MTUC, MEF debate on Employment Insurance System

The announcement on the proposed terms of the Employment Insurance System (EIS) has continued to stir the debate between employers and employees.

The EIS, announced by Prime Minister Datuk Seri Najib Tun Razak in March, is a compulsory retrenchment insurance scheme for private sector employees aimed at helping those who lost their income due to loss of employment.

The bill, to be tabled in Parliament later this month, is expected to come into play on Jan 1, 2018.

Under the scheme, workers would contribute 0.2 percent from their monthly salary or as low as RM1.90 for those who earn RM1,000 a month, while those earning more than RM4,000 would pay the ceiling amount of RM7.90.

The contribution from employers would be an equal 0.2 percent.

If implemented, the bill would seek to protect some 6.6 million local private sector workers, providing them with financial help for up to six months.

On Wednesday, Astro AWANI's Markets Today spoke to both sides of the divide – Malaysian Trades Union Congress president Abdul Halim Mansor and Malaysian Employers Federation (MEF) executive director Datuk Shamsuddin Bardan.

Below are some of the highlights from the interview hosted by Luqman Hariz.

Q: The MEF had proposed the deletion of certain segments in the EIS Bill 2017 including the early re-employment allowance, training allowance and job search allowance. Why?

Shamsuddin: Because those activities are already being carried out by various government agencies. For example, job matching is currently being done by JobsMalaysia for free, there’s no charges towards employers or employees for their services. On retraining retrenched employees, this is currently very much done by 1MOC (1Malaysia Outplacement Centre) which is being operated by HRDF (Human Resources Development Fund), so there is no need for EIS to be involved in this activity. These were among the matters we raised during our discussion (chaired by Second Finance Minister Datuk Johari Abdul Ghani) with the four ministers assigned by the Cabinet to speak to the stakeholders.

The principle of the EIS policy is that its coverage is only limited to employees who are not paid any retrenchment or termination benefit by the employers. If you are paid, then you are not expected to be assisted by the EIS.

Q: Based on recent retrenchment or downsizing exercises we’ve seen in the country, how many employees are actually eligible for the EIS?

Abdul Halim: Firstly, we need to understand that the EIS is more of a protection than a benefit. We intend to protect the employment, but if retrenchment does happen, then we have to be prepared. Retrenchment is something unexpected in the workers’ lives. Those who are retrenched have families to feed. This is why we need a protection. Whatever it is named, however the benefit works, you have to understand that the fund we are creating will start very small so that we can expand it to provide better protection in the future.

Shamsuddin: In the last 10 years, the amount of unpaid retrenchment benefits is averaged at RM65 million. Under the proposed scheme, looking at the contribution by both employers and employees, the fund is set to collect some RM660 million a year. That’s more than enough to cover payments of up to RM65 million per year.

I beg to differ Abdul Halim’s statement that the fund will start small; RM660 million is not a small amount of money. During the discussion with the ministers, a consensus that was reached was that we look at the amount – if the amount collected is sufficient, then possibly the committee that will be formed within the EIS itself can advise the authorities to stop/suspend the collection.

Abdul Halim: The protection is like risk-pooling. Just because you’re paid, it doesn’t mean you’re covered. Like when you buy car insurance – you pray that nothing happens to you, but if something does happen, at least you are protected. This is what the workers need.