Friday 29 Mar 2024
By
main news image
This article first appeared in The Edge Financial Daily, on March 30, 2017.

 

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM), which is strongly opposing the Federal government’s move to implement the Employment Insurance Scheme (EIS), is concerned about the managenent of the potentially massive sum of monies that will be collected under the scheme.

The EIS aims to provide temporary financial aid for retrenched workers, and will require contribution from both employers and employees at a rate of 0.25% of the employee’s pay each.

According to FMM’s projection, the scheme is expected to cost Malaysian employers & employees some RM1.2 billion a year, based on the average salary of RM2,000 per month for 10 million employees.

Prime Minister Datuk Seri Najib Razak recently said the EIS, which was first announced in Budget 2015, would benefit about 6.5 million employees nationwide.

“It is inaccurate to claim that the EIS would benefit six million workers. No benefit is gained unless one is retrenched. And if we use the 1997-1998 Asian financial crisis [as an example], where only 0.6% (or 60,000 employees) of the total workforce was retrenched, only [those few] are expected to claim from the EIS, which is being financed by the remaining 99.4%,” FMM president Tan Sri Dr Lim Wee Chai told reporters at a press conference yesterday.

Lim, who is also executive chairman of Top Glove Corp Bhd, said that even during the height of the financial crisis, when the 60,000 workers were retrenched, the industry only had to fork out RM30 million to compensate them.

Several employer associations which have made their own EIS projections also only estimated yearly retrenchment payouts of about RM16.3 million — which is less than 2% of the RM1.2 billion collection — Lim said.

“The issue now is the collection by the government from the EIS. There is a disparity between the amount which will be collected and what will be paid out. What exactly is the RM1.2 billion going to be used for?” Lim questioned.

Quoting statistics from the human resources ministry (MoHR), FMM noted that the number of laid-off employees out of the total workforce of 10 million people in the past several years was “small and normal”. In 2014, it said retrenched workers accounted for about 26,000 people; the number grew to 38,000 people in 2015 and remained the same for 2016.

“Malaysia is fortunate to have close to 0% retrenchment. Even if employees are denied [a] longer service period, most of them are re-employed by other companies immediately. We do not have a retrenchment or unemployment problem,” Lim said.

FMM also voiced its concern over the impact of the EIS on the country’s economy, stating that the scheme would add more burden to businesses which are “already finding the current operating environment very challenging” and affect investments in the country.

Further, FMM said it did not find any justification for the scheme’s implementation as the country’s existing labour laws on termination are “well in place and being enforced”.

“We have labour laws to protect [employees]. Under these laws, companies are obliged to provide retrenchment benefits to laid-off employees. If the government really wants to protect those who are not compensated [like in cases where loss-making companies are out of funds], then the EIS will need to be tailored for that very purpose,” Lim said.

“If it’s possible, we would like to see this scheme not implemented. If it must be put into place, then reduce the contribution rate,” he also said.

On this note, FMM said it still has its doors open for further discussions with the government on the proposed EIS before its scheduled implementation by Jan 1, 2018.

FMM noted that it, together with other associations including the Malaysian Employers Federation (MEF), had met with the government to discuss the matter in 2015. As FMM had similarly opposed the EIS then, it said the MEF then proposed a different savings scheme, but said there were barely any further discussions among all parties since.

“Earlier this month, we issued a joint statement by 91 industry groups which voiced their objections to the scheme. But we then read in newspapers that the bill has been approved by the cabinet. We have had no invitation from the government for further meetings, so we assume that all has been decided. We wrote to MoHR requesting a dialogue session about three weeks ago, but have yet to get a response,” added Lim.

At present, FMM also noted, it is unclear whether the EIS — which will be tabled in the next parliamentary session in June — will affect foreign workers too.

      Print
      Text Size
      Share