KUALA LUMPUR (Oct 11): The Government is proposing to give wage and hiring incentives to employees and employers in a bid to address the high youth unemployment rate in the country, and to reduce the country’s over-dependence on low-skilled foreign workers.
Putrajaya proposes to spend RM6.5 billion across five years in an initiative called “Malaysian@Work”, Minister of Finance Lim Guan Eng announced in Budget 2020 today.
It seeks to incentivise unemployed graduates and returning women workforce, and encourage the employment of locals, and increase participation in Technical and Vocational Education and Training (TVET).
For employers:
- Employers who hire graduates who are unemployed for 12 months will receive a two-year incentive of RM300/month/person.
- Employers who hire women aged 30-50 who were unemployed for at least 12 months will receive a two-year incentive of RM300/month/person for two years. For this employment category, the existing income tax exemption will be extended until 2023.
- Employers who hire Malaysians to replace foreign workers will receive a two-year incentive of RM250/month/person.
For workers:
- Graduates who were unemployed for 12 months will receive a two-year incentive of RM500/month when they find employment.
- Women aged 30-50 who were unemployed for 12 months will receive a two-year incentive of RM500/month.
- Malaysians who manage to secure jobs that replace foreign workers will receive a two-year incentive of between RM350 and RM500, depending on the sector.
Meanwhile, under the TVET incentive programme, youths who enter TVET courses will receive an additional RM100/month besides the existing allowance for trainees on apprenticeships.
“The Government will also extend double tax deduction on expenses incurred by companies participating in Skim Latihan Dual Nasional (SLDN) for another two years.
“In addition, the double tax deduction currently given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corporation Malaysia Bhd (TalentCorp) will be expanded to include students from all academic fields rather than just engineering and technology.”
Lim said Malaysians@Work will be managed by the Employees Provident Fund (EPF), and will be subsequently integrated with the Employment Insurance System (EIS) as well as other active labour market programmes.
“The Government anticipates that the Malaysians@Work initiative will cost RM6.5 billion over five years and create an additional 350,000 jobs for Malaysians and reduce foreign workers dependency by more than 130,000,” he said.
The Government believes that after the two-year period, the retention rate is expected to exceed 90%, he added.
According to Lim, there were officially 2.2 million foreign workers at end-2018, or 15% of the national labour force of 15 million people. The Malaysian Employers Federation estimated in 2016 that the number of illegal foreign workers stood at around 4 million.
“Malaysia has become overly dependent on low-skilled labour, especially foreign workers. Cheap foreign labour disincentivises companies from investing in more productive capital and technology,” said Lim.
According to the Economic Outlook 2019/20 prepared by the Ministry of Finance, the unemployment rate in Malaysia is expected to stay at 3.3% in 2020, unchanged from 2019. However, the youth (ages 20 to 24) unemployment rate was at an alarming 12% in 2019.
Last year, the Pakatan Harapan Government promised in its election manifesto to create one million job opportunities, and to increase the minimum wage to RM1,500 per month.
It has opted for a staggered minimum wage increase across different sectors, with the latest announced in Budget 2020 being a floor of RM1,200 floor for workers in cities and major towns.