MEF objects to Employee Insurance Scheme for retrenched workers

The Malaysian Employers Federation (MEF) has opposed to Putrajaya’s plan of the Employee Insurance Scheme (EIS) as reported in The Malay Mail Online. Although the scheme was aimed to provide financial support for retrenched workers, the group said the “EIS will escalate operating costs and could affect businesses severely amid the economic slowdown.”

The federation commented in a statement: “It will be an additional burden to the already high cost of doing business and will make Malaysian employers less competitive, especially given the challenging economic outlook.”

In fact, the deputy human resources minister Datuk Ismail Abd Muttalib had told the Dewan Rakyat that the Economic Planning Unit (EPU) has approved the planning papers for the proposal. He said that the paper will be presented to the cabinet soon; and if approved, the EIS bill could be tabled in the next parliament sitting.

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MEF said it had already submitted a protest memorandum to prime minister Datuk Seri Najib Razak. The bill was proposed by the government following concerns that the economic downturn would force companies to retrench workers.

However, the federation said companies were already paying retrenched workers benefits.

It also said up to 99% of the workforce will not benefit from the scheme despite making contributions as the retrenchment rate have remained less than one percent.

MEF noted: “The retrenchment rate, even during the bad years, was at an average of 0.6% of total private sector employees.”

“If the EIS were to be set up, only 0.6 per cent of EIS contributors would benefit,” it added.

As an alternative, the MEF proposed a private savings scheme in which employees will contribute one percent to a third to the Employees Provident Fund account.

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