The advent of variable pay - also known as performance-related pay or productivity-linked wages - is fast becoming an important aspect of the attainment of sustainable remuneration in Malaysia.

A move towards a system through which a greater part of remuneration is funded by performance or increases in productivity is encouraged. However, the challenge of such a wage environment is what happens when changes take place to operational parameters that affect employee returns in a variable pay situation.


In two recent cases(1) the industrial court dealt with complaints for constructive dismissal by three employees. The employees were holiday counsellors whose income was based on a fixed salary and a commission. The employer operated from several locations - one was a thriving hill resort and casino complex called the Genting Highlands Resort & Casino, while others included a corporate office in the capital and in regional states.

The employer decided to reorganise its sales force. In so doing it shifted a number of vacation counsellors from the resort to other locations. The employer took the view that sales in the resort were almost self-generating, whereas there was a need to develop sales and sales potential in other locations. The employees that were transferred had become accustomed to lucrative commissions from the sales generated in the resort and pleaded constructive dismissal.

The employees complained on the following grounds:

  • A move to a location that was accompanied by a foreseeable loss of commission income was a breach of the implied term of contract;
  • The right to transfer should not be exercised in a manner that results in a loss of income;
  • They had an expectation to remain in the resort and not be moved to other locations; and
  • The level of sales promotion offered by the employer for its products and services in other locations did not match that of the resort.


The industrial court dismissed the claims and found that the employees were transferable between locations - the employer had not only reserved the right to effect such a transfer by way of an express contractual provision, but it was also an implied right that was recognised as part of the managerial prerogative.

The court then proceeded to examine whether a drop in commission could give rise to grounds for claiming constructive dismissal. In examining this issue, the following observations were made:

  • The claimants were only entitled to fixed salary;
  • The company provided no guarantee for the commission earned after each successful sale;
  • Commission was given as an incentive; and
  • The volume of sales was the key indicator of the employee's performance.

Accordingly, the industrial court concluded in Afindi v Awana that:

"It is my considered view that based on the cases mentioned above as well as the admissions and concessions made by the claimants their grounds to say that in view of them having received less commission due to their transfer which had therefore had affected their earnings is not a valid reason for claiming constructive dismissal simply because earnings of commissions is a fluctuating factor in that it is dependent on the achievements of set sales target set by the company the objective of which is to motivate sales personnel to achieve higher productivity and thereby achieving higher sales revenue which is crucial for the economic survival of the company."

The court then proceeded to examine whether the failure by the company to maintain the same level of sales promotion and support - namely the use of off-property contacts to obtain sales leads - would alter the position. It held in the negative, observing that:

"It is a fact that the company has many marketing strategies that constantly change from time to time. The company may or may not maintain a given level or channel for promotion… they cannot expect the company to maintain and perpetuate a system that feeds and breeds such complacency."


The decisions in these two cases demonstrate that the courts clearly recognise that there are vocations in which employees consciously enter into employment appreciating the fact that a significant part of their income is variable and hence at risk. In such a scenario, the employer will not be compelled to preserve a status quo that is contrary to its commercial advantage purely to enable an employee to reap the convenient returns that the system appears to allow.

For further information on this topic please contact Rutheran Sivagnanam at The Chambers Group by telephone (+60 3 2732 9530), fax (+60 3 2732 9531) or email ([email protected]).


(1) Afindi bin Ramli v Awana Vacation Resorts Development Bhd (1796/2011) and Zarina Bt Abd Latif v Awana Vacation Resorts Development Bhd (536 TAHUN 2012).