- Company faces 35-40% drop in revenue due to slowdown in orders
- Expects further turbulence in 2nd half of this year, when PPE orders eventually dry up
- Has a 99,000 employee base; 70,000 employed in Sri Lanka
- VSS does not apply to factory workers; to be completed by August
- VSS has already been rolled out at MAS Intimates, which employs about 37,000 people
By Nishel Fernando
Apparel major, MAS Holdings, which is also the largest lingerie manufacturer in South Asia, has announced a voluntary separation scheme (VSS) across all the clusters of the group, to reduce its overall employee base by 4 percent by this August, amid the slowdown in business, due to the economic malaise brought on by the COVID-19 pandemic.
MAS Holdings in fact started the implementation of the restructuring plan on a staggered basis two years ago, with the help of the constancy firm, McKinsey & Company, amid increasing competition from peer countries such as Bangladesh and financial troubles faced by some of its key customers.
The COVID-19 pandemic has paralysed the global apparel industry, forcing apparel manufacturers to implement stringent cost-cutting initiatives.
According to company sources, MAS Holdings’ revenue has declined by 35-40 percent, as export orders have come to a virtual halt with the spread of
The company is expecting further turbulence in the second half of this year, when the PPE orders eventually dry up.
“In order to navigate through this period, we have implemented stringent cost-saving initiatives across our organisation, such as deep salary cuts and deferment of other benefits to our executive cadre.
Yet, as this crisis unfolds, it is increasingly clear that this downturn is not going to be limited to just this year, with analysts predicting a 12 to 24-month recovery period,” MAS Holdings said in an official statement.
The actions taken by the company during the past couple of months were aimed at the job security of all the employees, at least in the short term, an internal memo showed.
However, the company noted that these measures were not sufficient. Hence, it has implemented a business recovery strategy that includes immediate operational and structural changes, in order to stabilise the business in the short and medium term.
“In this context, some strategic business units of MAS will undergo a restructuring process to support the greatly scaled down level of business. Having consulted with the relevant regulatory bodies, MAS will also be implementing a voluntary separation scheme in strict compliance with all national regulatory requirements guided by our organisational values,” the official statement said.
The company is currently in the process of implementing the VSS across all of its clusters, to cut down 4 percent of its 99,000 global employee base, including Sri Lanka, under the business recovery strategy.
In May, Stretchline Holdings, of which MAS Holdings is a joint venture partner, announced a voluntary retirement scheme (VRS) at one of its plants in Sri Lanka, for 100 senior employees in the company.
MAS Holdings has already started rolling out the VSS at the group’s largest cluster, MAS Intimates, which has four design and development hubs in New York, Hong Kong, London and Sri Lanka and 14 manufacturing facilities in Sri Lanka, Bangladesh, India and Indonesia, employing over 37,000 people around the globe.
However, a company source said the factory workers would not be subjected to the VSS, at the moment.
“As an organisation committed to the welfare of its people, this is a tough call to make but a necessary one. We have taken all measures to ensure the welfare of our people, who have always been our greatest asset and we hope that these measures will aid in a smooth transition for them,” MAS Holdings Group CEO Suren Fernando said.
However, some employees who have been approached by the management told Mirror Business that they were facing forced resignations under the terms laid out by the company. They fear that if they refuse to resign, they would have to work in a toxic environment, which would not be sustainable.
MAS Holdings defended the scheme stressing that the VSS goes above and beyond the industry standards, including retainment of certain allowances and benefits to ensure that immediate needs of these employees are well taken care of.
The VSS package would be mainly tied to the years of service. For example, a person, who has been employed over 10 years, would receive a package worth of salaries of 20 months, including all allowances and other payments.
Further, the company noted that it would also support these employees to find equal employment opportunities with supportive measures, such as providing training and setting up a job bank.
Meanwhile, MAS Holdings has also decided to scale down its Hong Kong office, which is considered to be an integral part of its success. The move is also partly due to the ongoing protest movement in Hong Kong. The services offered through this centre are expected to be consolidated and offered out from Sri Lanka.
Responding to a Mirror Business query as to why only MAS Holdings has announced a VSS, an industry figure said that other top apparel firms in the country have already implemented such schemes staying out of the radar and noted that their number could be much higher than MAS Holdings.
“Why we are able to save 96 percent of our employee base is that because we have been through the turnaround process two years back. If we hadn’t done that, the number would have been bigger,” a company source stated.
The Sri Lanka Apparel Exporters Association forecasts around 100,000 employees in the sector are likely to be laid off under the current challenging environment.
Currently, MAS Holdings has 68,000 employee base in Sri Lanka, out of its overall 99,000 employee base across over 15 countries.
The company, which posted US $ 2 billion in revenue in 2018, has diversified into different areas of the industry, while the newest segment being IT solutions, focusing on the fashion and lifestyle industry.
The key clients of MAS include Victoria’s Secret, Nike, Lululemon PVH, Marks & Spencer and Soma Intimates.