Did you realize that your paycheck last month had a new deduction? It took out from RM1.90 to RM7.90 from your gross salary. It’s not Employee Provident Fund (EPF) nor Social Security Organisation (SOCSO)—it’s Employment Insurance Scheme (EIS) or Sistem Insuran Pekerjaan (SIP) in Malay.
Don’t panic over the new deduction. It’s actually a beneficial contribution for all of us. Here’s what you need to know about it.
1. What is Employment Insurance Scheme (EIS)?
EIS is a financial safety net that protects the interest of employees, which follow suits countries like South Korea and Canada. It’s a job-loss coverage scheme that aims to help workers who have lost their jobs by providing them with temporary financial aid.
The financial aid will last up to six months based on a scaled amount but the official scheme will only kickstart in 2019. In the meantime, the government has allocated RM136 million for the unemployed to receive an interim benefit in the year 2018 where they will receive RM600 worth of allowance a month for a maximum span of three months.
The combined 0.4% mandatory contribution by employees and employers in the private sector will gather a collection of RM479.5 through this initiative, said EIS chief Datuk Mohd Sahar Darusman.
Other than providing financial aid, EIS also helps the unemployed to find work by providing career counselling, job matching and placements, and training programmes.
Malaysian Employers Federation (MEF) executive director Datuk Shamsudin Baradan said that there were about 30,700 people underwent retrenchment as of September 2017, TheSun Daily reported last month. Paying a few ringgit a month for a job-loss insurance scheme definitely worth every cent of it.
2. How did the new mandatory contribution come about?
EIS came after the Employment Insurance System Bill 2017 was passed in the Dewan Rakyat in October 2017. It will benefit 6.6 million workers and 430,000 employers in the private sector.
It began to roll out in January 2018 and it’s administered by the Social Security Organisation (SOCSO).
3. How much will you be contributing every month?
For every employee, you would need to contribute 0.2% of your salary to EIS. Whereas for your employer, they would need to contribute on your behalf for another 0.2%.
SOCSO has outlined the rate of contribution based on salary range groups in a briefing document:
The minimum contribution from you would be RM1.90 if your salary starts at RM1,000. The total 0.4% contribution into EIS includes your company’s contribution for you as well as your own. Thus, EIS collects RM3.80 each month. The 0.2% salary-based contribution is capped at RM7,90, therefore you don’t have to worry that you would be paying thousands of ringgit if you are making hundreds of thousands a month.
The capping point stands at RM4,000 and earners in this category contribute a combined RM15.80 a month to the scheme. If the company refuses to comply with the EIS, legal actions will ensue and that would lead up to two years’ prison or a maximum fine of RM10,000, or both, if found guilty.
4. Who will eligible for the financial aid?
The scheme is applicable to every private sector employee if they:
• lost their job due to retrenchment or redundancy;
• accepted VSS/MSS (voluntary/mutual separation scheme)
• lost their job due to force majeure (unexpected, unavoidable accident) such as natural disasters, riot, fire, or gas leak incidents
• lost their job due to employers who absconded (without following the proper process of separation), became bankrupt, or closed down
• lost their job due to business restructuring, automation, or digital and technology
• lost their job due to a downsizing exercise
• lost their job due to constructive dismissal (forced into resigning by the employer’s conduct) or breach of contract by employers
• were ordered to perform work beyond normal scope that endangers the safety and health of the employee
• resigned due to personal or family threats, or due to sexual harassment on the employee
Whereas, one is not eligible for the insurance payout if they:
• lost their job due to misconduct at work
• tendered voluntary resignation
• stopped working due to retirement
• stopped working due to expiry of fixed term contract
5. How will it affect you?
Source: Astro Awani
Prime Minister Datuk Seri Najib Tun Razak said that the scheme will benefit both employers and employees in the long run.
“EIS will add to the efficiency of the labour market (in the country) through a better system of matching supply and demand, and lead to increased productivity and competitiveness of the industries,” said our prime minister who is also our minister of finance.
Shamsudin projected that about 50,000 Malaysians will lose their jobs this year due to various factor and he included EIS as one of the factors. The mandatory 0.2% contribution by employers based on their employees’ salary will lead to an increase of operating cost.
The MEF executive director’s statement had bothered many Malaysians but Mohd Sahar later disagreed to Shamsudin’s outlook. He said retrenchment figures in the country hardly exceeded 40,000 annually for the last 10 to 20 years.
Malaysian Trades Union Congress (MTUC), on the other hand, welcomed the implementation but afraid that it would be abused by employers. Secretary-general J. Solomon said that stringent regulations have to be in place or else employers will use EIS as a reason to reduce their workforce.
“We support the EIS but we wanted the EIS not to be abused.
“With EIS, employers can tell workers, ‘I will retrench you because now you can get money from EIS’,” said J. Solomon.