Water industry in Selangor

CHAPTER 1

INTRODUCTION

Officially registered on 3 September 1999, Konsortium ABASS Sdn Bhd (ABASS) is a subsidiary to Kumpulan Darul Ehsan Berhad (KDEB), a Selangor State Government owned company that specializes in the water business and currently involved in the management, operations and maintenance of the Sungai Semenyih Water Treatment Plant which include the Semenyih Dam, water intake and the water transfer facilities. In 2001, ABASS has been awarded the concession by the Selangor State Government for the Sg. Semenyih Water Supply Scheme for a period of 30 yearsto undertake the privatization of Sungai Semenyih Scheme, which grants the right and authority to:

Operate and maintain the water treatment plant, raw water river intake, water transfer facilities and dam for a period of 30 years;

Design, construct, complete, test and commission the new installation works and thereafter to operate and maintain the completed installation works.

The scheme with a nominal design capacity of 545 million litres per day (MLD) supplies treated water to Syarikat Bekalan Air Selangor SdnBhd (SYABAS) which in turn distributes the water to households in Putrajaya, Cyberjaya, KLIA, Sepang, Puchong, Sri Kembangan, Bandar BaruBangi, Kuala Langat and its surrounding areas.

ABASS expertise is in operation and maintenance of water treatment plant by having on board a professional team of engineers, chemists, technicians and operators. The overall manpower strength is 109 employees (as at January 31, 2011) which consist on the following breakdown :

Category of Position

No. Of Staff

Board of Appointment

1

Management

8

Executive

33

Special Grade

8

Non-Executive

58

Total Staff

109

Table 1.1: No. of staff at ABASS

Water industry in Selangor has been facing major changes pursuant to the Concession Agreement dated December 15, 2004 between SYABAS, the State Government of Selangor Darul Ehsan, and the Federal Government. SYABAS was granted a concession for a period of thirty (30) years, commencing on January 1, 2005 (the Operational Date) whereby SYABAS has assumed all duties and functions of Perbadanan Urus Air Selangor Berhad (PUAS) in the area of water supply and distribution of water to consumers within the State of Selangor Darul Ehsan and the Federal Territories of Kuala Lumpur and Putrajaya involving a population of over 7.3 million and industrial and commercial users through 1.52 million consumer accounts thus making it the biggest water supply privatization in Malaysia.

With that, the challenges in producing quality drinkable water are crucial. For that reason also ABASS has created its own set of HR challenges in order to become efficient. One of the challenges is that handling staff disciplinary or misconduct issue. Therefore this paper will discuss on the misconduct issue and procedures that has been implemented.

CHAPTER 2

CONTRACT OF SERVICE AND CONTRACT FOR SERVICE – ORGANISATION’S PRACTICE

2.1 Contract of Service

Employment Act 1955 (EA) interpret "contract of service" as any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract. In other words, “contract of service” exist when an organisation or employer employ an individual to work for them in return for remuneration. According to EA, there are two (2) types of “contract of service” that must be in writing which is :

Contract for a specified period of time exceeding one (1) month;

Contract for the performance of a specified piece of work, which will take more than one (1) month to complete.

Besides that, the employer also has responsibility and power of control over his employee. As for normal industry practices, most of the control elements can be find in the Letter of Employment and Employee Terms & Conditions.

There are a few provisions of “contract of service” that must be in writing and stated clearly in the agreement. After a thorough study on ABASS Letter of Employment, there are some of the control elements inclusive of the compulsory provision stated in the agreement as below :

Designation and grade

Indicate position and grading offered by the employer.

Employment date

Indicates date of commencing employment

Wages and compensations

Indicate wages earned and compensation as leave, medical benefits and allowance provided by an employer.

Working hours

Indicates official working hours and break time for normal and shift employee.

Performance appraisal/ evaluations

Employee shall perform his job efficiently and the management have the right to review the performance from time to time.

Probation period

Employee shall undergo a certain month of probation period (depending on the grading) which the management at its discretion may extend up to maximum one (1) year, based on an employee performance.

Termination notice

Both parties are required to give a certain period of written notice or pay in-lieu of notice for termination of employment.

Right to transfer

Explain right of employer to transfer employee to other department, branch or subsidiary at company’s discretion

Confidential information

Declaration not reveals any of company’s confidential information to any third party during or after termination of employment.

Statutory deductions

Compulsory contribution shall be made by employer and employee in accordance with statutory requirements.

Code of conduct

General listing of code of conduct that employee shall obey during employment with the company.

Based on the above elements, it shows that there is an employer – employee relationship whereby an employee has responsibility towards employer and also a control element by employer towards an employee. There is also a code of conduct that needs to comply by the employee whereby breach of any of conduct will be misconduct to the organisation. Breach of any of the term or condition enables the unsatisfied party to terminate the agreement by giving certain period of notice or pay in-lieu of notice.

However, this employer – employee relationship can be proof by conducting several tests to determine the relations. This test will be further discussed in the next chapter.

2.2 Contract for service

According to Employee Provident Fund (EPF), “contract for service” is an agreement to provide service to a person or a group of people. The person providing the service is free from any control and monitoring by the person or group of people receiving the service. A “contract for service” exists when an organisation or employer offers to an outside party to do a particular piece of work under certain contract and it is not an employer – employee relationship.

Workers under “contract for service” are not protected by the employment laws. They are not fall within the scope of the Employment Act, Industrial Relations Act, Employees Provident Fund Act or any other act which provides benefits and protection for employees.

As for ABASS, one of the examples for the “contract for service” is the payroll outsourcing contract. Even though the supplier are sending their employee to do the payroll outsource at ABASS premises, his salary is not being paid directly by ABASS and all the interest is not being covered by ABASS. Furthermore, there is no agreement between ABASS and the workers that stated all the provisions as per direct employment workers.

There are some elements that differ the “contract of service” and “contract for service” in ABASS. Below are some elements stated in the “contract for service” :

Scope of work;

Outsource contract period;

Value of outsource contract;

Renewal period;

Payment terms;

Terminations;

Compliance with laws;

Penalties;

Breach of contract

Even though there are some similar elements in the agreement such as termination, it can understand that the agreement (contract for service) is more on providing services and independent contract arrangement. Independent contractor arrangements are most appropriate for a short-term period to undertake specific and specialised consultancy work.

CHAPTER 3

LEGAL TEST

There are four (4) types of legal test that being used to help the courts to determine whether a contract of service has in fact arisen between the employers – employee relations. The test are :

Control test

Control test is referring to the level of control of the employer towards employee. This test relates to the extent of control which the employer had over the employee in relation to the manner in which the employee was to do his work. The greater the control, the greater the possibility that there is a contract of service exist.

At first, the courts will investigate whether the employer has the ‘right to control’ over the worker. They will look at the work relationship for indicators of control. In Bata Shoe Co (Malaysia) v Employee Provident Fund (1968), the court decided no such relationship existed between the company and workers that being appointed by the shop manager. Only the shop managers were employees of the company due to the considerable control which the company had over the shop managers.

However, this control test has been seen as inadequate especially in occupations of a skilled or professional nature because the employer may be unable to exercise such control.

Organisational test

Organisational or integrational test refer to the fact that employee are an essential group to the organization. The organisational test seeks to test if the worker is part and parcel of the organization, and also involves study of each and every specific situation.

In Cassidy v Ministry of Health (1951), Cassidy was taken to hospital with a broken wrist. The wrist was incorrectly set in plaster, and did not fully heal. The courts had to decide who was negligent in the case because the hospital management did not control on how the surgeon acted in his job. Since the control test is not applicable in this case, the courts then proceed with the organisational test and decided that the surgeon was an integral part of the organisation and so was an employee.

It is often easy to recognise a “contract of service” when it can be seen, but quite difficult to justify wherein the distinction lies. One feature which seems to run through the instances is that, under a “contract of service”, a worker is employed as part of the business and his work is done as an integral part of the business, whereas, under a “contract for services”, his work although done for the business, is not integrated into it but is only additional or accessory to it.

This test relies on the extent to which a person can be considered as part and parcel of an organisation. The greater the integration with the organisation the greater the possibility of a contract of service exist.

Multiple test

Multiple test or mixed tests is a test that considered all the related and relevant factors such as power of choice, types of wages, method of appointment and termination and right of control.

This test, which is more relied upon nowadays, takes into account multiple considerations in order to determine whether a contract of service exists. Among other things, the courts will take into consideration the extent of control, the power of selection and appointment, power to suspend and dismiss the employee, the intention of the parties and the nature and contents of the agreement between them.

The central elements of the multiple tests are :

Did the worker undertake to provide his/her own work and skill in return for remuneration?

Was there a sufficient degree of control to enable the worker fairly to be called a servant? The first of the tests to evolve was called the control test. The basic question was whether the employer told the worker what job to do, when it was to be done and how it was to be done.

Were there any factors inconsistent with the existence of a “contract of service”?

What would definitely deny the existence of an employer - employee relationship? If there are not, then there is a presumption that, because the worker could be an employee, he should be so considered.

This multiple test is considered more efficient than control test just because it is not only depending on a single factor but all related factors will be take into consideration to determine whether the worker is under “contract of service” or “contract for service”.

Composite test

Composite test is referring to the three (3) major elements that being used to determine the existence of the contract. Below are the description of the three (3) elements :

Employee consent to work is the consideration for the wages that being given by the employer. Employee also using his skills to perform the task and responsibility that being given by the employer.

By giving the consent, employee will be subjected to a reasonable degree of control by the employer and showing the relationship of employer – employee.

Other provisions and rules in the “contract of service” must be consistent and comply with the principles of a “contract of service” as stipulated by the laws.

Apart from that, employee should understand their responsibility and rights towards an employer in order to differentiate between employer and employee. If the employee is doing their work independently without any control from the employer, it means that he or she is not an employee and only “contract for service” existed.

In ABASS case, I would highly recommended to use multiple test in order to justify the employer – employee relationship due to below explanations :

Existence of “contract of service” and “contract for service” in the company;

Consideration the extent of control, the power of selection and appointment, power to suspend and dismiss the employee, the intention of the parties and the nature and contents of the agreement;

The right of exclusiveness to the work performed by the employees;

A rewards and compensation that indicated employer – employee relationship.

CHAPTER 4

MISCONDUCT AND PROCEDURES APPLICABLES

Misconduct can be defines as any behavior on or off the job which is inconsistent with the fulfillment of the express or implied terms of an employee’s “contract of service”. An employer has the right to take disciplinary action against an employee guilty of misconduct. However, employee must make known of the rules and it must also be reasonable and consistently upheld.

In ABASS, misconduct has been classified into two (2) categories named major and minor misconduct. However, minor misconduct can be treated as major misconduct if being repeated for several times. Below are some examples of misconduct as stated in ABASS Terms & Conditions of Employment :

Major Misconduct

Stealing or willfully damaging company property;

Taking or possessing forbidden substances at work (drugs and alcohol);

Leakage of company confidential information;

Fraud (tempering with documents or providing false documents);

Misuse of power or positions;

Insubordination;

Negligence;

Sleeping while on duty;

Fighting;

Involve in bribe.

Minor Misconduct

Smoking in non-smoking areas (inside company premises);

Coming late to work (more than three (3) times per month);

Wear inappropriate in works;

Using company property without consent/ approval;

Ineffective or careless in job;

Poor performance (perform below 54% for three (3) consecutive year)

There are steps of action or procedures that will be taken by the company in order to resolve the misconduct issue. For cases that falls under minor misconduct, the punishments are slightly differ from the major misconduct. Employee are generally let off with an oral or written warning.

Below are action imposed by the company if there is the a major offences committed by the employee :

Major offences committed by employee

Show cause letter issued

Show caused accepted

Show caused questionable

Warning letter issued

Suspect employee up to maximum 14 days with half pay (for preliminary investigation prior to domestic enquiry)

Issued charge(s) and notice letter informing of domestic enquiry to the accused

Appointed panel of enquiry

Conduct domestic enquiry

Guilty

Not guilty

Warning

(Final warning, demotions, suspension without pay, withholding of increments/ bonus, etc.)

Dismissal

Even though the company has a right to dismiss due to the major offences committed by the employee, it will be the last resort to the company. All enquiries will be properly done and conducted with principle of natural justice.

CHAPTER 5

SUMMARY

In many instances employers lost their case in the courts because they followed inadequate procedures. Where the cause of dismissal was misconduct, the Court expected the employer to carry out a domestic inquiry run according to the principles of natural justice. Indeed, this requirement is mandatory for employees covered by the Employment Act.

From the finding that has been elaborated before, I would say that ABASS is having a proper procedures and guidelines on the disciplinary. All the procedures are complying with the rules and guidelines as stipulated in the Act. All employee is being treated the same even though they are being appointed under various level and grade.

However, I would highly recommend the management of ABASS to have a different type of approach rather than straightly issuing a warning or show cause letter. The best solution can be :

Counseling Unit

The Human Resource (HR) Department can propose to have a small unit under HR which is concentrate on the employee counseling. The counseling can be arranged periodically to all employees in order to get know on problems or issue that might be raise among employee to avoid the issue become worse.

Employee Development Program

This program is more towards employee development. The intention of this program is employer to get better ideas from the employee from all aspects of work and also as a proper channel to employee to voice out their grievances.

Total words count : 2943 words



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