FMM: Defer and review Employment Insurance Scheme

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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.

source – The Star (30 March 2017)