{"id":23535,"date":"2021-02-23T09:30:09","date_gmt":"2021-02-23T01:30:09","guid":{"rendered":"https:\/\/www.imoney.my\/articles\/?p=23535"},"modified":"2021-09-09T11:16:06","modified_gmt":"2021-09-09T03:16:06","slug":"how-to-tax-filing-for-retrenched-employees-in-malaysia","status":"publish","type":"post","link":"https:\/\/www.imoney.my\/articles\/how-to-tax-filing-for-retrenched-employees-in-malaysia","title":{"rendered":"Tax Tips For Employees Who Lost Their Jobs Or Get Retrenched"},"content":{"rendered":"

By December 2020, about 772,900 people lost their job<\/a>s<\/a> compared to 510,000 the year before.<\/p>\n

Last year also ended with the Malaysia’s unemployment rate<\/a> rising to 4.8%. The nation hasn’t seen such a high rate of unemployment since 1993.<\/p>\n

2020 was a year that most of us had never experienced before with the impact of the Covid-19 pandemic felt in every industry and job sector, and the after-effects will remain for years to come. Malaysian workers have also not been spared.<\/p>\n

However, tax season still comes around every year. How do workers who have been retrenched or are facing retrenchment declare their annual income for last year (2020)? Read on to find out how your income should be declared in these unfortunate situations.<\/p>\n

<\/span>What is retrenchment? <\/strong><\/span><\/h2>\n

It is a strategy adopted by companies or corporations to reduce the diversity or the overall size of its operations. This strategy is often used to cut expenses with the goal of becoming more financially stable.<\/p>\n

Typically, the strategy involves withdrawing from certain markets or reducing manpower as part of a cost restructuring plan. In a retrenchment exercise, companies can lay off workers due to cost, business or operational factors. Due to the ongoing pandemic, retrenchment happened on an unprecedented scale in 2020.<\/p>\n

According to the International Labour Organisation (ILO), 8.8 per cent of global working hours<\/a> were lost in 2020 compared to the last quarter of 2019. This translates to a whopping 255 million full-time jobs losses. In fact, working-hour losses in 2020 were four times greater than during the global financial crisis in 2009.<\/p>\n

This sudden loss or lack of income isn\u2019t just a terrifying prospect, it also means an increase in non-performing loan (NPL) in the country, resulting in higher debts for individuals, especially for people with financial obligations such as a home loan or a car loan.<\/p>\n

<\/span>What happens when you get retrenched?<\/strong><\/span><\/h2>\n

One of the first things to ask after you\u2019ve been laid off is whether you are entitled to any termination benefits after the end of the employment relationship.<\/p>\n

As an employee, your right to a termination benefit upon retrenchment depends on whether or not you are covered by the Employment Act (EA)<\/a>.<\/p>\n

In general, an employee is only covered by the EA if their wages do not exceed RM2,000 a month, or if their occupation is a manual one, irrespective of how much they earn (applicable for workers in Peninsular Malaysia and Labuan only; Sabah and Sarawak have their own Labour Ordinances),<\/p>\n

If an employee falls within the scope of the EA, he is entitled to termination benefits if he has been employed for at least 12 months. The termination benefits payable are as follows (or the amount in the employment contract if it is higher):<\/p>\n