Shades of 1989 as Putrajaya floats financial safety net for workers

KUALA LUMPUR, May 3 ― With the current economic slowdown, the government has again proposed setting up an insurance scheme for the jobless, but its rollout any time soon is questionable as employers and workers refuse to pay extra for another fund.

The idea for a national financial safety net for workers who lose their jobs dates back to 1989, however, former human resources minister Datuk Seri Dr S Subramaniam said Putrajaya had been unable to make progress with the scheme over the past 27 years due to objections from employers.

“They couldn’t agree to the models we proposed… their reason was, for a company that is winding up, they would have already paid for retrenchment benefits but this is of course for [financially] healthy companies.

“But for the unhealthy companies, they won’t be able to pay anything,” he told Malay Mail Online when contacted yesterday.

On Labour Day Sunday, Prime Minister Datuk Seri Najib Razak announced the government is considering introducing an Employment Insurance System (SIP) as a buffer for workers who lose their jobs.

Dr Subramaniam, who is now health minister, said the previous proposal took a three-pronged approach with the government, employers and workers all contributing to the insurance scheme.

The scheme is intended to financially aid retrenched workers during the period of seeking re-employment for up to six months.

“The idea is good as it would help give some cushion but only for a six-month period… we don’t want to encourage them to rely on getting money from it. The idea is to help them get jobs again,” Dr Subramaniam said.

But the government’s engagement with unions on the proposal also met a brick wall as workers refused to contribute to the programme, citing rising living costs and high taxes.

Putrajaya had initially proposed that employers and employees contribute 0.25 per cent from their gross salary to the insurance scheme, but later suggested companies deduct the amount from their 1 per cent contribution to the Human Resources Development Fund (HRDF).

“The government proposed that employers not contribute anything extra but instead take 0.25 per cent from their contribution to HRDF for this insurance programme,” Malayan Trade Unions Congress (MTUC) secretary-general N. Gopal Kishnam told Malay Mail Online yesterday when contacted.

“MTUC is not so agreeable to this because we do not want workers to fork out anything extra, even if it is just 0.25 per cent, as they are already bogged down with all sorts of taxes like the GST and other rising living costs,” he added.

The HRDF was set up in 1993 to help employers upskill their workers, which is among the programmes Najib said SIP would introduce.

But Gopal questioned the effectiveness of HRDF as a workers upskilling vehicle, saying MTUC opposed the idea that money meant for HRDF was channelled to another fund.

“We need to make sure if the HRDF is really managed well and is benefiting the workers because funds with the HRDF seems to be under utilised,” he said.

Unlike rich economies like the US or the United Kingdom, Malaysia does not have unemployment insurance. Workers are required to contribute to the Social Security protection scheme but the amount contributed is too small to cover retrenchment.

“It’s not like in the west. Over there workers pay a lot for social security which also covers retrenchment. Here the amount workers pay is meant for specific protections and not sufficient to cover retrenchment,” Dr Subramaniam said.

The minister said he is uncertain if Najib’s announcement meant all parties have agreed to the insurance scheme as he is no longer with the human resources ministry.

The prime minister said the government is currently finalising the details, saying it will be a sharing of responsibilities between employers and workers.

He said an announcement is expected to be made soon. – MMO