MEF Rejects Proposal for Retrenchment Fund and Employment Insurance Scheme

August 30, 20168:36 am570 views
MEF Rejects Proposal for Retrenchment Fund and Employment Insurance Scheme
Shamsuddin Bardan, Executive Director, Malaysian Employers Federation (MEF)

The Malaysian Employers Federation (MEF) has rejected proposals for retrenchment fund and an employment insurance scheme, saying these are not feasible and would not benefit majority of the employees, EF Executive Director Shamsuddin Bardan told FreeMalaysiaToday.

He further added that these initiatives would not benefit the employer either. The retrenchment fund proposal made by Parti Sosialis Malaysia (PSM), said the government should provide seed funding with employees and the employer contributing towards it.

Government is mulling on the proposal of the employment insurance scheme that would require employees to contribute a certain percentage of their salaries, and employers to make matching contributions as well. The main idea behind introducing this scheme is to help retrenched workers to survive for six months on 50 percent of their salaries.

On the basis of calculation made on the past retrenchment figures, Shamsuddin firmly believes that while hundreds of ringgit has been collected every year, the payout to retrenched staff would not even reach to 20 percent of the amount.

The main issue being, some companies do not pay the retrenchment benefits to employees as they are expected to. “If we have the fund, everyone would be penalised, with revenues and salaries being deducted. Worse still, it will encourage irresponsible employers to forgo paying retrenchment benefits, because they know the employees will be taken care of,” Shamsuddin added.

See: Malaysian Government Plans to Introduce Insurance Scheme to Protect Retrenched Workers

Instead, Shamsuddin proposed a new idea – a different scheme to help retrenched workers. He believes this would benefit all parties, with employers, employees and the government taking equal responsibility with limited liability.

“For employees, a third EPF account could be set up with deductions from their salary going into this account until it amounts their one-month salary.”

Companies can set aside equivalent of one-month’s pay for all the staff into a company account. The government could set aside allocation for retrenchments, based on worker’s income records and disburse month’s wages to those who are retrenched.

By adopting this strategy, any employee in the private sector who has been retrenched can get upto three months’ wages on top of their retrenchment benefits.

However, funds from the government and employer would only be disbursed, when a worker is retrenched. Companies would then not lose money, and employees who have not been retrenched can avail of an additional month’s salary upon retirement.

Owing to a string of factory closures in the last couple of months, the calling for safety and security of retrenched workers has grown significantly.

Also read: Malaysian Employers Must Honour Minimum Wage Rates as per the MWO 2016, Else Face Penalty

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