Cush­ion­ing a painful fall

If man­aged well, the Em­ploy­ment In­sur­ance Sys­tem will be a much-needed safety net

The Star Malaysia - StarBiz - - Viewpoint - ER­ROL OH star­biz@thes­tar.com.my

UN­LESS we’re trapeze artists, we rarely think about safety nets. That is, un­til we fall.

The thing is, only the luck­i­est among us never fall. The rest know how it is when we lose con­trol and grav­ity takes over to send us on a quick and often painful trip down­wards.

Some­times, we fall from great heights. It may not be in the lit­eral sense but it can be equally crip­pling, such as when we un­ex­pect­edly lose our liveli­hood. If there’s noth­ing to stop us from crash­ing to the ground, the body count will rise to the point that ev­ery­one will be af­fected, even the most sure-footed.

That’s the ar­gu­ment for so­cial safety nets, which are also known as so­cial pro­tec­tion or so­cial se­cu­rity sys­tems.

Ac­cord­ing to the World Bank, so­cial pro­tec­tion sys­tems help the poor and vul­ner­a­ble cope with crises and shocks, find jobs, in­vest in the health and ed­u­ca­tion of their chil­dren, and pro­tect the age­ing pop­u­la­tion.

Pro­claimed and adopted by the United Na­tions Gen­eral As­sem­bly in 1948, the Univer­sal Dec­la­ra­tion of Hu­man Rights says that ev­ery­one, as a mem­ber of so­ci­ety, has the right to so­cial se­cu­rity.

The Gov­ern­ment ex­plains that its pro­posed Em­ploy­ment In­sur­ance Sys­tem (EIS) is a so­cial safety net that will help work­ers who have suf­fered a loss of em­ploy­ment.

When the sys­tem is in place, the ben­e­fi­cia­ries are promised im­me­di­ate fi­nan­cial as­sis­tance to cover liv­ing ex­penses while they’re in be­tween jobs. It will also pro­vide em­ploy­ment ser­vices – job search, ca­reer coun­selling, job match­ing and place­ment, and reskilling and up­skilling train­ing.

But busi­nesses op­posed the tabling of the EIS Bill in Par­lia­ment in Au­gust. So much so that the sec­ond read­ing in the De­wan Rakyat was put on hold so that the Gov­ern­ment, rep­re­sented by four Cab­i­net mem­bers, could en­gage with bod­ies rep­re­sent­ing em­ploy­ees and em­ploy­ers.

The ob­jec­tion had been made known months be­fore the Bill was pre­sented to the law­mak­ers.

On March 23, Prime Min­is­ter Datuk Seri Na­jib Tun Razak said in a state­ment that the Gov­ern­ment would im­ple­ment the EIS for the 6.5 mil Malaysians work­ing in the pri­vate sec­tor, with em­ploy­ers and em­ploy­ees con­tribut­ing to the scheme. The new Act was tar­geted to come into ef­fect in Jan­uary 2018.

On the same day in March, over 90 in­dus­try bod­ies and cham­bers of com­merce go to­gether to say they re­jected the pro­posal to set up the EIS.

Among them were prom­i­nent na­tional-level or­gan­i­sa­tions such as the Malaysian Em­ploy­ers Fed­er­a­tion, Fed­er­a­tion of Malaysian Man­u­fac­tur­ers (FMM), As­so­ci­ated Chi­nese Cham­bers of Com­merce and In­dus­try of Malaysia, Malaysian In­ter­na­tional Cham­ber of Com­merce & In­dus­try, and Malaysian As­so­ci­ated In­dian Cham­ber of Com­merce and In­dus­try.

The joint press re­lease claimed that the EIS had “ob­vi­ous flaws” that would be detri­men­tal to em­ploy­ees and em­ploy­ers. The or­gan­i­sa­tions ar­gued that “only a few em­ploy­ees and re­cal­ci­trant em­ploy­ers will ben­e­fit at the ex­pense of other em­ploy­ees and re­spon­si­ble em­ploy­ers”.

They also warned that if busi­nesses con­tin­ued to be bur­dened with ad­di­tional costs, more en­ter­prises would fail and this might lead to un­paid re­trench­ment ben­e­fits.

They coun­tered the pro­posed sys­tem with this point: “In this re­gard, if in­deed the Gov­ern­ment is con­cerned about the ad­verse ef­fects of re­trench­ments, the Gov­ern­ment should NOT al­low such load­ing of costs. A vi­able busi­ness will not see any re­trench­ment, and on the con­trary, the em­ploy­ees will have job se­cu­rity as well as en­hanced re­wards as the busi­ness pros­pers.”

At the time, the busi­ness com­mu­nity be­lieved that the con­tri­bu­tion rate for the EIS would be 0.5% of monthly wages, split evenly be­tween em­ploy­ees and em­ploy­ers. They must have been taken aback when they saw that the Bill spec­i­fied a 1% rate in­stead.

It’s def­i­nitely a mat­ter that de­mands some dis­cus­sion be­cause the In­ter­na­tional Labour Or­gan­i­sa­tion (ILO), which was brought in to as­sist with the de­sign of the EIS, rec­om­mended that the com­bined con­tri­bu­tion rate should not ex­ceed 0.3% to 0.4%.

“The higher rate of 0.4% cent could be cho­sen if a safety mar­gin is de­sired, and to pro­vide for start-up costs,” said the ILO in a 2015 re­port.

Af­ter the tri­par­tite en­gage­ment in Au­gust fol­low­ing the de­fer­ment of the sec­ond read­ing of the Bill, the Gov­ern­ment has agreed that rate be low­ered from 1% to 0.4%.

There’s no in­di­ca­tion of how deep a com­pro­mise that re­duc­tion is, but the Gov­ern­ment has made it clear that it would not ac­com­mo­date other re­quests for amend­ments to the Bill. The plan is to con­tinue with the sec­ond read­ing dur­ing the next De­wan Rakyat meet­ing, which be­gins on Oct 23.

The em­ploy­ers may still be un­happy about some as­pects of the sys­tem, but they will have a say in how it’s run be­cause em­ploy­ers and work­ers are rep­re­sented on the board of the So­cial Se­cu­rity Or­gan­i­sa­tion (Socso), which will be ad­min­is­ter­ing the EIS.

In ad­di­tion, the EIS Act will pro­vide for an Em­ploy­ment In­sur­ance Com­mit­tee to ad­vise the Socso board on “all mat­ters re­lat­ing to the sys­tem in­clud­ing the rates of con­tri­bu­tion, ben­e­fits and the em­ploy­ees to be in­sured un­der this Act”. Mem­bers of bod­ies rep­re­sent­ing em­ploy­ers and em­ploy­ees will be on the com­mit­tee.

The em­ploy­ers were not wrong when they pointed out that Malaysia’s re­trench­ment trend has been rel­a­tively be­nign and that few peo­ple were de­nied their re­trench­ment ben­e­fits. But there’s no guar­an­tee it will stay this way, es­pe­cially when tech­nol­ogy leaps are dis­rupt­ing many in­dus­tries.

Con­sider what the ILO said in its 2015 re­port: “Cur­rently Malaysia has a low rate of un­em­ploy­ment. There­fore there is scope to es­tab­lish an un­em­ploy­ment pro­tec­tion sys­tem at a com­par­a­tively low cost.

“As Malaysia pro­gresses, achiev­ing a higher stan­dard of liv­ing and mov­ing to­wards be­com­ing a high-in­come coun­try, an un­em­ploy­ment pro­tec­tion sys­tem will need to form an es­sen­tial part of its so­cial se­cu­rity sys­tem, as is the case in other de­vel­oped coun­tries.”

The Gov­ern­ment says the EIS is based on the “sol­i­dar­ity fund, pool­ing of re­sources and shar­ing of risk” con­cept. It’s a mouth­ful, but it es­sen­tially means many Malaysians are pay­ing to pro­vide pro­tec­tion dur­ing the times when some of us will re­ally need the sup­port.

Yes, some of us and our loved ones will be for­tu­nate enough to never have to claim for EIS ben­e­fits, but how do we know for sure that we be­long in that cat­e­gory?

Those of us em­ployed in the pri­vate sec­tor will feel bet­ter when there’s a safety net below us. But that sense of se­cu­rity has to be matched with sturdy and re­spon­si­ble gov­er­nance of the EIS. Oth­er­wise, some of us may still plunge all the way to the ground. For some rea­son, ex­ec­u­tive ed­i­tor Er­rol Oh keeps hear­ing in his mind the cho­rus of Tom Petty’s Free Fallin’.

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