PETALING JAYA: The Employment Insurance System (EIS) may be relatively new to Malaysia but it has been implemented in a host of countries for many years.
Thailand and Vietnam were among the first Asean countries to adopt the EIS. In the Asia Pacific region, Canada, Chile, China, Japan and South Korea are also enforcing the EIS.
The hype behind the EIS started to gain public attention when some employers raised their concerns through the media, claiming that there were not enough engagements and discussions with stakeholders.
But the Human Resources Ministry rightly pointed out that there were no less than 78 engagement sessions held, excluding study visits to countries such as Japan, South Korea and Thailand, to understand the operation and implementation of the EIS.
In order for the people to fully accept the rationale behind the EIS, the Government did the right thing – it postponed the second reading of the Bill to the next Parliament session in October.
Now, more time is allotted to engage with stakeholders, with an insider telling the Chinese media that the proposed monthly compulsory contributions (1% from both the employer and employee) is likely to be brought down to just 0.4%.
On Aug 1, the Bill was tabled for first reading by Human Resources Minister Datuk Seri Richard Riot and scheduled to come into force next year.
It will be managed by the Social Security Organisation (Socso) and payouts will start in 2019.
Several days ago, Richard and three of his Cabinet colleagues – Datuk Seri Dr Wee Ka Siong, Datuk Seri Johari Abdul Ghani and Datuk Paul Low – had met with stakeholders for another round of consultation.
“It was a fruitful session. We have come to an agreement and will release the full details very soon.
“As a responsible Government, we want all parties to understand, give their support and ensure the smooth implementation of the EIS for the people’s benefit,” Richard told The Star.
There is good prospect that the Bill will finally get the blessings of employers, NGOs and workers’ groups.
So what are the aims of the EIS since some 6.5 million workers in the private sector will be affected?
In a nutshell, the EIS proposes decremental financial assistance to those who have lost their jobs for up to a maximum of six months and thereafter, find a new job.
They have a period of 60 days to submit an application to Socso to claim the benefits.
Among EIS’ objectives are to provide income protection and increase employability of retrenched workers but those who stopped work voluntarily are to be excluded.
It would also provide re-employment placement programmes which include job search, job matching, job placement and worker’s mobility assistance.
The Human Resources Ministry said with the EIS firmly in place, it would bring about significant socio-economic benefits to the country, businesses and society.
The Government will be able to maintain economic stabilisation should a recession set in and reduce the costs of public assistance schemes.
There will also be social stability in society with a reduction in civil unrest, delinquency and incidents of crime.
According to Socso, employment service and training programmes of the EIS would assist in creating a more efficient and effective matching of supply and demand, which translate into better functioning of the labour market and higher productivity.
The system acts as an economic stimulus and stabiliser, especially during an economic downturn.
Being an open economy, the implementation of the EIS is an important milestone in preparing Malaysia’s labour market to face socio-economic challenges, particularly the imminent impacts of the Fourth Industrial Revolution.
Therefore, the EIS is also a security buffer for the business community against economic volatility.
Meanwhile, Richard said his ministry was aware of the increase in cost of doing business.
“But there is also a need to provide a social safety net to workers who are laid off by way of a partial temporary income replacement and job search.”
The EIS consists of two main components – Employment Insurance and Active Labour Market Policy (ALMP).
Employment insurance provides temporary income to help retrenched workers to meet their basic needs.
On the other hand, the ALMP caters to job search, job counselling, job placement, retraining and skills upgrading to improve workers’ employability in order to give them better prospects to secure other jobs.
Workers who lost their jobs due to retrenchment, force majeure, employers who have absconded, bankruptcy, closure of businesses, business restructuring, redundancy, automation and others will also be protected under the EIS.
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