Santiago: High EIS contributions will burden workers, employers

Klang MP says the money collected under the scheme may snowball into millions over the years and will then sit idle.
KUALA LUMPUR: Klang MP Charles Santiago says the Employment Insurance Scheme (EIS) will eventually end up burdening both workers and employers.
In a statement issued at the Dewan Rakyat today, he said the scheme, managed by the state, required a contribution of 0.5% of monthly wages from both employers and workers.
A worker earning RM2,000 would thus pay RM10, and his employer would contribute the same amount, making it a total of RM20.
“If we multiply this by 6.5 million private sector workers covered by the scheme and further multiply it by twelve months, we will have a grand total of RM1.56 billion.
“It is this money that will be distributed to people who get thrown out of their jobs,” he said.
He then posited a worst-case scenario in which 35,000 retrenched workers in any given year were allowed a RM15,000 compensation package per person.
“This amounts to a total payout of RM525 million, leaving a surplus of RM1.04 billion to be brought forward to the following year.
“The remaining surplus will snowball over the years into a huge fund such as the Human Resources Development Fund (HRDF), Socso and EPF,” he said.
Santiago said questions then arose as to the reasons for collecting such a huge amount of money when the retrenchment payment is only 30% of total collections.
The DAP lawmaker warned that the money would be underutilised and sit idle.
“Why burden workers and employers, especially in the small and medium industries, who are already feeling the sting of stagnant wages, high cost of living and GST, plus payments for Socso and EPF?”
He added that the scheme might lead to workers losing their jobs as higher production costs would make employing foreign and undocumented workers more attractive.
A possible alternative was to have a tripartite arrangement between the government, employers and trade unions, he said.
“A possible alternative strategy in organising the EIS finances would be to use surplus funds that exist in HRDF and Socso more effectively.
“This, together with a RM1 contribution from each worker and payments from employers and the government in the next years could make the scheme highly sustainable in the long run.”
Santiago said with this strategy, the scheme could be implemented by the end of the year as opposed to the planned two years.
“The one-ringgit strategy would contribute about RM19.5 million towards the EIS coffers,” he added.
Santiago said it had been reported that HRDF’s cash surplus in 2014 was RM1.1 billion with RM1.3 billion and RM1.2 billion in the following two years respectively.
“Before jumping to implement its plan, the government must do an impact assessment to see how it affects workers and small and medium industries,” he said.
The EIS acts as a social safety net for workers.
It provides temporary income relief for retrenched workers who have not been paid termination or lay-off benefits.
The government tabled the bill for first reading at the Dewan Rakyat on Aug 1. The lawmakers are expected to debate the bill at this Dewan sitting.
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