Govt introduces employment insurance for private sector


The government yesterday tabled its bill to provide employment insurance for private sector workers that include benefits for retrenched workers.

The Employment Insurance System Bill 2017 (EIS) provided, among others, benefits and re-employment placement programmes for retrenched workers.

The bill was tabled by Human Resources Minister Datuk Seri Richard Riot Jaem and is expected to be passed during the current sitting of Parliament before it ends on Aug 10.

The proposed insurance would be administered and operated by the Social Security Organisation (Socso) and governed by the Human Resources Ministry.

Both employers and workers will have to contribute to the insurance fund.

Under the scheme, employers and employees would have to contribute to the fund from as low as 10 sen each to a maximum of RM19.75, according to the worker’s monthly salary scale.

The benefits for retrenched workers under the proposed law also include early re-employment allowance, training allowance fees, job search allowance (JSA), as well as reduced income allowance.

The early re-employment allowance would be paid in a lump sum to an insured person who accepts a new job offer during the waiting period, or while receiving the JSA.

In his reaction to the possible introduction of the scheme, Malaysian Employers Federation (MEF) ED Datuk Shamsuddin Bardan (pic) suggested the EIS should include a savings element for the welfare of employers and employees.

He said the funds that are to be raised from the scheme should be channelled back to the employers and employees, if neither parties are involved in either shutting down a company or any separation schemes.

“We need to discuss this matter further with the government in order to come up with the best mechanism for everyone — especially now when employers are already facing challenges to absorb any hike in cost of doing business,” he told The Malaysian Reserve (TMR) yesterday.

Shamsuddin also claimed that there was a lack of consultation between the government and the industry on the bill.

He said the EIS would deprive working capital for employers, as well as lowering down consumers’ purchasing power while shrinking their extra disposable income further.

“Even when the economy was at its worst during the 1998 and 1997 financial crisis, only less than 50,000 people in the private sector lost their jobs — which is equivalent to some 0.6% of the society.

“I do not think that we should collect so much to resolve a problem that is not very huge. The government should also be made responsible to contribute to the fund, rather than shouldering the burden on employers and employees alone,” Shamsuddin added. The EIS is expected to pay three months’ benefit or the JSA to employees who contributed for at least 12 months, if he or she is retrenched.

The JSA would entail 80% of an employee’s salary in the first month; 50% salary in the second month and 40% salary in the third month).

Meanwhile, Malaysian Trades Union Congress (MTUC) president Abdul Halim Mansor told TMR that the EIS serves as a positive protection for the private sector, especially against companies that refuse to provide compensation for the retrenched staffs in the case of firms closing down.

“The EIS will be made mandatory to all registered private entities and those who choose to not adhere to the law will be given penalty by the respective organisations — whether it is the EIS, Socso, or Employees Provident Fund,” he said.

Abdul Halim said many neighbouring countries such as Singapore, Vietnam, Thailand and South Korea have implemented similar schemes earlier.

He added that the government had increased the EIS’ fund size up to RM130 million from the initial RM50 million when the fund was introduced under a different name back in 2011.

“If the EIS is to take effect by January 2018, the capital that has already been allocated into the fund will be used immediately to finance and aid retrenched workers before the fund reaches its maturity period.”

The EIS is a job-loss coverage scheme, which will access Socso’s database for retrenched staff, undergoing a voluntary or mandatory separation scheme, force majeure, made redundant due to business restructuring or closure, and those whose employers abscond or become bankrupt.

A contributor will also need to contribute 24 months to enjoy the maximum unemployment benefit, which provides a portion of one’s insured salary up to six months when a worker remains unemployed.

As of December 2016, Socso’s fund size was RM24.68 billion with RM3.17 billion collected last year, he said, adding that it paid out RM2.97 billion in 2016.

For 2017, the Department of Statistics Malaysia projected the unemployment rate to be 3.6%- 3.8% (3.5% in 2016) with some 600,000 people expected to be jobless based on the labour force forecast of between 14.3 million and 14.9 million employed.