Make EPF contribution for informal workers mandatory, says World Bank

 

World Bank country manager for Malaysia Yasuhiko Matsuda said the government should formulate policies that can ensure informal workers feel secure and well-protected. (Bernama pic)

KUALA LUMPUR: The government should make automatic contributions to retirement savings mandatory for informal workers on income earned via digital platforms, says the World Bank.

“Informal workers are vulnerable, which hinders their ability to invest further in skills enhancement or take risks in starting new businesses.

“Therefore, the government should formulate policies that can ensure these people feel secure and well-protected in case of accidents or business failures, enabling them to continue engaging in the labour market,” World Bank country manager for Malaysia Yasuhiko Matsuda said.

He was speaking at the launch of the bank’s report, Informal Employment in Malaysia: Trends, Challenges and Opportunities for Reform.

He said tracking earnings is more manageable in today’s digital landscape compared with the past, when transactions were primarily cash-based.

The World Bank defines informal workers as people who are in occupations not covered by formal pensions, retirement savings, such as EPF, or employment injury insurance like the Social Security Organisation (Socso).

The report highlighted that informal workers, lacking adequate security and protection, often resort to reducing food consumption and borrowing money as coping mechanisms when faced with a sudden financial problem.

In contrast, the report said, formal workers are more inclined to rely on other means, such as borrowings from banks, personal savings, retirement funds or other pension savings.

Matsuda said some informal jobs are highly productive, including those in the gig economy, which was valued at RM1.33 billion in the third quarter of 2023.

Other suggestions in the report include establishing a convening body to bring stakeholders in informal employment together, providing skills training, and mandating digital platforms to provide work-related insurance (via Socso) for high-risk occupations, to safeguard informal workers.

Economy deputy secretary-general Zunika Mohamed, who attended the launch, said the ministry will look into the World Bank’s suggestions ahead of the 13th Malaysia Plan.

“Improving the welfare of informal workers will continue to be one of the priorities for the government as highlighted in the mid-term review of the 12th Malaysia Plan,” she said. - FMT