Ministry insists will forge ahead with studying unemployment benefits
KUALA LUMPUR, June 12 — The Human Resources Ministry (MOHR) insisted today it will continue to look into unemployment insurance (UI) despite reports that Putrajaya will shelve the plan until minimum wage is fully enforced.
Minister Datuk Seri Dr S. Subramaniam said “there is nothing to postpone” as no decision has been made on how to implement the scheme that has angered small-medium enterprises (SMEs) who say it will create unnecessary costs during a global economic slump.
“There is no decision made so there is nothing to postpone. The studies will proceed,” he told a press conference, although he admitted that given the added cost expected from a new minimum wage policy “their fears are justified.”
However, with SMEs saying added costs from UI “might be the last straw that breaks the camel’s back,” Dr Subramaniam (picture) said “the government’s stand is that UI should not burden them unduly.”
National Economic Council (NEC) member Datuk Seri Dr Chua Soi Lek had said yesterday the prime minister has directed the Human Resources Ministry and the International Trade and Industry Ministry 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,” the MCA president said in a media statement.
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.
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 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.
“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.
“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 have 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.