KUALA LUMPUR, June 9 — The federal government plans to introduce unemployment benefits by pushing through legislation as early as September, a move that has angered small-medium enterprises (SME) as employers could bear 40 per cent of the cost.
The Malaysian Insider has learnt that Putrajaya completed consultations with stakeholders at local and national levels last month for unemployment insurance (UI), with a proposed contribution from the government and employers each doubling what employees fork out.
A source said the government is looking at announcing the move as soon as September, the same month Prime Minister Datuk Seri Najib Razak will table Budget 2013, likely before leading Barisan Nasional (BN) into polls for the first time.
“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,” the 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.
They say they were left in the dark over UI until a few weeks ago. The Small-Medium Industry Association of Malaysia (SMIAM) has since pressured the Human Resources Ministry and the Social Security Organisation (Socso) into a dialogue session to be held today.
SMIAM president Teh Kee Sin told The Malaysian Insider that they were left out of earlier consultations despite being the hardest hit from any hike in labour costs.
SMEs, which 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.
“We have no idea what the progress is. What we want to know is whether this is to replace compensation already set out in the Employment Act or a new parallel system. We are already making compulsory monthly contributions for Socso and the Human Resources Development Fund.
“The government is now attempting to introduce UI. Can we digest another compulsory cost from the government?” Teh asked, saying that the move “seems to promote unemployment” rather than aid the local export-oriented economy amid global financial troubles. According to the Malaysian Trades Union Congress (MTUC), the umbrella body representing 800,000 workers from 390 unions, the government completed “regional and national satellite workshops on May 24 to gain feedback” from the three main stakeholders, i.e., the government, employers and workers.
“The steering committee is led by Socso. The International Labour Organisation (ILO) has been involved from the start and will send in their expert advice by the end of June,” MTUC secretary-general Abdul Halim Mansor told The Malaysian Insider.
The Malaysian Insider also reported this week that general elections will likely be delayed until November to allow the ruling BN to shore up support with Deputy Prime Minister Tan Sri Muhyiddin Yassin suggesting that more cash handouts are in store.
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 Abdul Halim had also told The Malaysian Insider last month that the government was drafting legislation to introduce the fund.
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.
“We want time to give our input, to object and protest if need be,” he said.