COVID-19 Crisis: a valid basis for not providing salary increments
Kesatuan Eksekutif Bank Pertanian Malaysia Berhad, Semenanjung v. Bank Pertanian Malaysia Berhad
(Industrial Court Award No. 1152 of 2021)
The Industrial Court has confirmed that the economic impact of the COVID-19 pandemic may justify an employer’s decision not to award discretionary salary increments to its employees.
The above case arose pursuant to a complaint by a trade union of executive employees against Bank Pertainan Malaysia Berhad against a decision not to provide salary increments to its staff in2020.
In dismissing the complaint brought by the Union, the learned President of the Industrial Court concluded that such a decision was made “for the purpose of preserving the sustainability of the Bank’s operation as well as livelihood of all of its employees in light of the uncertainty in the Bank’s future financial position” due to the economic crisis caused by COVID-19.
The Court likewise rejected the Union’s contention that increments should be paid based on the profits earned by the Bank in 2019, noting that as “annual salary increment would become the Bank’s future monthly commitment, and not just merely a one-off payment granted to its employees, as such the Bank’s past profit is irrelevant in determining the payment of annual salary increment”.
This Award thus provides useful guidance for employers as they currently navigate the uncertain waters of today's economy: highlighting that employers can take prospective measures to avoid escalating costs and plan for the future rather than be beholden to the past.
The full Award can be read below.