 days work continuously
or pay 12 days wages in 4 weeks shall be deemed that he/she has been laid off.

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The Industrial Relations Act 1967 on the other hand provides avenue for employees
who may feel that the retrenchment is conducted in mala fide manner or without valid
reasons or as a window dressing with intention to hire foreign workers. Section
20(3) provides an opportunity for the retrenched employee to file case as unfair
dismissal and claim for reinstatement. For employees who are not covered by the
Employment Act 1955, they can file their case and seek any possible remedy if they are not
paid any lay off benefits. There are some cases of which Industrial Court have instructed
employers to pay retrenchment benefits based on lay regulations terms.
However, the Malaysia court have taken their stand that it is prerogative of the
organization to plan for their reorganization which could lead to retrenchment exercise
(Marcus Van Geyzel, 2016). But the court could intervene the exercise if it is shown that the
employers decision was not genuine, such where it was a termination disguised as a
redundancy or where the affected employees were victimised or selected to be retrenched for
unfair reasons.
According to The Code of Conduct for Industrial Harmony which was issued in 1975,
an employer should take positive steps to avert or minimise reductions of workforce by
adopting appropriate measures such as

limitation on recruitment;

restriction of overtime work;

restriction of work on weekly day of rest;

reduction in number of shifts or days worked a week;

reduction in the number of hours of work;

re-training and/or transfer to other department/work.

Where a retrenchment becomes necessary, the Code encourages employers to take the
following measures:

Giving as early a warning as practicable to the affected employees.

Introducing schemes for voluntary retrenchment and retirement and for payment of
redundancy and retirement benefits.

Retiring workers who are beyond the retirement age.

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Assisting workers to find alternative employment.

Spreading the termination of employment over a longer period.

Ensuring that the employees are informed or consulted before a formal announcement
is made.
The Code also recommends that the employer should select the employees to be

retrenched based on an objective criteria, and that retrenched employees should be given
priority to be re-employed by the employer if the employer decides to employ workers again
in the future. Non-compliance with the Code will not mean that a retrenchment will be
deemed to be unfair, but employers should try to comply with the Code where possible
because the recommendations in the Code are good practice, and it could also strengthen the
position of an employer if an employee brings an unfair dismissal claim as a result of the
retrenchment.
The Impact
The retrenchment could affect different people in different ways (George Robotham,
2014). Sometimes people retrenched are working in a job they are happy in and believe they
are doing a good job of; the effect on their self-esteem can be overwhelming. A sense of loss,
worry about financial insecurity, uncertainty and depression can be effects. Sadly things may
get so bad that some think about suicide. Being retrenched should not be the subject of
embarrassment in our modern times. It is not a reflection on your competency, rather it is a
reflection on the change of approach by an employer. Those left behind can also suffer from
the loss of their workmates, become unmotivated, be worried about when the axe is going to
fall on them and be less productive. An often forgotten part of the equation is the managers
who have to hand out the redundancy notices. Many managers report this has been a very
difficult part of their job.
Employers should ensure that those to be retrenched should undergo a set of transiting
training and self-development programs. These programs may include contemporized
entrepreneurial and personal financial skills which will ensure that they have a stable
socioeconomic life after retrenchment (Ogbechie, 2015).

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In the statement made by the respondent, it is shown that the retrenchment only have
minor effect her socially and economically. But one thing for sure is that her acceptance of
the VSS offer was made with full support of the family especially her husband. This kind of
support really helps the retrenched employee feeling secure and known that whatever happen
there will always be a safety net for them.

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2.

Lik-Jing Ung, Rayenda Brahmana and Chin-Hong Puah (2014) Does retrenchment
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3.

Marcus Van Geyzel (2016), What you need to know about the law on retrenchment of
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Mettie Eilstrup-Sangiovanni (2015), Threat, Decline and Retrenchment, International

Studies Quarterly.

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George Robotham (2014), The Effects of Retrenchment and Redundacies,

safetyrisk.net

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7.

Lara Salzwedel (2014), Retrenchment and the Accompanying Psychological Effects,

www.registeredcounsellor.co.za

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9.

Ashgar Ali and Ali Mohamed (2015), Voluntary Retrenchment: Voluntary or manual

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