Tuesday 19 Mar 2024
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KUALA LUMPUR (June 18): Local manufacturers reiterated today that while they are not against the introduction of the Employment Insurance System (EIS), the current model is neither balanced nor equitable.

The Federation of Malaysian Manufacturers (FMM) said the scheme has too wide a scope and should only cover those retrenched because of business failure, not due to downsizing, which employers would have to provide termination benefits.

"Allowing workers to enjoy both the employment termination and the lay-off benefits under the Employment Act 1955, including those who are in voluntary separation schemes and mutual separation schemes — this group of workers will be enjoying double benefit, which is against the principle of social security, which is clearly stated in the Social Security Act," it added in a statement today.

FMM said the EIS has also resulted in "unnecessary strain on the fund by including training, which should be excluded and carried out by the Pembangunan Sumber Manusia Bhd financed by forfeited levy and late payments' interest".

The federation said employers and employees contributing to the EIS are also very concerned over the management of the fund. "Poor management and unwarranted expenditure would lead to unjustified increases in the contribution rate."

It was responding to the government's move to review the scheme, which came into force on Jan 1.

FMM also maintained that the fund should be a tripartite responsibility, that is, the government should also contribute towards the operating expenditure of managing the fund.

"We are also of the view that instead of two funds, which would require two different sets of resources, whether human as well as investment in operating systems, the EIS should be managed by the Social Security Organisation (Socso), especially since the contributors are the same group of persons," it said.

FMM understands that Socso is in the process of adjusting its system to allow employers to make a single payment for both the Socso and EIS funds by end of 2018

"The exercise should be widened to include single management of funds, but with separate accounts to ensure transparency in the disbursement and management of funds.

"Contributions to the fund should also stop once reserves reach a certain percentage like in South Korea where the contribution rate is reduced when the reserve is 1.5 to 2 times of annual expenditure," it added.

In January, former human resources minister Datuk Seri Richard Riot was reported as saying that the implementation of the EIS would benefit and protect the interests of 6.5 million existing employees under the Employees Social Security Act 1969. Employers who failed to comply with the EIS could be subject to legal action, including a fine of RM10,000, or two years in jail, or both if found guilty.

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