This article first appeared in The Edge Financial Daily on December 19, 2018

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) would like more details on the government’s proposal to deduct foreign workers’ salaries as savings in the Social Security Organisation (Socso).

While there could be positive outcomes such as savings for workers, protection against runaway workers and reducing short-term foreign exchange repatriation, the FMM said other factors still needed consideration.

“Foreign workers may consider the proposed 20% deduction as too high as many would have financial commitments in their home countries, including repaying debts,” the FMM said in a statement yesterday.

Relevant legal statutes such as the Employment Act and the Socso Act should also be reviewed and amended to facilitate the necessary changes, it said, and also cited “the mechanism and criteria for foreign workers to withdraw their funds as well as whether there is interest earned, such as savings in a bank”.

There is also a need to look into the legality and human rights aspect to enforce savings and confiscating runaway workers’ earnings, the FMM added.

Nevertheless, the FMM viewed the proposal positively and is “looking forward to be involved in the technical committee meetings which should be convened to further discuss this proposal before submitting it to the cabinet for consideration”, said FMM president Datuk Soh Thian Lai.

The human resources ministry proposed on Saturday that employers deduct 20% of their foreign workers’ basic salaries for Socso, and to prevent them from fleeing their jobs. The proposal is for employers to avoid losses on investments when bringing workers into the country.

Human Resources Minister M Kula Segaran said the proposal was submitted to the National Labour Advisory Council last week and it is open for discussions among stakeholders before it is finalised. He also said the measure had been implemented successfully with the same objective in South Korea and Japan.

In November, Putrajaya announced that from Jan 1 next year, Socso’s coverage will include foreign workers who were previously under the purview of the Workmen’s Compensation Act.