EIS should not overlap with other social benefits, says FMM


The Federation of Malaysian Manufacturers (FMM) opposes any overlaps between the Employment Insurance Scheme (EIS) and other existing social benefits.

The EIS, which compels employers to contribute a proposed 0.2% of monthly earnings, has drawn criticisms from various employer groups which view the collection scheme as redundant.

FMM president Tan Sri Dr Lim Wee Chai said the government should optimise the use of existing funds, instead of introducing similar programmes and dividing resources in silos.

Alternatively, Lim suggested the discontinuation of the standing employment termination and lay-off benefit in favour of the EIS. The association claimed that contributions to two alike plans would see retrenched employees receive double benefits.

“We are not against the employment insurance system but have strong concerns over the basic principles and proposed features of the model,” Lim said in a statement.

He said the International Labour Office proposed emulating Vietnam, which froze accumulated credits when the EIS was introduced. Lim added that Korea allows employers and employees to choose between severance pay or pension, while Japan and Bahrain do not have severance pay.

Following a meeting with the government on Aug 10, FMM submitted a written recommendation to the Ministry of Human Resources on the need for greater transparency and consistency in the EIS.

The group is banking on further engagements with the government to revise the EIS bill before it is re-tabled by Minister Datuk Seri Richard Riot Jaem in the next Parliament sitting in October.

“FMM hopes that consultation is carried out first with stakeholders in line with good practice,” Lim said.

Meanwhile, Lim hailed the move to reduce the EIS contribution rate from 0.5% to 0.2% as a step in the right direction as actuarial findings suggest that the total contribution rate should not exceed 0.3%.

However, he said the government should contribute by covering administrative expenses to further reduce the cost of managing the EIS and maintain the contribution rate at the suggested level.

FMM also recommended adequate employer-employee representation in managing the fund for transparency.

Putrajaya has temporarily shelved the EIS bill to seek feedback from related stakeholders like the National Chamber of Commerce and Industry of Malaysia, SME Association of Malaysia, FMM and the Malaysian Employers Federation.

The EIS Bill 2017 was first tabled in Parliament on Aug 1 and was expected to be passed by Aug 10. The plan was stalled after employer groups expressed their concerns of possible abuses to the scheme.