INDUSTRIAL COURT OF MALAYSIA CASE NO.

1/2-46/10 BETWEEN PAPER AND PAPER PRODUCTS MANUFACTURING EMPLOYEES' UNION AND TRI-WALL (MALAYSIA) SDN. BHD.

AWARD NO : 444 OF 2011

Coram :

YA PUAN SUSILA SITHAMPARAM MR. ALAGASAMY VENKATASAMY ENCIK YUSOF BIN AWANG

PRESIDENT EMPLOYEES PANEL EMPLOYERS PANEL

Venue Date of order of reference Date of receipt of order of reference Dates of hearing Date of oral submissions Representation

: : : : : :

Industrial Court Kuala Lumpur. 24 December 2009 6 January 2010 7 and 8 July 2010 16 March 2011 8 July 2010 16 March 2011 Mr. S. Somahsundram Executive Secretary for and on behalf the union. Mr. V. Nantha Kumar Malaysian Employers Federation for an on behalf the company. 1

AWARD

This is a reference by the Honourable Minister of Human Resources pursuant to section 26(2),Industrial Relations Act 1967 (hereinafter referred to as the said Act) arising out of a trade dispute pertaining to the First Collective Agreement between Paper and Paper Products Manufacturing Employees' Union (hereinafter referred to as the union) and Tri-Wall (Malaysia) Sdn Bhd (hereinafter referred to as the company). The company is in the business of fabrication, supply of

corrugated cartons and other packing materials.

The parties have agreed to 32 articles which are annexed to the award and form part of the award. The disputed articles are article 3 on the scope of the collective agreement and some job categories in Appendix A to the collective agreement, article 7 on rest days, article 14 on medical attention, article 29 on transport subsidy, article 38 on salary adjustment and the salary structure Appendix A to the collective agreement. in

Financial position of the company

The audited statement of accounts for the financial years from 2004 to 2007 and unaudited statement of accounts for the years 2008 and 2009 were tendered vide CO-5 to CO-11. The net loss for the financial year ending 31 March 2004 was

RM207,418 vide CO-5, page 7.

The net profit for the financial year ending 31 March 2005 was RM113,461 vide CO-6, page 7. There was a change in the financial year in 2005 from March to December. The net profit for the period commencing 1 April and ending 31

December 2005 was RM155,663 vide CO-7, page 7.

The net profit for the financial year ending 31 December 2006 was RM904,665 vide CO-8, page 7. The net profit for the financial year ending 31 December 2007 was RM934,495 vide CO-9, page 7. The net profit for the financial year ending 2008 was RM660,328 vide CO-10, page 7. The net profit for the financial year ending 2009 was RM1,128,257 vide CO-11, page 8.

The sales revenue for the financial year ending 31 December 2008 was RM11,857,572 which was lower than the sales revenue for the financial year ending 31 December 2007 which was RM13,454,166 and the sales revenue for the financial year ending 31 December 2009 which was RM15,286,919 vide CO-9 and CO-11, pages 7.

Scope of the collective agreement and salary structure

COW1, the Managing Director of the company testified that the company had followed the Hays competency benefit system in assessing the performance of the 3

employees vide CO-4. There were four assessors who did the appraisal of an employee's performance every four months. Two assessors were the employee's superior, one assessor was a peer and when applicable, one assessor was a subordinate.

The average appraisal rating was taken from the four appraisal ratings. There were ten criteria for assessing an employee's performance but the weight which was given for each criteria was different. 30% of the points was given for attendance. He admitted that none of the assessors had undergone any training in the Hays competency benefit system except him.

He stated that the employees were placed into their respective job categories such as Line Leaders, Assistant Line Leaders, Workers and Supervisors. The

employees were then rated according to a Bell curve. At least 60% of the employees were rated as A or B. So far no one had been rated as D. Bonuses or

incentives were not given to those who had received D. During cross-examination, he admitted that S Saraswathy, a General Worker and a number of others had received a D grade in 2006 vide CO-1.

The grading and the annual increment for 2010 was shown at the last page of CO-1. The average annual increment of salary was 7.4%. The employees did not receive any annual increment of salary in 2009 as the sales revenue and profits were low. The company still paid bonus that year but it was a lesser amount. The

performance bonus which was paid to employees ranged from 0.5 months to 1.5 months.

He referred to the appraisal ratings which was given for Margrat d/o Muniandy, a General Worker for the period commencing March 2008 to February 2009 vide CO-4, page 4. There were four appraisals done for the period March to May; June to August; September to November; and December to February. Her average appraisal rating was 88.15. She was graded B and she received an annual increment of salary of 5.3%.

He could not confirm when she had joined the company and whether she had worked for the company for twenty years. In 2007, her basic salary was RM916; in 2008 and 2009, it was RM948; and in 2010, it was RM998 vide CO-2.

He stated that Kasiammal d/o Nadimuthu, a Line Leader had joined the company on 1 July 1994 and she had worked for the company for sixteen years vide UB1, page 69. She received an annual increment of RM31 from 2007 to 2008. In 2006, her basic salary was RM1,027; in 2008 and 2009; it was RM1,058; and in 2010, it was RM1,132 vide CO-2.

In response to a question during cross-examination as to whether the salaries of the employees was a reflection of rate for pay, he replied that it was not right to look at absolute numbers and one should look at percentages instead.

He stated that the annual

increment was given based on the average

appraisal rating of each employee for the year. There was a deduction from the appraisal rating if an employee took more than two days medical leave and unpaid leave in that year. The employees were not penalised for hospitalisation. Some

employees had a bad attendance record. The productivity of the company was affected when an employee took medical leave or unpaid leave.

The sum of RM50 was given for attendance. If an employee took two days of medical leave, RM25 was deducted. If the employee took unpaid leave, another RM25 was deducted, Thus, that employee would not receive any attendance allowance. Kasiammal d/o Nedimuthu had taken twenty-three medical leave or unpaid leave in 2008. days of either

He also testified that the company had granted an annual salary increment to each employee which was based on the employee's last drawn salary as at 31 March of each year and on his or her performance for the previous year. In 2010, the annual salary adjustment which was given ranged from 5% to 15%; in 2008, it ranged from 1.1 % to 8%; in 2007; it ranged from 1.9% to 14.3%; and in 2006, it ranged from 2.5% to 8%. He stated that the cumulative annual salary adjustment ranged from 7.5% to 34.2%.

He contended that the present system of salary adjustment took into

consideration the increase in the costs of living and the increase in consumer price index. In 2007, the increase in consumer price index was 2 %; in 2008, it increased by 5.4%; and in 2009, it increased by 0.5%. The cumulative increase was 7.5% for the three years.

The Hays competency benefit system

is in respect of the appraisal of the

performance of employees. There is no provision for an appeal against the assessment by the employee if he or she is not satisfied with his or her appraisal rating.

The current salary system which is practiced by the company does not reflect a fair value for the work the employees are doing. The practice of deducting from the attendance allowance for those who have taken medical leave is not fair. The poor health of the employees may be due to environmental factors at the place of work. The employees whose attendance allowance have been deducted for taking medical leave for more than two days were also given a lower appraisal rating which affected their annual increment of salaries. Thus, they were penalised twice.

The rationale for a fixed annual increment is that there is added value to a job when an employee acquires more skill and experience. That rationale was rejected by the Industrial Court in Prestige Ceramics Sdn Bhd v Non-Metallic Mineral Products Manufacturing Employees' Union [2004] 1 ILR 1177 where the Productivity Linked Wage System (hereinafter referred to as the PLWS) was implemented.

If the company intends to implement a salary/wage system which is linked to performance, then, the best system would be the PLWS. The Guidelines for Wage Reform on PLWS which was approved by the National Labour Advisory Council in 1996 must be adhered to. The union should be consulted on the criteria for the assessment of the performance of the employees and the formula for ascertaining the profitability of the company.

The implementation of PLWS must be done in a just and equitable manner as elucidated by the court in Kesatuan Sekerja Pembuatan Barangan Galian Bukan Logam v MCIS Safety Glass Sdn Bhd, Case 1/2-1187/07, Award 1104 of 2010 (Unreported). There should be both a fixed component and a variable component for the annual increment in salary and the bonus.

The company has not had a salary scale for its employees, some of whom have been working with the company for sixteen years. There should be a salary scale with minimum and maximum salaries for each salary group and an annual increment of salaries.

The company had proposed a salary scale for employees with a minimum and maximum salary for each salary group/job category vide Appendix S-1 annexed to the statement in reply. It did not propose any fixed annual increment of salary.

The union had proposed a salary scale with a minimum and maximum salary and fixed annual increments for each salary group/job category vide Appendix A annexed to the statement of case.

There were sixty-three employees whose names were submitted to the Director-General of Trade Unions by the company for a secret ballot to be conducted vide exhibit U9,Bundle UB1. They participated in the secret ballot on 7 December 2001.

COW1 explained that the names of three employees who appeared in that list performed either managerial, executive or confidential functions and should be

excluded from the scope of the collective agreement vide CO-2. They were Ganesan, a Factory Supervisor who performed the function of counselling; Revathy, a Purchasing Supervisor who had access to purchasing files which were confidential in nature; and Mohd Syaidi, the Store Supervisor.

COW1 explained further that the R&D Supervisor did drawings and was eligible. The Store Supervisor had left the company. The company had one Assistant Supervisor who did the accounts and finance which was a confidential function. However, that job category/salary group appears in the salary scale proposed by the company.

COW1 had identified the job categories of Factory Supervisor, Store

Supervisor, Purchasing Supervisor and the Assistant Supervisor performing a financial function as being managerial, executive or confidential. It is the prerogative of the management to decide on the nature of the job function.

The salary scale which has been proposed by the union was fair and reasonable. The court deleted some of the job categories and added some job

categories in the salary scale as proposed by the union to conform with that proposed by the company. The court did not accept the union's proposal for four new job categories/salary groups namely Skilled Operators, Senior Skilled Operators, Office Boy and Officer Cleaner as it was the management's prerogative to decide on job categories/salary groups.

The court took into consideration the financial position of the company and found that it was in a position to pay the salaries under the proposed salary scale by the union. The court also took into consideration the increase in the consumer price index for the period prior to the date of commencement of the collective agreement on 1 July 2007.

Article 3 shall read: ARTICLE 3- SCOPE OF COLLECTIVE AGREEMENT a) This Agreement shall cover all employees of the Company except the following categories. (i) Employees whose functions are of a confidential nature which cover staff, finance, tax and company policies. 10

(ii) (iii) (iv) b)

Managers. Engineers and Accountants. Security personnel.

In the event the Company introduces new position(s) within the scope covered under this Agreement, the Company shall discuss with the Union such position(s) in relation to their job grade and pay scale within the context of this Agreement. Confirmed employees who have retired or been terminated during the period of the collective agreement on account of illness shall be entitled to arrears and all other monetory benefits arising from this Agreement.

c)

Appendix A of the collective agreement shall read:

POSITION
GENERAL WORKER SEMI SKILLED OPERATOR FORKLIFT DRIVER VAN/CAR DRIVER LORRY DRIVER LINE LEADER ASSISTANT LINE LEADER

SALARY SCALE
RM 700.00 x RM70.00 x 20 = RM2,100.00 RM 800.00 x RM80.00 x 20 = RM2,400.00 RM1,000.00 x RM100.00 x 20 = RM3,000.00 RM1,200.00 x RM120.00 x 20 = RM3,600.00 RM1,400.00 x RM140.00 x 20 = RM4,200.00 RM1,200.00 x RM120.00 x 20 = RM3,600.00 RM1,000.00 x RM100.00 x 20 = RM3,000.00

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QUALITY CONTROL INSPECTOR STORE ASSISTANT STORE HAND R & D SUPERVISOR GENERAL CLERK SALES COORDINATOR DESIGN ASSISTANT

RM1,200.00 x RM120.00 x 20 = RM3,600.00

RM800.00 x RM80.00 x 20 = RM2,400.00 RM700.00 x RM70.00 x 20 = RM2,100.00 RM1,400.00 x RM140.00 x 20 = RM4,200.00 RM1,400.00 x RM140.00 x 20 = RM4,200.00 RM1,600.00 x RM160.00 x 20 = RM4,800.00 RM1,600.00 x RM160.00 x 20 = RM4,800.00.

Rest day

The court accepted the company's proposal on rest day. The terms of employment which are currently practised by the company are similar to the provisions in section 60 (3 ) (b ), Employment Act 1955.

Article 7 shall read: ARTICLE 7- REST DAY (a) An employee shall be entitled to rest of one whole day on Sunday. The current practice of alternate Saturdays off for office employees as non-working days in Sg. Buloh, Selangor shall continue whereas in Penang and Johor the current practice of working on Saturdays shall continue.

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(b)

An employee employed at a monthly rate of pay who works on a rest day shall be paid for any period of work : (i) (ii) which does not exceed half his normal hours of work, one day's wages at the ordinary rate of pay; or which is more than half but does not exceed his normal hours of work, two days' wages at the ordinary rate of pay.

Medical attention

The court accepted the company's proposal on medical attention with some amendments and increased the limit of medical coverage for employees who had not been hospitalised to RM2,000 per employee per year.

Article 14 shall read: ARTICLE 14-MEDICAL ATTENTION a) Medical Benefits All employees shall be eligible for free medical treatment by a medical practitioner appointed by the Company or where the employee is referred by medical practitioner appointed by the Company for specialist treatment, the Company shall pay for the cost of medicine and treatment subject to a maximum limit of RM2,000.00 per year for each employee.

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b)

If no such medical practitioner is appointed by the Company or, if having regard to the nature or circumstances of the illness, the services of a medical practitioner so appointed are not obtainable within a reasonable time or distance, then, by any other registered medical practitioner or medical officer.

c)

In case of an emergency by reason of distance and time if the medical practitioner appointed by the Company is not obtainable an employee may receive medical attention, treatment and medicine prescribed by any Government Hospital, Government clinic, private clinic or private Hospital.

d)

The Company shall appoint two (2) clinics each of different entities at the following locations : (i) (ii) Sg Buloh, Selangor Old Klang Road, Selangor.

e)

An employee may utilise hospitalisation benefits at any Government hospital or private hospital subject to the limit imposed by the Company's Group Medical Insurance Scheme coverage whereby the financial liability of the Company will be limited in accordance to the coverage of Group Medical Insurance Scheme the terms of which are stated in the Company's Handbook. Scheme shall be borne by the employee. Any additional charges incurred above the Group Medical Insurance

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Transport subsidy

At present, the transport subsidy is RM40 per month. The company proposed an increase in transport subsidy to RM50 per month. The union proposed that the transport subsidy be increased to RM100 per month. The court allowed a new transport subsidy of RM80 per month to those employees who were not provided transport.

Article 29 shall read:

ARTICLE 29 TRANSPORT SUBSIDY a) The Company shall continue with its current practice of providing transport to employees reporting for work. b) Notwithstanding clause (a) herein above, employees who are not provided transport by the Company shall be paid a transport subsidy of RM80.00 per month.

Salary adjustment, salary scale and annual increment

The representative for the company submitted that there be no salary adjustment. The union proposed that there be a salary adjustment of the basic salary by 9 %. The court allowed a salary adjustment of 8% of the basic salary of the employees. A salary adjustment will provide job stability for the 15

employees. The salary adjustment will have retrospective effect from 1 July 2007.

Article 38 shall read: ARTICLE 38 SALARY ADJUSTMENT , SALARY SCALE AND ANNUAL INCREMENT a) The Company shall give a 8% salary adjustment of the basic salary as at 30th June 2007 which shall be effective on 1st July 2007 to confirmed employees. b) Thereafter the salary adjustment as provided in clause (a) herein above, the salary of the employees shall be placed in their respective salary groups as provided in Appendix A. c) The allocation of the salary group and job function of each employee shall be decided by the Company. d) If an employee's new salary after his salary adjustment mentioned in Article 38(a) is below the minimum salary for his salary group, his salary shall be adjusted to the minimum salary applicable to him. e) If an employee is drawing the maximum salary or more than the maximum salary in his salary group, he will continue to draw that salary on a personal-to-holder basis. f) The Company shall pay one lump sum ex-gratia payment of RM1,000.00 to each confirmed employee covered by this collective agreement agreement.

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g)

The Company shall grant an annual increment to all confirmed employees on 1 April of each year as in the salary scale as per Appendix A.

h)

Confirmed employees who have less than twelve months of continuous service as at 30 March will receive their annual increment on a pro-rata basis. For the purposes of this article, pro-rata increment shall be calculated as follows:-

Completed months of service 12

x Annual increment rate of the appropriate job group"

The court took into consideration public interest, the financial implications and the effect of the award on the economy of the country and on the industry concerned and also the probable effect on similar industries as provided by section 30(4) of the said Act.

HANDED DOWN AND DATED THIS 5th DAY OF APRIL 2011

signed... ( SUSILA SITHAMPARAM ) PRESIDENT INDUSTRIAL COURT OF MALAYSIA.

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