Apr 28, 2017

10 questions on the Employment Insurance Scheme

10 questions on the Employment Insurance Scheme


As we approach Labour Day on the 1st of May, we acknowledge the contributions that the workers in Malaysia have made to the country.

The proposed Employment Insurance Scheme (EIS) by Prime Minister Najib Razak, which is expected to be tabled in parliament in the July / August 2017 sitting, has the potential to help Malaysian workers through a transition process when they lose their jobs. But given that the details of this scheme have not been disclosed – and there is no parliamentary committee set up on look at the issue of jobs, employment and the economy – many questions remain to be asked about the EIS.

Here, we pose the following 10 questions to be answered so that there can be greater confidence that the EIS will be an effective programme to help the workers in our country.

1. Retrenchment compensation is currently spelled out in the Employment Act 1955 and the Employment Termination and Lay-Off Benefits (ETLB) Regulations 1980. Will the retrenchment compensation continue to be paid out by the employer after the introduction of the EIS? Will workers be worse off in the long run if retrenchment benefits are cut/abolished as part of a package deal for introducing the EIS?

2. The estimated amount collected will be between RM700 million and RM800 million a year (based on 0.25% Employers’ and Employees’ contributions, 6.5 million workers, earning RM2,000 in salary) How much will be the administrative cost? Will it be as high as 25% of the amount collected as some reports have indicated?

3. Since the EIS is an insurance scheme, like Socso, does this mean that employees won’t be able to get back these funds if they don’t get retrenched in their lifetime? How much disposable income will the EIS scheme take away from the regular worker over their lifetime?

4. How will the EIS funds be managed? Will it be managed in the same manner as the Socso funds? Socso has delivered returns that, on average, are lower than EPF’s returns.

5. One of the purposes of the EIS is to help retrain and reskill workers who have lost their jobs. How will these retraining and reskilling programmes be different from existing programmes that are being implemented by the government such as Skim Latihan 1 Malaysia (SKIM) and others? The government must provide a convincing case that the provision of retraining schemes under EIS will be more effective than current programmes.

6. There are already existing training schemes provided and paid for by the sums collected from employers and managed by the Human Resources Development Fund (HRDF). There have been numerous reports that more than RM100 million of this fund has not been used by employers for retraining purposes. Can the existing HRDF scheme be utilised better for retraining purposes? What is to say that the proposed EIS scheme will not end up like the HRDF scheme i.e. lots of unused funds that are not put into retraining schemes?

7. Initial reports indicate that only those workers who are currently being covered by Socso i.e. those earning less than RM4,000 a month will be eligible for the EIS scheme. But many middle-income workers are also being retrenched these days including those in the financial industry and the oil and gas industry. What kinds of plans and programmes does the government have to help these workers who are in the M40 category?

8. Estimates by Malaysian trade unions show that workers lose between RM50 million to RM100 million a year from lost compensation as a result of companies going bankrupt but only RM700 million to RM800 million will be collected from the EIS scheme, half of which is coming from workers. Is this an effective approach in solving the non-compensation issue?

8. One of the main reasons why workers at the lower end of the economic spectrum are losing their jobs is because of employer preference for foreign workers. If the government does not have a comprehensive plan to reduce our reliance on foreign workers, how effective will the EIS scheme be? How easy will it be for the workers who have lost their jobs to find new jobs, especially when they have to compete with lower paid foreign workers?

9. Some countries in Asia that have employment insurance schemes also feature government contributions to these schemes (Thailand – 0.25%, Taiwan – 0.1%, Vietnam – 1%). Has the government considered having its own contribution to this scheme to decrease the financial burden on employers and employees alike?

Original source: FMT

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