VSS Versus Pay Cuts

Dell Malaysia’s move to trim its workforce by offering a separation scheme to the all 5,000 over workers must come as a rude shock for its employees.

It is coming at a time when Malaysia is facing a recession for the first time in 10 years. The voluntary separation scheme (VSS) is part of Dell’s plan to cut 8,800 jobs worldwide or 10% of its global workforce.
The workers have been given until end-March 31 to decide if they want to take up the VSS.
VSS should not be seen as the only option as there are other methods which Dell can use to retain its workers.
The VSS also comes at a time when the PC manufacturer announced that its earnings fell 48% to US$351 million (RM1.3 billion) in the fourth quarter ended Jan 31, 2009 from US$679 million a year ago. Total 4Q revenue fell 16% to US$13.43 billion from US$16 billion.
For the full financial year, Dell’s net income was down 16% at US$2.48 billion from RM2.95 billion. Its revenue was nearly unchanged at US$61.1 billion.
When compared on a regional basis, revenue for Dell’s Asia-Pacific (excluding Japan) business recorded the sharpest decline, down 24% on year to US$1.4 billion as shipments fell 19%, mainly due to slowdown in key countries in China and India.
Based on the weakening revenue growth in the Asia-Pacific excluding Japan, it is not a wonder why it has decided to slash jobs in this region.
The multiplier effect of job losses has greater impact than anticipated, if based on a family of four where the father is the main breadwinner and in an economy like Penang.
Unlike the US with its welfare aid, there is no such provision in Malaysia.
Unfairly, the tax man also takes a slice of the VSS benefits. The government should relook at this and instead forego the tax or stagger it when the affected workers have found a job.
Also, the job loss also means there is no more medical or private hospitalisation benefits for the workers who opt for the VSS.
Government sector employees have life-time jobs with medical benefits and government loans while these do not apply to private sector employees. Hence, it may be difficult for civil servants to understand or grasp with the magnitude of the job loss on a person.
Instead, Dell or other multinational companies should relook at the US experience in VSS and opt for other methods to retain the staff or provide retraining.
Singapore’s CapitaLand opted for pay cuts instead of retrenchments.
All is not lost yet, this will be a very tough year but then again there are other ways to ease the shock of job loss.