The Employment Insurance System Act 2017 (EIS) is an Act that aims to encourage the employees to seek re-employment apart from strengthening their employability in the labour market through placement programmes. I. Introduction In 2015, more than 44,000 workers were retrenched due to various factors such as restructuring of the finance institutions, falling in the crude oil price and unstable ringgit currency.[1] In 2016, approximately 38,000 workers had lost their jobs with the majority of the lay-offs in manufacturing, trading, wholesale and retail, mining and finance sectors.[2] As a trading nation with an open market economy, Malaysia is no exception to the impact of shift in the economic structure from traditional economy to knowledge-based economy. Loss of employment, especially among low-skilled workers and labour-oriented industry is unavoidable. Among the Association of Southeast Asian Nations (ASEAN), only Thailand, in 2004, and Vietnam, in 2009, had established an unemployment insurance scheme.[3] The existing Employment Act 1955 (“Act 265”)[4] only provides social security protection to the unemployed workers in private sector whose wages do not exceed RM2,000 or employees in West Malaysia with specific jobs as described in the First Schedule of the Act 265. Furthermore, the Minister of Human Resources (“Minister”) may provide termination benefits, lay-off benefits and retirement benefits to the employees by regulations made under the Act 265.[5] For instance, Employment (Termination and Lay-Off Benefits) Regulations 1980 (“Regulation 1980”) stipulates that an employer should pay termination or lay-off benefits to an employee who has been employed under a continuous contract of service for the past 12 months.[6] However, both the Act 265 and Regulation 1980 only provide a minimum amount of termination or lay-off benefits payment to the employees. The existing laws neither encourage the employees to actively seek re-employment nor strengthen their employability in the labour market. Hence, the Employment Insurance System Act 2017 (“Act”), passed by the Dewan Rakyat on 25 October 2017, the Dewan Negara on 18 December 2017,[7] and came into force on 1 January 2018,[8] is a timely yet comprehensive law to protect the workers in Malaysia. The Act sets out provisions to provide certain benefits and a re-employment placement programme for insured persons in the event of loss of employment which will promote active labour market policies. This article provides an overview of the Act. II. Application The Act applies to all industries having one or more employees who are Malaysian citizens or permanent residents in Malaysia.[9] Hence, all employers in the private sector who have one or more employees are obligated to insure their employees (“insured person”). The Act is applicable to all employees including part-time workers irrespective of the amount of wages.[10] However, public servants, domestic workers, self-employed and few others as described in the First Schedule are excluded. It is pertinent to note that the list is not exhaustive because the Act empowers the Minister to amend the First Schedule from time to time.[11] III. Administration The Act establishes the Employment Insurance System (“System”)[12] which is administered by Social Security Organisation (“SOCSO”).[13] In this regard, SOCSO empowers SOSCO Board (“Board”) to perform any of its functions, duties and obligations under the Employees’ Social Security Act 1969.[14] Hence, the existing functions and roles of the Board will be expanded to cover administration of the System.[15] Furthermore, the Act establishes the Employment Insurance Committee (“Committee”) to advise the Board on all matters in relation to the System including the rates of contribution, benefits and the employees to be insured under the Act, and the investment of the Employment Insurance Fund (“Fund”).[16] In line with the principle of a tripartite system, the Committee comprises government representatives, trade unions and employer’s associations.[17] The Committee is further reinforced by the appointment of a maximum of three other members with experience, knowledge and reasonable expertise in employment insurance, labour matters and investment.[18] IV. Registration The Act requires every employer to register his industry with SOCSO within the period and manner as prescribed in the Act.[19] Any employer who fails to comply with it shall be liable to a fine not exceeding RM10,000 or to imprisonment for a term not exceeding 2 years or both.[20] However, employers and employees who have registered with SOCSO in accordance with the Employees’ Social Security Act 1969 shall be deemed to be registered under the Act.[21] V. Contributions All employees shall be registered and insured by their employers irrespective of their wages.[22] The contribution payable in respect of each employee shall be shared equally among the employer and employee at the rate specified in Part I of the Second Schedule.[23] If an insured person has multiple employers, every employer should pay the contributions in respect of the insured person separately.[24] The contribution can range from 10 cents for wages up to RM30 and RM15.80 for monthly wages up to RM4,000.[25] If the wages of the insured person exceed RM4,000 per month, the wages shall be deemed to be RM4,000 for the purpose of payable contribution under the Act.[26] However, the Minister, upon consideration of the sustainability of the Fund, may determine the rates of contribution in accordance with Part I, Part II, Part III or Part IV of the Second Schedule in every three years or more.[27] In this regard, the Minister will conduct a proper actuarial review, engage with relevant stakeholders, obtain recommendations from the Committee and seek approval from the Board before he proceeds to decide on the new rates by order published in the Gazette.[28] In the same vein, the different rates as specified in the Second Schedule are determined upon a review of the financial stimulation model with the need to sustain the Fund for a long period of time. It is pertinent to acknowledge that the total contribution rate payable by the employer and employee is less than 0.4%, which is the lowest rate compared to the other countries implementing a similar system such as Argentina (1.5%), Canada (4.39%), China (3%), South Korea (2.15%), the United States of America (3.2%), Thailand (1.25) and Vietnam (3%).[29] VI. Benefits An insured person who considers that he or she has been laid off shall submit an application of claim for benefits to SOSCO within 60 days from the date of the loss of employment.[30] In this context, loss of employment occurs if the contract of service of an insured person is terminated or becomes void due to reasons other than: (a) the voluntary resignation by the insured person; (b) the expiry of contract of service of the insured person; (c) termination of the contract of service by mutual consent without terms and conditions; (d) completion of the work in accordance to the contract of service; (e) retirement of the insured person; or (f) the termination of contract of service of the insured person due to misconduct.[31] The phrase ‘becomes void’ indicates circumstances which are beyond the control of the employee or the employer and cause the contract of service unenforceable such as natural catastrophe, public commotion and so on. This is to prevent moral hazards, frauds, exploitation of employees, unfair dismissal and to preserve employees’ rights under the employment law. Next, SOCSO should determine if the insured person fulfils the contributions qualifying conditions in respect of the claim for benefit as specified in the Fourth Schedule up to 12 claims and the insured person has not attained the minimum retirement age on the date of the loss of employment.[32] The Act empowers SOSCO to approve or reject the claim for benefits after proper consideration.[33] Once the claim has been approved, SOSCO shall then decide on the appropriate benefits to be provided to the insured person. In this regard, the right to receive any benefits under the Act is neither be transferable nor attachable.[34] However, if an insured person dies, in coma or is of unsound mind during the period in which the person is entitled to or is receiving the benefits, such benefits shall be paid to his or her dependants.[35] SOCSO may suspend the payment of any benefits for a period of not more than 60 days if there is reasonable ground to believe that the insured person has furnished false, untrue or incorrect particulars.[36] Then, SOCSO is required to carry out an inquiry in respect of the suspension.[37] The payment of any benefits suspended shall forthwith be resumed if the insured person is proved innocent under the Act and vice versa.[38] Any claim for benefits made under the Act is not a bar to any claim and representation under other relevant written laws such as the Industrial Relations Act 1967,[39] the Employment Act 1955,[40] the Labour Ordinance of Sabah,[41] the Labour Ordinance of Sarawak[42] and the Minimum Retirement Age Act 2012.[43] Nonetheless, SOCSO shall hold the determination on the question of loss of employment in respect of the claim for benefits until the claim under other laws has been resolved.[44] The Act provides for the following benefits: A. Job Search Allowance[45] Job search allowance means a monthly payment for a period of three to six consecutive months to assist an insured person who has lost employment during the period of seeking employment.[46] SOCSO should pay to the insured person at the rate on a monthly basis as specified in the Third Schedule: (a) 80% of the assumed monthly wages for the first month; (b) 50% of the assumed monthly wages for the second month; (c) 40% of the assumed monthly wages for the third and fourth month; and (d) 30% of the assumed monthly wages for the fifth and sixth month. It is observed that the higher rate at the early stage of unemployment is provided to reduce the burden of an insured person who has just been retrenched. The declining rate is set to encourage the insured person to actively seek re-employment. The payment for job search allowance shall be made to the insured person immediately after 7 days from the date of the approval of a claim for such benefit (“waiting period”). Once the insured person is secured with an offer of employment during the 6 month period, the insured should notify SOCSO within 7 days from the date of acceptance of the offer.[47] Also, the job search allowance shall continue to be paid to the employees although they have attained the minimum retirement age if the loss of employment occurs before they attain the minimum retirement age.[48] B. Early Re-Employment Allowance[49] Early re-employment allowance means an incentive paid in lump sum to an insured person for accepting an offer of employment from any employers and commencing the employment within the waiting period or the period of receiving job search allowance at the rate as specified in the Third Schedule.[50] The Act provides for early re-employment allowance to be paid to the insured person who receives a job offer and reports to duty for work within the waiting period or during the period of receiving a job search allowance. In such events, the insured person will be entitled to 25% of the total job search allowance or the total balance of the remaining unpaid job search allowance as described in the Third Schedule.[51] If the insured person accepts the offer within the waiting period, he may choose whether to accept the early re-employment allowance.[52] If he chooses not to accept the allowance, then the contributions qualifying condition will not be affected and he shall be deemed to have never made the claim for such benefits.[53] Also, it is important to note that no early-employment allowance shall be paid to the insured person after the 6 months period of receiving job search allowance expires.[54] C. Reduced Income Allowance[55] Reduced income allowance means a lump sum payment to assist the insured person who has two or more employments and has lost one or more of the employments.[56] If the insured person has two or more employments at the same time and has lost one or more, but not all, of the employments, he should be entitled to a reduced income allowance for each loss of employment at the rate as specified in the Third Schedule. The reduced income allowance shall be paid in lump sum to the insured person.[57] In this context, the insured person shall not be entitled to a job search allowance, a training allowance or an early re-employment allowance.[58] However, if the insured person who has two or more employments loses all of the employments on the same date, he will then be entitled to one job search allowance for one loss of employment and a reduced income allowance for the other loss of employment, and he may select the loss of employment for which the job search allowance shall be paid.[59] D. Training allowance and training fee[60] Insured person who has lost an employment may apply to SOCSO to attend any training provided by a training provider approved by SOCSO during the period the insured person receives the job search allowance. This application must be done within the period of not more than 12 months after the insured person has received the job allowance, or within the period of 6 months after accepting an offer of employment and reporting to work.[61] In this regard, the insured person will be entitled to a training allowance for not more than 6 months[62] at the rate of 25% of the assumed monthly wages calculated on daily basis. The training allowance is capped at a minimum of RM10 and a maximum of RM20 per day which is paid monthly according to the number of training days attended by the insured person.[63] On another note, SOCSO shall bear and pay a maximum of RM4,000 training fees to the training provider who provides the training to the insured persons.[64] In the event where the insured person who is undergoing any training passed away, SOCSO should continue paying the training fees for the training attended by the insured person as agreed between SOCSO and the training provider.[65] For the purpose of this Section, ‘training fees’ means all costs relating to the training of an insured person including meals and materials for the training.[66] VII. Re-Employment Placement Programme Re-employment placement programme means a programme managed by SOCSO for insured person for the purposes of re-employment.[67] The Act requires insured person to commence participation in the re-employment programme within the waiting period.[68] The insured person is required to comply with directions given by SOCSO in respect of the programme, and shall be available to work, actively seek for work, and undergo any training as necessary.[69] If there is any offer of employment suitable to the insured person, SOCSO shall inform the insured person accordingly.[70] In the event that the insured person refuses the offer without reasonable ground, the insured person will not be entitled to receive any benefits under the Act.[71] Here, it is observed that the Act does not discuss what can be construed as reasonable grounds. Hence, the test of reasonableness under Regulation 1980 can be used to determine what constitutes reasonable grounds.[72] Under Regulation 1980, if the new owner of a business offers to continue to employ the employee with favourable terms and conditions of employment but the insured person unreasonably refuses the offer, the insured person should not be entitled to any termination benefits.[73] Similarly, the Act stipulates that the insured person must provide reasonable reason when refusing an offer of re-employment informed by SOCSO, otherwise the insured person will not be entitled to the relevant benefits provided under the Act. VIII. Financial Provision SOCSO is tasked to administer the Fund[74] which consists of contributions payable by the employers, insured persons and all other moneys and properties lawfully received by SOCSO[75] including an allocation of RM52 million by Government of Malaysia (“Government”) under the 10th Malaysia Plan and RM70 million announced by the Prime Minister during the Labour Day 2017 celebration.[76] It is pertinent to note that even though the Government is not a party to pay the contribution payable in respect of the insured person, the Government has indirectly illustrated its commitment to support the System financially. In this context, the Fund can only be utilised for the payment of benefits, training fees, expenses incurred for the re-employment placement programme, evaluation costs, administration expenditure and other relevant purposes.[77] The Board is empowered to invest the Fund subject to such terms and conditions as may be determined by the Minister after consultation with the Minister of Finance.[78] Furthermore, SOCSO will have to prepare a budget annually showing the probable receipts and the estimated expenditure of SOCSO for the ensuing year.[79] The budget is to be submitted for the approval of the Minister accordingly.[80] Besides, SOCSO’s account must be audited annually by the Auditor General.[81] The Board is required to submit the annual report and the audited account to the Minister and subsequently, the Parliament. Furthermore, the Board is tasked to carry out actuarial review on the implementation of the System and the report should be submitted to the Minister every five years.[82] It is opined that this check and balance mechanism is necessary to examine the relevance of the System from time to time. IX. Social Security Appellate Board The Act provides jurisdiction of the Social Security Appellate Board (“Appellate Board”) to decide on any question, dispute, claim or appeal referred to the Appellate Board where the application of claim is made within 60 days from the date on which the insured person consider himself losing employment.[83] The Appellate Board may submit any question of law for the decision of the High Court.[84] It is pertinent to acknowledge that the Appellate Board consists of a Chairman and two assessors representing employers and employees respectively under section 83 of the Employees’ Social Security Act 1969. The membership of the Appellate Board is commendable for it is representative of the essence of a tripartite system in settling any arising dispute fairly. X. Conclusion In a nutshell, the System seeks to enhance the labour market in Malaysia as a dynamic and efficient one. It aims to help the insured persons who had lost their jobs via certain benefits and re-employment placement programmes. For instance, it supports the unemployed in seeking new employment and enhances their employability through upskilling, training, reskilling workshops. Additionally, unemployment benefits enable insured persons to maintain a minimum standard of living until their re-employment. The System serves as complement and shall not operate as a bar to the existing labour law.[85] For instance, an insured person may still be entitled to benefits provided under both the Act 265 and Regulation 1980. The Government does not intend to burden the employers via the contribution in respect of their employees. In fact, the System enhances the insured persons’ skills and indirectly increases the nation’s productivity once the insured persons are re-employed. The System will be constantly reviewed to meet the current needs and to shape positive attitudes towards the labour market in Malaysia.[86] It is hoped that the Act will bring positive impact to the labour market in Malaysia. With a comprehensive social security system, Malaysia is more ready to face the global economic challenges existing in this ever-evolving world. The law is stated as at 20 January 2018. Written by Ng Seng Yi, a final year student of the Faculty of law, University of Malaya and supervised by Dr. Siti Zaharah Jamaluddin, Associate Professor in the Faculty of Law, University of Malaya. Edited by Adam Huang. Footnotes:
[1] Hansard, House of Representative, Thirteenth Parliament, Fifth Session, Third Meeting, 25 October 2017, p 131, (Pandikar Amin Mulia). [2] See footnote above. [3] International Labour Organisation, Comparative Review of Unemployment and Employment Insurance Experiences in Asia and Worldwide, (Bangkok, ILO, 2013). [4] Act 265. [5] Section 60J(1) of the Employment Act 1955. [6] Regulation 3(1) of the Employment (Termination and Lay-Off Benefits) Regulations 1980. [7] Bernama, “Dewan Rakyat Passes Employement Insurance System Act 2017”, The News Straits Times, 26 October 2017, <https://www.nst.com.my/news/nation/2017/10/295134/dewan-rakyat-passes-employment-insurance-system-Act-2017> [8] Bernama, “Employment Insurance System to be Implemented Next Year, Says Minister”, The Malaymail Online, 31 October 2017, <http://www.themalaymailonline.com/malaysia/article/employment-insurance-system-to-be-implemented-next-year-says-minister> [9] Section 2 of the Employment Insurance System Act 2017. [10] Section 2(1) reads together with Section 16(2) of the Employment Insurance System Act 2017. [11] Section 84 of the Employment Insurance System Act 2017. [12] Section 4(1) of the Employment Insurance System Act 2017. [13] Section 4(2) of the Employment Insurance System Act 2017. [14] Section 59B of the Employees’ Social Security Act 1969 (Act 4). [15] Section 4(3) of the Employment Insurance System Act 2017. [16] Section 8 (2) of the Employment Insurance System Act 2017. [17] Section 8(3) of the Employment Insurance System Act 2017. [18] Section 8(3)(n) of the Employment Insurance System Act 2017. [19] Section 14(1) of the Employment Insurance System Act 2017. [20] Section 14(2) of the Employment Insurance System Act 2017. [21] Section 15 of the Employment Insurance System Act 2017. [22] Section 16(1) of the Employment Insurance System Act 2017. [23] Section 18(1) of the Employment Insurance System Act 2017. [24] Section 19 of the Employment Insurance System Act 2017. [25] Part I, Second Schedule of the Employment Insurance System Act 2017. [26] Section 16(2) of the Employment Insurance System Act 2017. [27] Section 18(3) of the Employment Insurance System Act 2017. [28] Hansard, House of Representative, Thirteenth Parliament, Fifth Session, Third Meeting, 25 October 2017, page 139, (Pandikar Amin Mulia). [29] See footnote 3 above. [30] Section 28 of the Employment Insurance System Act 2017. [31] Section 30(1) of the Employment Insurance System Act 2017. [32] Section 32(1) of the Employment Insurance System Act 2017. [33] Section 33(1) of the Employment Insurance System Act 2017. [34] Section 38(1) of the Employment Insurance System Act 2017. [35] Section 39(1) of the Employment Insurance System Act 2017. [36] Section 41(1) of the Employment Insurance System Act 2017. [37] Section 41(3) of the Employment Insurance System Act 2017. [38] Section 41(4) of the Employment Insurance System Act 2017. [39] Act 177. [40] Act 265. [41] Sabah Cap 67. [42] Sarawak Cap 76. [43] Act 753. [44] Section 43(2) of the Employment Insurance System Act 2017. [45] Section 34 of the Employment Insurance System Act 2017. [46] Section 3 of the Employment Insurance System Act 2017. [47] Section 34(5) of the Employment Insurance System Act 2017. [48] Section 34(3) of the Employment Insurance System Act 2017. [49] Section 35 of the Employment Insurance System Act 2017. [50] See footnote 45 above. [51] Section 35(1) of the Employment Insurance System Act 2017. [52] Section 35(3) of the Employment Insurance System Act 2017. [53] Section 35(4) of the Employment Insurance System Act 2017. [54] Section 35(5) of the Employment Insurance System Act 2017. [55] Section 36 of the Employment Insurance System Act 2017. [56] Supra, n.45. [57] Section 36(2) of the Employment Insurance System Act 2017. [58] Section 36(1)(b) of the Employment Insurance System Act 2017. [59] Section 36(4) of the Employment Insurance System Act 2017. [60] Section 37 of the Employment Insurance System Act 2017. [61] Section 37(1) of the Employment Insurance System Act 2017. [62] Section 37(3) of the Employment Insurance System Act 2017. [63] Section 4(a) of the Fourth Schedule of the Employment Insurance System Act 2017. [64] Section 37(6) of the Employment Insurance System Act 2017. [65] Section 40 of the Employment Insurance System Act 2017. [66] Section 37(7) of the Employment Insurance System Act 2017. [67] Section 3 of the Employment Insurance System Act 2017. [68] Section 44(1) of the Employment Insurance System Act 2017. [69] Section 44(2) of the Employment Insurance System Act 2017. [70] Section 44(3) of the Employment Insurance System Act 2017. [71] Section 44(7) of the Employment Insurance System Act 2017. [72] Regulation 8(1) of Employment (Termination and Lay-Off Benefits) Regulations 1980. [73] Regulation 8, Employment (Termination and Lay-Off Benefits) Regulations 1980. [74] Section 46(1) of the Employment Insurance System Act 2017. [75] Section 46(2) of the Employment Insurance System Act 2017. [76] Hansard, House of Representative, Thirteenth Parliament, Fifth Session, Third Meeting, 25 October 2017, page 144, (Pandikar Amin Mulia). [77] Section 47 of the Employment Insurance System Act 2017. [78] Section 50(2) of the Employment Insurance System Act 2017. [79] Section 52(1) of the Employment Insurance System Act 2017. [80] Section 52(2) of the Employment Insurance System Act 2017. [81] Section 54(1) of the Employment Insurance System Act 2017. [82] Section 57(1) of the Employment Insurance System Act 2017. [83] Section 59 of the Employment Insurance System Act 2017. [84] Section 64 of the Employment Insurance System Act 2017. [85] See footnote 43 above. [86] Section 87 of the Employment Insurance System Act 2017.
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11/1/2020 06:50:28 pm
The Employment Insurance System (EIS) was first implemented in January 2018 by PERKESO. It is a financial scheme aimed at helping employees who lost their jobs until they find new employment.
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