PETALING JAYA | Manufacturers are looking at some drastic measures in the next three to six months to stay afloat.

Some companies have indicated that they might have to resort to lay-offs or retrenchments.

A recent survey conducted by the Federation of Malaysian Manufacturers (FMM) on the impact of the MCO showed that 63% of respondents might have to resort to such cost-cutting measures with 47% having to do so within the next three to six months.

Majority (78.7%) of companies would have to lay off or retrench up to 30% of employees with 27% indicating that they would have to lay off between 21% to 30% of employees followed by 22% having to lay off between 11% and 20% of employees.

Some manufacturers are looking at different measures to preserve employment. They include freezing headcount, instituting unpaid leave, removal of some non-contractual allowances and benefits, forced annual leave, reduction on work days per week, reduction in some benefits agreed in the collective agreement for the unionised companies and reduction in hours work per day.

The manufacturers are facing tremendous strain on their revenue and ability to sustain business amidst the Covid-19 pandemic and the movement control order (MCO).

More than 50% of the respondents of a recent survey conducted by the Federation of Malaysian Manufacturers (FMM) on the impact of the MCO on employment revealed that revenue had dropped by more than 50%.

“This has led to the inability of businesses to sustain their operations beyond three months if the MCO continues to be extended and conditions do not improve,” Federation of Malaysian Manufacturers President Tan Sri Soh Thian Lai said in a statement.

“Forty-four per cent of the respondents indicated that they would only be able to sustain their business with the current workforce for three months while 34.1% only managing to sustain business for one month.”

The survey was conducted from April 6 to 10. It had a response from 419 companies, majority (89.5%) from manufacturing and manufacturing-related and support services.

Of this, 53.7% were from the non-essential product sectors and thus were not able to operate while 63.9% of those from the essential product sectors managed to obtain approval to operate during the MCO1 and MCO2 period. Sixteen per cent of the respondents were in a unionised environment.

“Working from home proved to be a challenge for many companies as either work processes were unable to be performed remotely or companies were not prepared with the necessary infrastructure to support employees working from home,” Soh said.

“It was evident from the survey that the 30% that obtained approval to operate were able to work with 50% staff strength or less.”

However, the majority 70% comprising some essential product manufacturers who were not granted approval and all the non-essential product manufacturers were unable to work or faced difficulties in working from home, he added.

Soh said the initiative introduced by the government, namely the Wage Subsidy Programme (WSP) was welcomed by employers and is a great relief to many in mitigating their cash flow constrains.

“This was especially helpful for employers who had to continue paying full wages during this MCO period as instructed by the government irrespective of whether work was performed or not,” he said.

“The government had acknowledged the severe constraints faced by employers and announced their agreement on April 6 for negotiations between employers and employees on the terms of employment during the MCO including cost cutting measures such as pay cuts and unpaid leave.

“However, it must be recognised that this negotiation process with employees or employee representatives would not be an easy task for most employers.”