Government shelves plans for new unemployment benefits

KUALA LUMPUR, June 11 — Putrajaya today called off enacting a new law on unemployment insurance (UI) in September, which entrepreneurs say would further strain their pockets during a global economic slowdown.

National Economic Council (NEC) member Datuk Seri Dr Chua Soi Lek confirmed that the prime minister has directed International Trade and Industry Minister Datuk Seri Mustapa Mohamed and Human Resources Minister Datuk Seri Dr S. Subramaniam to shelve the unemployment insurance scheme until the government enforces the minimum wage system.

“The unemployment insurance scheme requires further deliberation not just to avoid the increase of the financial burden on the business sector, but there is also a need to explore the mechanism of the insurance scheme to ensure that no other issues will arise during its implementation,” he said in a media statement today.

Dr Chua (picture), who is also MCA president, said he also urged the authorities to make public the details of the scheme to answer doubts.

Putrajaya has previously toyed with the idea of a retrenchment fund to be set up with equal contributions from both employers and employees but the plan was met with scepticism from companies.

The UI appears to be a revival of the idea as MTUC secretary-general Abdul Halim Mansor had also told The Malaysian Insider last month that the government was drafting legislation to introduce the fund, as early as September, a move that has angered small-medium enterprises (SMEs) as employers could bear 40 per cent of the cost.

SMEs make up 99 per cent of operational companies and employ 59 per cent of the labour force, or seven million workers, are the most labour-intensive, with 15 per cent of manufacturing costs coming from human resource.

The Malaysian Insider learnt that Putrajaya completed consultations with stakeholders at local and national levels last month for UI, with a proposed contribution from the government and employers each doubling what employees fork out.

“The UI is for those retrenched after confirmation. There has been a proposal that those confirmed after three months of work be compensated for up to 24 months,” a source told The Malaysian Insider.

But SMEs, who have previously complained of crippling wage bills under the minimum wage policy announced on Labour Day, are questioning the need for more compulsory labour costs.

Small-Medium Industry Association of Malaysia (SMIAM) members have said unemployment is a “non-issue” and the scheme would send the “wrong message” to employees.

They stressed that employees were already adequately compensated under the present Employment (Termination and Lay-Off Benefits) Regulations 1980 which provides for compensation to workers who are retrenched.

“If the government is going to push for the UI, the SMEs are worried. We are worried that by implementing this, the wrong message will be sent to employees.

“They should work hard to get better welfare, not at the expense of employers,” SMIAM president Teh Kee Sin told a news conference on June 9, after a dialogue with the Human Resources Ministry and the Social Security Organisation (Socso) on the matter.

Most developed economies practise a form of unemployment benefit, with the United Kingdom practising a Jobseekers’ Allowance (JSA), commonly known as “the dole.”

The British scheme compels those seeking welfare payments to commit to actively seeking employment but imposes no time limit, leading to accusations that many of the 5.5 million on the dole are purposely trying to remain unemployed.

The United States, however, imposes a 99-week limit on unemployment benefits.

But headwinds from the euro-zone crisis and a cooling Chinese economy has hit Malaysian exports, slowing growth to 4.7 per cent for the first three months of the year, the third consecutive quarterly drop since Q2 2011.

Several manufacturing associations told The Malaysian Insider recently they are already “cautious” and looking to “consolidate rather than expand” over the next 18 months without added pressure on their balance sheets from contributions to UI.

Teh also warned the Najib administration not to go down the same path as the controversial minimum wage policy “where they only consulted us at the last minute” over the move which the SMIAM said would add 30 per cent to employers’ labour costs.


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