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FMM: Job losses brewing

FMM In The News: THE STAR, PETALING JAYA, Tuesday, April 21, 2020 - Four out of five manufacturers may have to lay off close to a third of their workforce due to the movement control order (MCO), according to a survey by the Federation of Malaysia Manufacturers (FMM).

“Working from home proved to be a challenge for many companies either because work processes cannot be performed remotely or companies are not prepared with the necessary infrastructure to support employees working from home, ” FMM said in a statement yesterday.

The impact on some companies is greater than others, it said, and some might have to resort to lay-offs and/or retrenchments.

“A total of 63% indicated that they may have to resort to such cost-cutting measures with 47% having to do so within the next three to six months.

“A majority (78.7%) of the companies would have to lay off/retrench up to 30% of employees with 27% indicating that they would have to lay off between 21% and 30% followed by 22% having to lay off between 11% to 20%, ” it said.

The survey, conducted from April 6-10, saw responses from 419 companies, with a majority (89.5%) of the respondents coming from the manufacturing and manufacturing-related and support services industries.

It noted that most or 44% of the respondents surveyed said that they would only be able to sustain their business with the current workforce for three months while 34.1% will only be able to sustain business for one month.

It said the impact of MCO on employment revealed that revenue had dropped by more than 50% for more than 50% of the respondents. A total og 74% of the respondents felt the wage subsidy programme (WSP) was inadequate to retain employees in the next three to six months without any pay cuts or retrenchment.

“Manufacturers are facing tremendous strain on their revenue and ability to sustain business amid the Covid-19 pandemic and the MCO. This has led to the inability of businesses to sustain their operations beyond three months if the MCO continues to be extended and (health) conditions do not improve, ” FMM said.

On the WSP, FMM said 78% of the survey’s respondents have either applied or are planning to apply for the subsidy.

“However, given the limit of 200 claims imposed on eligibility of large companies as well as the ineligibility of those earning wages above RM4,000 for the subsidy, 15% of the respondents were unable to claim subsidy for all their employees which averaged 377 employees earning RM4,000 or less and an average of 143 workers earning more than RM4,000, ” it said.

The survey revealed that 74% of respondents suggested that the wage subsidy should cover all employees irrespective of the wage level with some suggesting that the ceiling be set at RM8,000 instead of RM4,000.

FMM said the survey also found that 57% who responded felt the wage subsidy should be more than 50% of wages while 51% of respondents said the wage subsidy period was too short and should be for at least six months for employers to be able to wade through the impact and aftermath of the Covid-19 and the MCO.

“Given the inability of businesses to sustain their businesses with the current workforce, some of the likely cost-cutting measures that employers would undertake in the next three to six months in order to preserve employment include freezing headcount (67%), instituting unpaid leave (59%), removal of some non-contractual allowances and benefits (59%) and forced annual leave (59%), ” it said.

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