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FMM: Current EIS model is neither balanced nor equitable

The Federation of Malaysian Manufacturers (FMM) supports the government’s move to review the Employment Insurance System (EIS).

FMM reinforces that employers are not against introduction of the EIS but is of the view that the current model is neither balanced nor equitable. For example, the current model is:

  • Too wide a scope for the scheme - which should only cover those retrenched because of business failure, not due to downsizing (where employers would have to provide termination benefits):
  • Allowing workers to enjoy both Employment Termination and Lay-off Benefits under the Employment Act, including those who are in Voluntary Separation Schemes and Mutual Separation Schemes. This group of workers will be enjoying double benefit, which is against the principle of social security, which is clearly stated in the Social Security Act;
  • Unnecessary strain on the fund by including training, which should be excluded and carried out by the Pembangunan Sumber Manusia Berhad (PSMB) financed by forfeited levy and late payments’ interest.

“Employers and employees contributing to the EIS are also very concerned over the management of the fund. Poor management and unwarranted expenditure would lead to unjustified increases in the contribution rate,” the release stated.

FMM maintains that the fund should be a tripartite responsibility, i.e. the government should contribute towards the operating expenditure of managing the fund. It remarked: “We are also of the view that instead of TWO funds, which would require two different sets of resources, whether human as well as investment in operating systems, the EIS should be managed by Social Security Organisation (SOCSO), especially since the contributors are the same group of persons.”

Additionally, FMM understands that SOCSO is in the process of adjusting its system to allow employers to make a single payment for both the SOCSO and EIS funds by end of 2018. The exercise should be widened to include single management of funds but with separate accounts to ensure transparency in the disbursement and management of funds.

Contributions to the fund should also stop once reserves reach a certain percentage like in South Korea where the contribution rate is reduced when the reserve is 1.5 to 2 times of annual expenditure.

FMM looks forward to the government calling for public consultation with all stakeholders in its review exercise so that there is a better understanding of the concerns and proposals by employers on improvements to the EIS to be more transparent and efficiently managed without unnecessarily raising the regulatory burden for both employers and employees as contributors.

Photo / 123RF

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