Let me explain the differences between Retrenchment, Mutual Separation Scheme (MSS) and Voluntary Separation Scheme (VSS) in the simplest way possible.
All three are commonly used when the company genuinely has a surplus of labour and needs to reduce its workforce, often as part of cost-cutting measures.
For retrenchment and separation schemes, employers are generally required to submit Borang PK (Pemberhentian Kerja) to the Labour Department (JTK) at least 30 days before the relevant action.
1. Retrenchment: “I don’t need you anymore.”
The company decides to terminate your employment because there is a surplus of labour, meaning the company no longer requires as many employees to perform the work.
You don’t get to accept or reject the retrenchment, but the company must have legitimate grounds and follow the proper process.
2. MSS: “Shall we break up?”
One party, normally the employer, proposes to end the employment relationship on mutually agreed terms.
The other party can accept, reject or negotiate the offer.
If both parties agree, they sign a separation agreement.
3. VSS: “Can I volunteer to leave?”
The company offers a voluntary separation programme, and employees can apply to leave under the scheme.
However, volunteering doesn’t automatically mean your application will be approved. The company still gets to decide whether to accept it.
When it comes to compensation, companies generally offer more attractive packages to encourage employees to leave voluntarily.
A common comparison is: VSS > MSS > Retrenchment
However, this is not a legal requirement. The actual compensation depends on the company’s offer, the employee’s contractual and statutory entitlements, and the circumstances of the separation.
And remember,. calling something an MSS or VSS doesn’t automatically make it voluntary if employees are being forced to accept it.
Hope this clarifies!
xoxoxo, AuntyHR
