A SAFETY NET FOR EMPLOYEES
With the Employment Insurance System (EIS), some 6.5 million workers in the private sector will be protected, in case another recession sets in.
PETALING JAYA: Due to the current challenging times, the Government is doing all it can to help lessen the people’s burden.
But resources are scarce due to a drop in crude oil price and global economic slowdown.
Realising this, the Government came up with several proposals to act as a safety net to protect workers, especially in the private sector, who are affected by loss of employment.
One such initiative is the Employment Insurance System (EIS) which was announced by Prime Minister Datuk Seri Najib Tun Razak on May 1.
Najib said for a start, the Government would inject a sum of RM70mil to help fund the Social Security Organisation’s (Socso) financial benefits under the scheme.
Hence, some 6.5 million workers in the private sector will be protected, in case another recession sets in.
Under the EIS, affected workers will get temporary financial aid to support themselves and their families while looking for new jobs.
Human Resources Minister Datuk Seri Richard Riot said the EIS was mooted by the Government as a long-term measure to ensure sustainable economic growth during an economic crisis and to further improve the coverage of the social safety net.
Richard said the EIS would add to the efficiency of the labour market through a better system of matching supply and demand, leading to higher productivity and competitiveness of industries, against the implications of disruptive technologies brought upon by the Fourth Industrial Revolution.
In actual fact, the EIS is not new with many countries such as South Korea, Japan, China, Vietnam and Thailand having implemented it successfully to stabilise the economy and help sustain economic activities.
“Frankly, we were taken aback by various statements issued by certain parties in relation to the EIS.
“My ministry has conducted many engagement sessions, explaining the rationale behind this scheme but still, these naysayers are still harping on unsubstantiated information.
“Some alleged that there will be a huge surplus after paying out the EIS benefits as if we are making money out of the scheme.
“There were also claims that only 50,000 workers would stand to benefit from the EIS every year,” Richard told The Star.
According to a study by the International Labour Organisation (ILO) published in 2015, an estimated 137,000 to 215,000 workers, who were laid off, will be eligible to claim for benefits in a base year of EIS’ implementation.
Richard said these quarters did not take into account that the figure was derived when Socso’s coverage was limited to workers earning RM3,000 and below.
“I believe the figure must be higher now since the number of Socso contributors had increased from 5.5 million in 2010 to 6.6 million last year.
“Therefore, the total amount for pay out benefits could not be just RM300mil as highlighted by them,” he stressed.
Richard said there was a “distinct difference” between retrenchment and loss of employment.
“I am not saying the number of retrenchment cases will increase, but these two categories cannot be lumped together. We must understand that both are not the same,” he said.
“Retrenchment” is only a part of loss of employment and its cover- age is based on the Employment Act 1955 and respective labour ordinance of Sabah and Sarawak, which are limited to a certain wage ceiling.
“Loss of employment”, on the other hand, covers a wider spectrum irrespective of wages.
According to Socso’s database, about 52% of workers are earning less than RM2,000, which is the wage ceiling of the Employment Act.
Citing the cases of Perwaja Steel Sdn Bhd and MegaSteel Sdn Bhd, Richard said workers who were laid off had to wait for many years to receive their termination benefits.
“Some workers may have collective agreements which stipulate termination benefits but the coverage is very small as the percentage of unionised workers is only 7.5% out of the total workforce, including the public sector union.
“In other words, the current termination benefits for the local private sector workers in Malaysia are not universal.
“Even those who are covered are not guaranteed to be paid their dues,” he pointed out.
Richard said this rather depressing situation would change once the EIS was implemented as it would cover all local private sector workers.
He said all of those affected would be paid their benefits “almost immediately” – after seven days of verification of loss of employment.
“So it is our hope that all stakeholders would give their full support to the second reading of the EIS Bill this coming October.
“The contribution rate of 0.4% is the lowest in the world,” he said.
If the Bill is passed in Parliament, Malaysia will be the third country in South East Asia to implement the EIS.
The contribution rate in neighbouring Thailand and Vietnam are much higher at 1.25% and 3%, respectively.
In a recent statement, the Human Resources Ministry announced that the contribution rate under the EIS Bill will be slashed.
During a tripartite engagement on Aug 10, it was agreed that among others, the contribution rate from 0.5% each by employers and employees be brought down to 0.2% each.
“The Cabinet also agreed for the revised Bill to be tabled in the next Parliament session in October,” the statement said.
On Aug 4, the Bill was postponed after the first reading to allow for a tripartite engagement with stakeholders.
Four members of the Cabinet were assigned to carry out the task namely Riot, Second Finance Minister Datuk Seri Johari Abdul Ghani and two Ministers in the Prime Minister’s Department – Datuk Seri Dr Wee Ka Siong and Datuk Paul Low.
Under the EIS, workers who have lost their jobs may be able to claim a portion of the insured salary for a period of between three and six months of being unemployed.
The EIS will be managed by Socso and payouts will start in 2019.
At least 78 engagements with employers’ federations and trade unions at national and state level have been held before the drafting of the EIS model and Bill.
In addition, study visits were organised to several countries which had successfully implemented the EIS in a bid to learn from their experiences.
The ministry also engaged experts from the ILO to assist in the study to help design a suitable EIS model for Malaysia.