MALAYSIA Tanah Tumpah Darahku


Tuesday, October 31, 2017

‘Employment Insurance System not sustainable at current deduction rate’


KUALA LUMPUR: The Employment Insurance System (EIS), which provides a safety net for retrenched employees, may not be sustainable if the contribution rate remains at 0.4%, says the Social Security Organisation.
This, it says, is based on projections done by the International Labour Organisation (ILO).
In an interview with FMT, Socso EIS chief Mohd Sahar Darusman said this in dismissing claims by some employer groups that it was collecting more in EIS contributions than it would need to pay out in retrenchment benefits.
“The combined 0.4% contribution rate is the lowest contribution rate in the world compared with similar programmes implemented around the world. These average around 2-3%.”
Sahar said that in Thailand, the combined contribution rate is 1.25%, Vietnam 3%, Saudi Arabia 2% and South Korea 2.15%.
He also pointed out that in Malaysia, contributions were based on a 50:50 basis, meaning both employers and employees shared the costs equally.
In other countries, the employers’ contribution rate is much higher than the employees’ contribution rate.
In some countries, like the United States of America, the entire contribution is paid by the employers.
In Malaysia, the EIS will involve 430,000 employers and 6.6 million employees.
Employers and employees will each contribute 0.2% of an employee’s salary per month. The money will go towards the EIS accumulated fund.
“The benefits of the scheme are plenty. It’s not just the retrenchment payouts for retrenched workers, but the process of job matching, the funding for training and other allowances.”
Sahar explained that based on Socso’s projections, at the current combined 0.4% contribution rate, the EIS’ accumulated fund may be enough for less than five years, if the total number of beneficiaries reaches 100,000 and over, as projected by the ILO.
“Assuming there is a very low rate of retrenchment and accumulation of the funds over time, Socso will provide additional benefits, including maternity benefits, mobility assistance, and wage subsidies or job retention subsidies that will benefit employees and employers even more.
“In fact, this was the reason why Socso wanted to introduce the 0.5% contribution rate from the very beginning but employer groups weren’t agreeable to this.”
Sahar said it was a pity that some employer groups do not understand the importance of creating a sustainable fund that will only benefit employers and employees in the long term.
“No one knows when a retrenchment may happen. Look at the Perwaja Steel, MegaSteel, Kin Steel, Malaysia Airlines, and retrenchments in the oil and gas industry as well as the banking industry.
“Were they all prepared for this? What were the contingencies available for them? Some of the retrenched employees weren’t even paid.”
According to Labour Department figures, 37,699 people were retrenched last year.
Sahar said this didn’t represent the actual retrenchment figures as companies with five employees or less aren’t required by law to report retrenchments to the department.
“So we don’t have the real picture and we could be looking at a higher number of potential claimants as opposed to the ones currently reported.”
In fact, Sahar said, out of the 662,000 enterprises in Malaysia, 74% were microenterprises with five employees or less.
Sahar said employers shouldn’t see the EIS as a burden, pointing out that the scheme is meant to protect both employees and employers, especially in the event of an economic crisis and employers aren’t able to pay termination benefits to their workers.
As for employees, Sahar said the EIS will at least put food on the table for the workers until they can get another job. FMT

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