EIS will not burden employers, says economist

KUALA LUMPUR: The Employment Insurance System (EIS), which was tabled in the Dewan Rakyat last week, will not burden employers in terms of costs.

It will instead support Malaysia to move into the next phase of development if it is implemented next year.

Director of the Social Security Research Centre, Faculty of Economics and Administration, Universiti Malaya, Prof Datuk Dr Norma Mansor, said under the new system, the contributions towards the fund would be made by both employers and employees.

Speaking to Bernama, she said, the insurance scheme would make it cheaper for employers to lay off workers in order to upgrade their technology and automate their businesses compared with the current workers’ protection scheme.

“When we talk about lay-off and the termination benefits, (currently) the responsibility falls on the employers alone and they are supposed to pay an equivalent of 4.5 months of the terminated worker’s salary. And it is only covering workers earning RM2,000 and below.

“The EIS is contributory, where every employee will also have to contribute to the fund. The contribution will go into a pool fund, similar to the Employees Provident Fund (EPF), where this fund is going to be invested,” she said.

Initially, she said, the insurance scheme may have to use the money from the fund solely, which was injected by the government with a total amount of RM122 million in two phases to pay the benefits for any terminated workers.

She said the insurance scheme, to be managed by the Social Security Organisation (Socso), would be getting bigger and it could benefit many other aspects of the labour market due to investment activities.

Norma expected that in the next five years, the benefit payment towards the employees whose services were terminated might only be made using the profits from investments, similar to EPF’s way of paying dividends to its members.

“We have learned from the 1997 crisis that our economy did not pick up to the pre-crisis level after the it recovered between 1998-2008. The National Economy Advisory Council has identified that one of the issues has something to do with the productivity in the labour market.

“(Before this), of the equation, on the employers’ side, it is very costly if they want to fire their workers for automation. It is easier for them to continue business as usual (without automation) or import the labour as it was easy for them to bring in foreign labour,” she added.

The EIS is contributory, where every employee will also have to contribute to the fund. The contribution will go into a pool fund, similar to the Employees Provident Fund (EPF), where this fund is going to be invested. — Prof Datuk Dr Norma Mansor, Director of the Social Security Research Centre, Faculty of Economics and Administration, Universiti Malaya

Norma said South Korea has already reformed its labour policies in the 1980s.

Under its Labour Protection Policies, when the workers were fired, the employers had enough coverage to pay their workers, she said.

“So, what the government is bringing into the Dewan Rakyat is about reforming our social protection policies as well as reforming the labour market. The new system not only protects workers during economic crisis but also upgrades employers.

“With the EIS, it is cheaper for companies to lay off workers and go for high technology. We are talking about digitalising our businesses. If the government did not come out with the scheme to protect workers, what would happen to them (if terminated)?” she asked.

Norma said EIS would pay the employee’s salary for six months on the decreasing amount every month to prevent abuse of the salaries and the workers needed to prove that they were in the midst of searching for another job.

The Bill will be tabled for second hearing in the Dewan Rakyat next week. — Bernama