EIS can’t support massive retrenchment, says Socso

The ideal accumulative contribution rate would be 0.75%, says chief executive


The Social Security Organisation (Socso) has warned that the current contribution rates under the Employment Insurance Scheme (EIS) would not be sufficient in the event of a major recession and large-scale retrenchments.

Socso chief executive Datuk Mohd Sahar Darusman said the ideal accumulative contribution rate would be 0.75%.

“For the last 10 years, retrenchments in the country were between 15,000 and 36,000 workers at a rate of 4% — which is what the EIS calculation rates are based on.

“Although the assumption is that retrenchment would be kept within this same range in the next one to two years, the insurance fund is not sufficient if our country goes into a financial crisis such as in 1998 or retrenchments that exceed 50,000 workers.

“For the fund to be sustainable, we think 0.75% should be the ideal combined rate. It is still the lowest rate among the implemented countries which charge an average of 2% to 3%,” he said at the EIS presentation in Kuala Lumpur yesterday.

Mohd Sahar said sustainable contribution, stable economy and fewer retrenchment exercises by companies are critical for the scheme to be effective.

During the 1997/1998 East Asia financial crisis, 83,865 Malaysian workers were retrenched in 1998.

Meanwhile, he said the present combined EIS rate also el iminates the prospects of other benefits for ret renched workers and their beneficiaries.

“Honestly, there isn’t much can be returned to the workers apart from the cash benefits.

“EIS is not just about cash. It also consists of employment intervention such as the Action Labour Market Policy (ALMP) that will safeguard the possibility for retrenched workers to land a job.

“Adequate reserve also enables us to have the option to support full payment for the extended maternity leave to 90 days — which was announced during the tabling of Budget 2018 last year — as employers only provide paid maternity leave of up to 60 days,” he said.

Under the ALMP, Socso must ensure re-employment of retrenched workers.

“Once Socso recognises a worker is being retrenched, the individual has to participate in the employment service programme to ensure a re-employment.

“If the individual failed to be employed after the EIS benefits period of six months, Socso has to continuously facilitate the individual to land a job as long as he is willing to work,” Mohd Sahar said.

He said Socso has also signed memoranda of understanding with JobsMalaysia and other job-seeking agencies to facilitate the employment service programme.

Meanwhile, Mohd Sahar said the retrenchment rate in the country has been kept at 4% — which is considered to be acceptable for a developing country.

“To say factors such as EIS contributions and levy of foreign workers are contributing to massive retrenchment is inaccurate,” he said.

He was responding to the Malaysian Employers Federation’s projection that 50,000 workers would be retrenched this year.