FMM: Defer and review Employment Insurance Scheme

  • Business
  • Thursday, 30 Mar 2017

Lim: ‘Last year, only 38,000 workers were retrenched and we do not need yet another multi-billion public fund to aid this small number of unemployment.’

KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) is asking the Government to defer and review the implementation of the Employment Insurance Scheme (EIS) as it would be an added tax burden to employers and employees.

FMM president Tan Sri Lim Wee Chai said the 0.5% contribution rate would be too high to commensurate with the small number of retrenchments in this country.

“Malaysia recorded the highest retrenchment rate during the 1997 Asian financial crisis, and that only involved 60,000 workers where 95% got their retrenchment benefits.

“Last year, only 38,000 workers were retrenched and we do not need yet another multi-billion public fund to aid this small number of unemployment.

“Additionally, we already have a Retrenchment Benefits Act to take care of those who lose their jobs,” he told the media in a press conference yesterday.

According to FMM’s calculation, the 0.5% was expected to cost employers and employees RM1.2bil a year based on the average salary of RM24,000 per year, multiplied by the country’s 10 million private sector workforce.

Lim said the Government’s model would be unfair additional taxation because employers would continue to bear the responsibility of paying termination and lay-off benefits in the event of a retrenchment as well as to contribute to the EIS.

“There would also be additional costs to the government to manage the fund in the form of collection, assessment of claims, tracking retrenched workers and distribution.

“The industry also feels that there have not been sufficient consideration and discussion by the government on our counter proposals to achieve a more amicable and practical win-win solution,” he said.

Lim also pointed out that the EIS would unnecessarily impose a burden cost of doing business on top of other high regulatory costs. “This would eventually affect business sustainability and socio-economic well-being,” he said. The EIS is aimed at employees who have lost their jobs, and will be a social safety net meant to provide financial help and assistance for workers in their job search. The Social Security Organisation (Socso) will be managing the scheme.

The new policy will be tabled in the June meeting of Parliament and expected to be implemented on Jan 1, 2018 while payment of the benefits will start on Jan 1, 2019.

On other matters, Lim also urged the Government on the problem of providing adequate water supply. FMM said some states, namely Perlis, Kedah, Penang, Selangor and Malacca had experienced acute water shortages in certain periods of time each year.

“Water rationing and unscheduled interruptions in the last few years have adversely affected manufacturing production each time, resulting in the loss of millions of ringgit due to reduction in production and foregone orders.

“Industries operate in anxiety and fear of a repeat of the 2014 water crisis in Negeri Sembilan and Selangor which lasted from February to August that year. We need to address the water risks aggressively as the non-revenue water (NRW) losses through leakages averages at a staggering level of 40%,” he said.

Besides supply, Lim said the Government must also consider demand and usage as water tariffs are different in each state and are among the lowest in Asean.

“The tariffs should be sufficient to cover the capital expenditure needed to address the NRW,” he said.

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