Employee Relations in Malaysia - Case Study Example

Running Head: Industrial Relations in Malaysia Student’s Name: Instructor: Course Name and Code: University: Date of Submission: Employee Relations in Malaysia: the shift from the Traditional Industrial Relations System to Contemporary Employment Relations The traditional Industrial Relations system is continually being phased out and organisations are increasingly taking up a contemporary Employment Relations approach in managing employee relations. Modern companies have embraced distinct strategies of dealing with employee needs; such that there is an insignificant need for trade unions as witnessed in the Industrial Relations system. There are various forces leading to the diminishing popularity of industrial relations in Malaysia. These include the rise of globalisation, competition, rising unemployment and government policy among other factors. Notably, a combination of these factors has led to a significant decline in union membership. It is especially evident that Malaysia’s legal and institutional environment is not favourable for strong unionism. An exception of the banking sector is noted, where the National Union of Bank Employees (NUBE) has a 90 percent membership capacity. This paper seeks to establish that contemporary Employment Relations are consistently replacing the Industrial Relations system; with a specific focus on Malaysia. Industrial relations in Malaysia The State has a significant control over trade unions in Malaysia. Since the British colonial times, a precedent for direct intervention of the state in industrial relations was set and this has continued to the present day. Union size is significantly regulated and the Director General of Trade Unions has authority to refuse the registration of a new union (Ayyadurai, 1990). Further, the Minister has the power to suspend unions (Barnard, 1992). This to a large extent explains why the Industrial Relations system is being phased out rapidly within the country. Furthermore, the ILO Convention 87 which allows freedom of association has not been ratified in Malaysia; a factor that has played a great role in discouraging union development (Peetz & Todd, 2000). In Malaysia, more companies constantly oppose unionism and the government has done little to challenge such opposition. Additionally, the number of items which unions may include in their objectives as provided in the Industrial Relations Act are highly restricted. Unions deal with overtime, leave and holidays and are not allowed to include managerial items such as hiring, firing, promotion, redundancy, transfer and allocation of duties (Ramasamy, 2006). Decline in Industrial Relations and the rise of contemporary Employment Relations The prevalence of the Industrial Relations system in Malaysia can be said to have decreased significantly. There is an indication that union membership in Malaysia has declined significantly over the years. According to Kuruvilla (1995), the record in 1990 was 9.35 percent, 9.24 percent in 1995, 7.87 in 2000, 7.84 in 20004 and 7.8 in 2006. This has been attributed to the reducing legal support for trade unions in the country such that there is little motivation for the same (Said, Zakaria & Said, 2002). A shift in industrial relations policies was witnessed in the country reflected common strategic interests between the government and foreign investors. Evidently, the Malaysian government needed to preserve competitive advantage in terms of cheap, disciplined labour in order to attract foreign investment (Ramasamy, 2006). This lead to increased involvement of the state in industrial relations thus culminating in what was referred to as repression, as opposed to controlled pluralism that was witnessed when unions were first introduced (Kuruvilla, 1995; Arudsothy & Littler, 1993). The government adamantly refused to grant the trade unions’ demands to enact minimum wage legislation. Accordingly, the unions only represented workers on issues of overtime, leave and holidays. Cost cutting by the government further led to changes in wage calculation so as to reduce costs through overtime costs. The hourly pay for working on rest days was thereby reduced to two times as opposed to the previous three. Additionally, workers going to work during holidays would be paid 3.5 times hourly pay as opposed to the previous 5.5 (Kuruvilla, 1995). Another major blow on labour unions in Malaysia was the government’s decision to exempt some of the foreign companies from labour laws. The first case was in 1981 when INTEL Corporation was allowed to work its employees for sixteen hours continuously (Kuruvilla, 1995). This was followed by an amendment of the Employment Act that gave directors a right to work employees for more hours as long as they did not exceed 48 hours per week, which gave employers more flexibility. Increased involvement in labour union activities in Malaysia has thus led to a reduced need for labour unions and consequently led to the development of contemporary Employee Relations. Besides the state’s involvement in union activities, there are other factors that have led to the decline in the growth of Industrial Relations. The decline in the Trade Relations system in Malaysia has been attributed to the rising level of globalisation, which has led to significant changes within the organisational setting (Verma, Kochan & Lansbury, 1995). The presence of multinational organisations and trade liberalisation have created a more dynamic and competitive environment such that employees are responsible for their own plight within in the job market (Kuruvilla, 1995; Ramasamy, 2006). Further, multinational companies have greatly influenced how companies are governed through their antiunion stance that is evident in most developed countries. This has consequently led to the removal of previously established minimum standards, weakened the collective bargain approach and blocked the emergence of minimum wage legislations. The evolution of Contemporary Employee relations in Malaysia and as in most countries is highly evident, mostly with the increased realisation of the importance of employees within the organisation. Companies are consistently seeking to maintain a favourable environment for their employees with an objective of promoting competitiveness in the industry through enhancing efficiency (Gennard & Judge, 2005). Traditional work systems have undergone significant revolution and it is notable that most companies are discouraging their employees from joining unions through attempting to make direct channels between the management and the employees. Furthermore, employees are more involved in the organisations’ development objectives such that they can present their needs directly to the management without necessarily joining trade unions (Kitay, 1997). If anything, systems created within the organisation enable employees to have representatives to forward their views and needs to the management. Organisations are constantly focusing on flexibility that allows the adoption of strategies that are expected to promote the organisation’s success. Accordingly, they are keener on enhancing employee satisfaction as opposed to oppressing them so as to make them more productive. They are not only ready to spend on their development but they also ensure fair remuneration even without the involvement of unions because managers are aware of how such changes could impact on the organisational growth (Kitay, 1997). This denotes increased employee motivation, participation and empowerment, aimed at making employees more efficient. While various companies in Malaysia have allowed employees to participate in decision making however, Peetz and Todd (2000) noted from their interviews that increased participation in decision making for employees is not rising significantly. Instances of empowerment of employees were however apparent, an indication that the Contemporary Employee relations are gaining increased use. This is more evident in the banking sector and multinational companies. Employees in these companies are therefore rarely involved in unions, thereby impacting on the growth of Industrial Relations systems in the country. Evidently, all is not lost for Malaysia’s Trade Relations system as witnessed in the country’s banking sector. In a country where there is a significant reduction in union membership, the National Union of Bank Employees (NUBE) retains a 90 percent membership capacity (Peetz & Todd, 2001). NUBE which has an approximate 30,000 members is considered a wealthy union by Malaysian standards and is considered the most powerful Asian banking union. NUBE seeks to promote fair wages levels and employer-provided welfare for its members. Notably, the trade union recognises the importance of employer/employee relations and thereby promotes participative management. Employees are not allowed to engage in strikes (Peetz & Todd, 2001). To a large extent therefore, it is can be established that Contemporary Employment Relations are evident in the banking sector. It is arguably true that there is a significant reduction in the utilisation of Contemporary Employment relations around the globe as witnessed in the case of Malaysia and increased adoption of Contemporary Employee Relations. This is often triggered by the changes in the organisational setting such that there are direct links between the employers and employees, hence reducing the need for labour unions (Rasiah, 1995). Notably, increased globalisation, competition and unemployment have led to changes in organisations such that they are more flexible and things are done is a well organised manner. In Malaysia, government involvement in the operations of trade unions has largely influenced the rate at which they have been phased out and it is notable that most companies tend to oppose unionism. This discussion makes note of the strong bank union, NUBE, which has managed to remain strong despite the poor legal support for unions in the country. The organisation’s operations however indicate that the union has embraced the importance of employee/employer relations and thereby encourages participative management. This insinuates that the banks thereby apply the Contemporary Employment Relations, through influenced by the union powers. Most companies in Malaysia are now adopting the contemporary Employment Relations and with the notable decrease in the number of unions, it can be concluded that the former is expected to take precedence within Malaysian organisations. References Arudsothy, P. & Littler, C. (1993). “State regulation and union fragmentation in Malaysia” In Frankel, S. (ED), Organized labour in the Asia-Pacific region: A comprehensive study of trade unionism in nine countries. Ithaca, NY: ILR Press. Ayyadurai, D. (1990). Industrial relations in Malaysia: issues and responses. Malaysian Management Review, 25(1), 38-50. Barnard, A. L. (1992). Labour law in Malaysia: a capitalist device to exploit Third World workers. Law and Policy in International Business, 23(2), 415-40. Gennard, J. & Judge, G. (2005). Employee relations. London: CIPD Publishing. Jomo, K. S. & Todd, P. (1994). Trade unions and the state in Peninsular Malaysia. Oxford University Press: Kuala Lumper. Kitay, J. (1997) ‘Changing Patterns of Employment Relations:Theoretical and Methodological Framework for Six Australian Industry Studies’ in Kitay, J. and R. Lansbury (eds) (1997) Changing Employment Relations in Australia. Melbourne: Oxford University Press. Kuruvilla, S. C. (1995). Industrialization strategy and industrial relations policy in Malaysia. Cornell University. Peetz, D. & Todd, P. (2001). “Otherwise you’re on your own”: Unions and bargaining in Malaysian Banking. International Journal of Manpower, 22(4), 333- 406. Peetz, D. & Todd, T. (2000). Globalisation and Employment Relations in Malaysia. Australia: University of Western University. Ramasamy, N. (2006). The future of the trade union movement in Malaysia. Malaysia: Universiti Putra Malaysia. Rasiah, R. (1995), ‘Labour and Industrialization in Malaysia’ in Journal of Contemporary Asia, 25(1), 73-92. Said, F., Zakaria, R. H. & Said, S. M. (2002). The determinants of trade union membership growth in Malaysia. IIUM Journal of Economics and Management, 10(2), 1-17. Todd, P. (2000). Malaysian Industrial Relations at Century’s Turn: Vision 2020 or a Spectre of the Past? Australia: University of Western Australia. Verma, A., Kochan, T. A. & Lansbury, R. D. (1995). Employment relations in the growing Asian economies. London: Routledge. 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