The Malaysian government has agreed in principle to reduce the contribution rate for the proposed Employment Insurance Scheme (EIS) from 0.5% to 0.2% of an employee's monthly salary. EIS is to be an insurance scheme for laid-off workers.
The agreement was reached during a meeting last week between representatives of the government led by Minister of Finance II Johari Abdul Gani and three other ministers, employers and trade unionists, reported Malay Mail Online.
The government was forced to retract the EIS Bill, which was tabled on 1 August, following strong objection from workers and employers who felt that the statutory contribution proposed was too high and disproportionate to the number of retrenched workers. The agreement reached last week could allow the government to re-table a new EIS Bill as early as October.
The government listed four types of allowances for retrenched workers under the proposed EIS: job search allowance, early re-employment allowance, reduced income allowance, training allowance, and training fee. The system, which is to be managed by the national social security organisation (Socso), would cover those with monthly wages of up to MYR4,000 (US$931), with contributions of 0.2% each from employers and employees.
Employers have been vocal in their opposition to the EIS. The Malaysian Employers Federation (MEF) has questioned the rationale of collecting an estimated MYR1.6 billion annually for the EIS, or over 5 times the compensation for all workers retrenched in the 1997 Asian Financial Crisis.
MEF executive director Datuk Shamsuddin Bardan based his calculations on contributions of 1% from both the employer and employee (0.5%) for an average monthly salary of MYR2,000 from 6.8 million private sector workers. This would amount to about MYR1.6 billion a year, while he estimated that unemployment benefits for 50,000 Malaysian workers retrenched during the 1997 crisis would total MYR300 million assuming that they received half-month wages based on a MYR2,000 salary for six months.
“So you collect MYR1.6 billion per year, pay MYR300 million a year, and are left with MYR1.3 billion in your kitty for what?” Mr Shamsuddin told Malay Mail Online.
Minister in the Prime Minister’s Department, Dr Wee Ka Siong, said the EIS Bill has been put on hold to allow for more engagement with the stakeholders. He said the cabinet had decided that there should be an “in-depth analysis” of the content of the Bill with employers and employees.
Around 38,000 workers lost their jobs back in 2015 and the number increased to more than 40,000 last year.
The government had planned to implement the EIS next year with payouts to be made from it with effect from 2019.