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CODE OF CONDUCT
FOR INDUSTRIAL HARMONY
TATA C A R A U N T U K
KEHARMONIAN PERUSAHAAN
What is the Code of
Conduct for Industrial
Harmony?

The Code of Conduct for Industrial

Harmony (the Code) is
an agreement made between the
Ministry of Human Resources (then
known as the Ministry of Labour and
Manpower) and the Malaysian
Council of Employers’ Organisations
(the predecessor to the Malaysian
Employers Federation) and the
Malaysian Trades Union Congress
since 1975.
What the Law States?
“In making its award, the Court may take
into consideration any agreement or code
The Code provides useful guidelines in relating to employment practices between
the area of industrial relations practice. organisations, representative of employers
and workmen respectively where such
There is no legal obligation on the part agreement or code has been approved by
of the employer to adhere to the the Minister.” Where an employer does not
contents of the Code. However, the follow the procedures set out in the Code,
the employer in fact commits an unfair
Code has been given its legal “teeth” labour practice. The Industrial Court has
by virtue of sec 30(5A) of the Industrial been very consistent in its reliance of the
Relations Act 1967. It states: Code in retrenchment cases. Failure to
follow the Code can result in a retrenchment
being declared an unfair dismissal.
 A
I
MS
The aim of the Code is “to lay down principles and guidelines to employers and
workers on the practice of industrial relations for achieving greater industrial
harmony”.

Under clause 7 of the Code, the central employer and employee organisations have
agreed to endorse and recommend employers and workers to observe and comply
with the industrial relations practices agreed upon and accepted by the Ministry of
Human Resources.
 cONTENTS
OF THE CODE

PART 1 PART 2 PART 3 PART 4

RESPONSIBILITES EMPLOYMENT POLICY COLLECTIVE COMMUNICATION
BARGANINING AND
CONSULTATION
PART
PART
01
01 :
RESPONSIBILITES
 PA R T 1 : R E S P O N S I B I L I T E S
At the level of

(1) As employers and workers and

trade unions representing them are
1 establishment or
undertaking (3) Where a trade union has been recognized:
(a) Management should take the initiative in seeking to
jointly and severally responsible for
establish, jointly with the trade union concerned,
good industrial relations, the first
effective procedures for negotiation, consultation
step is for both management and trade
(2) Good industrial relations depend upon good and the settlement of grievances and disputes.
unions to accept, at the highest level,
organization of work. Management should (b) Management and the trade union should take all
the same degree of responsibility for
therefore take all reasonable steps to ensure that: reasonable steps to ensure that both the management
industrial relations as for other
(a) All management personnel understand their and union personnel observe agreements reached
functions within their respective
responsibilities and what is required of them, and use agreed procedures.
organizations.
and have the training and authority (c) Management should not discourage employees from
necessary to discharge such duties and joining the recognized union and from taking an
responsibilities efficiently active part in its legitimate activities.
(b) Duties and responsibilities for each group
of employees are stated with clarity and
simplicity in the organizational structure (4) The supervisor is management’s first “contact” man with the
(c) Individual employees or work-groups know employees and special attention should be given to his appointment
what their objectives are and are regularly and his needs on the job. The employer should ensure that he:
kept informed of progress made towards (a) is technically proficient and adequately trained and possesses
achieving them the personal qualities required to exercise supervision
(d) Where possible, work is organized in such (b) Has charge of a work-group of a size that he can supervise
manner so that the individual employee has effectively
the chance to achieve a sense of job (c) Is an effective link in the interchange of information and views
satisfaction. between senior management and members of his work group
(d) Is briefed about innovations and changes before they occur so
that he can explain management’s policies and intentions to
his work-group.
 PA R T 1 : R E S P O N S I B I L I T E S
At national or industry

(5) Employers’ association should:

(a) Co-operate with the trade unions in
2 level
(7) To secure these aims, a trade union should:
establishing effective procedures at (a) Co-operate with employers’ association in
industry or national level for the establishing effective procedures at industry level
negotiation of terms and conditions for the negotiation of terms and conditions of
of employment and for the (6) A trade union can promote the interests of employment and for the settlement of disputes
settlement of disputes its members effectively only if it accepts, that, in that arise
(b) Encourage the establishment of common with management, it has an interest in (b) Co-operate with individual management in
effective procedures among member and a responsibility for the success of the establishing effective procedures for negotiation,
organizations for the settlement of undertaking and for the national, economic and consultation, communication and the settlement
grievances and disputes at the level social well-being of the country as a whole. This of grievances and disputes
of the establishment or undertaking involves co-operation with the employer in (c) Take all reasonable steps to ensure that their
(c) Take all reasonable steps to ensure promoting efficiency and good industrial relations officials and members observe agreements and
that member organizations observe use agreed procedures
agreements and agreed (d) Make full use of the established procedures for
procedures the settlement of disputes.
(d) collect, analyze and distribute
information to its members
concerning industrial relations
matters
(e) Identify trends and new
developments in industrial relations
and help its members to anticipate
and keep abreast of change
(f) Provide an efficient and realistic
advisory service to its members on
all matters of industrial relations.
 PA R T 1 : R E S P O N S I B I L I T E S
(8) To ensure that its organization is
effective, a trade union should also:
At national or industry
(a) Have enough officials, full time or
otherwise, to maintain regular
contacts not only with union members
2 level

but also with management of (10) As the basic relationship between an employer and
establishments or undertakings where (9) The trade union should also ensure that all the individual employee is defined in the individual
the union has been recognized its officials: contract of employment, it should be expressed in clear
(b) Maintain a communications system (a) Clearly know and understand the nature and precise language. It is the employee’s responsibility
which secures the interchange of and extent of their responsibilities and to satisfy himself that he or she understands the terms of
information and views between authority the contract and to abide by them.
different levels in the union and (b) Are adequately trained to look after
ensures that members are members’ interests in a responsible and
systematically and regularly kept efficient way
informed, factually and objectively, of (c) Wherever possible and practicable, hold
the progress of negotiations for a regular dialogues with officials of
collective agreement employers’ association and its members.
(c) Encourage its members to attend
union meetings and to participate
fully in union activities by holding (11) The employer and relevant trade union should ensure that procedures for dealing with
branch meetings at times and at questions that arise on the individual contract of employment are clearly laid down. But it is
places convenient to the majority; the responsibility of the employer himself to:
and, where there is a large enough (a) Familiarize himself with these procedures and
membership, consider forming the (b) Make use of them when the need arises.
branch organization of the
establishment
(d) Establish effective procedures for
the settlement of disputes among
members of the union
PART
PART
02
02 :
EMPLOYMENT POLICY
 PA R T 2 : E M P LO Y M E N T P O L I C Y
(12) A sound employment policy is a prerequisite to good employer-employee relations. It should
also reflect the Government’s policy requirements, announced from time to time. Good planning
and efficient use of manpower are important both for the success of the establishment and for the
security of those employed in it. The employer should, therefore:

(a)Keep fluctuations in manpower requirements to a minimum by means of advance planning

(b)Make changes, wherever necessary, with as little disruption as is necessary
(c)Where practicable, maintain, in consultation with the employees or their representatives or trade
union, as appropriate, a scheme for transferring employees from one job to another within the
establishment or undertaking so that unavoidable changes in manpower requirements can be
handled smoothly.
 E M P LO Y M E N T P O L I C Y
REDUNDANCY &
1 RECRUITMENT 5 RETRENCHMENT

2 TRAINING 6 WORKING
CONDITIONS
PAY M E N T S Y S T E M
3
4 S E C U R I T Y O F E M P LOY M E N T
 RECRUITMENT

(13) Recruitment and selection policy can help good industrial relations by ensuring that workers are engaged for jobs suited to
their abilities. The employer should, therefore:
(a) Define the qualifications and experience needed for the vacant job
(b) Ensure that selection is based on suitability for the job
(c) Consider filling the vacancy by transfer or promotion before trying to recruit from outside
(d) Explain the terms and conditions of employment to applicants before they are engaged
(e) Ensure that those who carry out recruitment and selection are competent to do so and that the recruitment and selection
methods are regularly checked to be effective
 TRAINING
2

(14) Adequately trained employees are essential for the success of the undertaking. Training appropriate to his work also
helps the individual to develop his potential, to increase the satisfaction he finds in his work and to improve his earning
capacity.
(15) Newly recruited employees (PROBATIONER) should be given initial instruction covering:
(a) The organization, its employment policy and welfare and social facilities that are available
(b) Specific training in the job to supplement previous training and experience.
(16) Younger persons entering employment or the first time should be given broader basic instructions covering a general
introduction to working life.
(17) In appropriate cases, further training should be provided when there is a significant change in the content of the
job or in the level of the job being performed.
 PAY M E N T S Y S T E M
3

(18) Although payment systems vary according to the nature and organization of the work, local conditions and other factors,
the following principles should be observed so as to ensure that the system of payment is soundly based and thereby reduces
the incidence of disputes arising:
(a) Payment systems should be as simple as possible
(b) Differences in rates should be related to the requirements of the job which should, wherever possible, be assessed by
agreed as well established methods
(c) Piece-work rates, incentive bonuses, etc should be determined by agreed or well established methods
(d) Rates of payment should be jointly negotiated where a recognized trade union exists.
 SECURITY OF
4 E M P LO Y M E N T

(19) Insecurity of employment and fear of the consequences of redundancy and retirement have a major
influence on attitudes to work and good industrial relations. Consistent with the efficiency and success of the
undertaking, the employer should provide greatest possible stability in terms of job tenure. The employer
should also, where practicable:
(a) Offer prospects for advancement and promotion within the undertaking with opportunities for any
necessary training
(b) Provide retirement, retrenchment and sick pay schemes to supplement statutory provisions.
 RETRENCHMENT AND
5 REDUNDANCY
Legislative Protection

The Code of Conduct for Industrial Relations Act, Industrial Relations Act,
1 Industrial Harmony 1975
Article 20 : Appropriate measures
2 1967, Section 20
Section 20 : The retrenched
3 1967, Section 13(3)
Section 13(3) : Recognizes right of
employer to terminate the services
to avoid retrenchment. employee has the right to claim in
of employees for reasons of
Article 21 : Consultation with trade response to challenge unfairly
redundancy or reorganization of an
union. retrenched if there is any element
employer’s profession, business,
Article 22 : Agreed practices in of unfair labour practice.
trade or work or criteria for such
retrenchment exercise. .
termination.

Sarawak Labour Ordinance , Labour Regulations (Temporary

4 Cap 76, Section 12(2), (3)
5 Termination and Retrenchment
Benefits [Sarawak]) Rule 2008 6
Employment Insurance
System (EIS)
Section 12(2) : the employer must
give the employee the appropriate Provides that an SLO employee SOSCO intends to assist employees
period of notice. entitled to termination benefits in situations where they have lost
Section 12(3) : Recognizes right of based on length of services if he their employment in assistance for
employer to terminate the services has been employed for at least 12 job search allowance, early re-
of employees for reasons change in months. employment allowance, reduced
the ownership of the business in income allowance, training
which the employee is employed, allowance and training fee.
Avenues for Redress

Industrial Labour Sosco

Civil Court
Relations Department
Department

Filling a representation under Filling a complaint to Applying assistance in Filling civil claims for
s20, Industrial Relations Act Director of Labour term of financial, job damages or restitution
1967 for unfair dismissal. Department for enquiry for search, training at SOSCO right or benefits of the
termination notice and for lost job. employee.
layoff benefits.
 Common Misconceptions, Pitfalls and
Mistakes EMPLOYER
1. No implement the agreed measures of the code.
2. No implement appropriate measures of the code.
3. No notice given MSS or VSS.
4. External causes as genuine redundancy.
5. Non genuine redundancy - Done mala fide. 1
6. Unfair payment on redundancy benefits.
7. Unfair selection criteria.
8. Unsupported on documentations or facts.
9. No offered redundancy benefits.
EMPLOYEE
2
1. Cause of redundancy, retrenchment and separation is
10. Carried out in bad faith. employer’s fault.
11. Forced to accept VSS or MSS. 2. Not told – reasons.
12. Proposed for resignation. 3. No choice – forced to accept VSS or MSS.
13. Non-Genuine redundancy-purely as punishment for poor performance or 4. Afterthought upon receiving the VSS or MSS.
misconduct as reasons. 5. Accepted to resign as good faith.
14. Termination simpliciter based on contract of service. 6. No alternative employment.
15. Insist prerogative to transfer. 7. Whole process done in bad faith.
16. Immediate retrenched without notice. 8. Refused new employment offer but requested for
17. Outsourcing – job still there. redundancy benefits.
18. Financial crisis but purchased new asset or salary increment or bonus.
 Procedure of
Managing Redundancy
F U N D A M E N TA L Q U E S T I O N S :
The Industrial Court has outlined well established principles for retrenchment, which are as follows:.

1 Whether there is a Genuine 2 Whether the employer conformed

Redundancy situations? with accepted standards of good
industrial relations practices?
Genuine redundancy only arises for
three particular reasons due to Retrenchment exercise being carried
closing down and restructuring: out, as followed in The Code, Clause
I. the business stops doing what 20 -22.
the person was employed to do;
II. the business stops doing it
where the employee was
employed to do it;
III. there is a reduced need for
people in the employee's
category doing that kind of
work in that place.
Industrial Court Award
Hight Court : Credit Corporation (YM) Sdn Bhd v Choo Kam Sing & Anor
[1999] 8 CLJ 86
No consultation In genuine retrenchment scenario, no reasonable employer would pay out non-contractual bonuses and
salary adjustments. The fact also there was no consultation with the claimant before his dismissal.

Suseela Devi Balakrishnan v Inti Internaitonal College Kuala Lumpur Sdn Bhd
Failure to follow The [Award : 343 of 2019]
The claimant applied and paid VSS total RYM199,086.10. The Court held there was insufficient
Measures justification and improper handling of VSS.
Perak Freight Service Sdn Bhd v Azlan Muszaffar Othman [2001] 3 ILR 44
The Court held that the company failed to establish a bona fide retrenchment exercise and the position
Victimization was redundant but purely of employ other as replacement. Done in mala fide and an act of victimisation.

Siti Azimah Binti Ymat Taib v Trapia Malaysia Sdn Bhd [Award 265 of 2019]
Bargaining on This is crucial as the Claimant as Human Resources Manager with many years standing ought to be aware
Termination Benefits her rights. The Court finds the Claimant had bargained on her VSS compensation. There was no evidence on
her challenging on grounds of unlawful dismissal.
 JASPAL SINGH V Ser vices
ALUMINIUM COMPANY OF MALAYSIA BHD Redundant
[1987] 2 ILR 558
The Industrial Court held In the law of redundancy it is important to note that it is the
services of the employee which must be made redundant and not his position or
title.
In this case, it was clear that there was no redundancy as claimed by the
company. The company continued to exist. It also made a profit in the year 1991,
though the company claimed that the company’s profit margin was reduced. It
was also clear that the company’s loss of profit was not because the business was
bad but firstly because the company ordered new equipment's for itself and
secondly the company showed a loss in the year ending 1990/91. These losses
were mainly due to the depreciation in value of the fixed assets, which amounted
to a loss in profit margin of the company. Therefore, the claimant’s termination
was an unfair labor practice and also a dismissal without just cause or excuse
since there was no redundancy.
 Te r m i n a t i o n
Pengkalen Holdings Bhd v James Lim Hee Meng Benefit
[2000] 2 ILR 252
The Industrial Court stated that the retrenchment compensation:

[S]erves as a cushion against the hardships faced by an employee who has to

contend with the loss of his employment and the consequential loss of his
immediate means to earn an income. In the context of good industrial relations
practice, it serves to minimise resistance and opposition to genuine
reorganisation measures undertaken by management. It acknowledges a
workman‟s security of tenure and recognises the fact that though no fault of his,
such security of tenure has to be given away to his employer‟s overriding interest
of economy and efficiency.
 Genuine
East Asiatic Company (M) Bhd Vs Valen Redundancy
Noel. Yap [1987] 1 ILR 363

The Industrial Court noted that right of the employer is limited by the rule that he
must act bona fide and not capriciously or with motives of victimization or unfair
labour practice.
 Burden of
Bayer (M) Sdn Bhd v. Ng Hong Pau Proof
[1999] 4 CLJ 155

On redundancy it cannot be gainsaid that the appellant must come to the Court
with concrete proof. The burden is on the appellant to prove actual redundancy
on which the dismissal was grounded.
 Code of Conduct
FEDERAL COURT IN for
SAID DHARMALINGAM ABDULLAH V Industrial Harmony
MALAYAN BREWERIES (MALAYA) SDN BHD
(1997) 1 CLJ 646
The reasonableness of the dismissal may well depend on the procedure
followed. It is pertinent to point out that article of the Code of Conduct for
Industrial Harmony, jointly agreed on 9 February 1975, by the Malaysian
Council of Employers’ Organisation and the Malaysian Trade Union
Congress with the Minister for Labour, provides, inter alia, for pre-dismissal
inquiry …
 WORKING CONDITION
6

(25) Good physical working conditions help to achieve good industrial relations. The first need is for the employer to ensure that
the standards laid down by law are fully complied with. But this is not enough by itself, for most work-places could be made
safe, healthier and more pleasant to work in if more care were taken about the working environment — like improving the
cleanliness, tidiness and general appearance of the work-place; reducing strain and monotony involved in the work;
encouraging workers and their representatives to co-operate in improving working conditions and providing for consultation
with workers on their representatives on these matters. Workers or their trade union representatives should co-operate with
employers in making the best use of the arrangements for consultation in this field
PART
PART
03
03 :
COLLECTIVE BARGAINING
 COLLECTIVE
3 BARGAINING

The Code points out the importance of close rapport with senior management and
trade union officers. The effectiveness of the collective bargaining system is largely
dependent upon the relationship between the two parties
PART
PART
04
04 :
04
COMMUNICATION AND CONSULTATION
 C O M M U N I C AT I O N A N D
4 C O N S U LTAT I O N

The Code puts it simply thus: “The employer should regularly provide employees
with as much information as possible on matters affecting them.” The
communication channels should be varied and suited to the different levels of
employee.
 By
Chong
Chun Nee

Department of Industrial Relations Sarawak

http://jpp.mohr.gov.my

：082-418112/418113 ：[email protected]

THANK YOU