KPRU Policy Paper


Introduction to Employment Insurance Scheme (EIS)

Dewan Rakyat sitting will resume on 24 July 2017. The Human Resources Minister Datuk Seri Richard Riot Jaem said the Employment Insurance Scheme (EIS) will be tabled in the coming Parliament sitting.

On 23 March 2016, Prime Minister Dato’ Seri Najib Tun Razak said that the government agreed to implemente the EIS for 6.5 million local workers in the private sector. The purpose of the EIS is to help working class people who lost their jobs to obtain financial aid and find a new job.

The workers will get a temporary financial aid and find a new job through employment service programmes which covers jobseekers’ aid, career counselling and job matching. Besides that, workers who lose their jobs will be given training either in the form of retraining or skill enhancement in order to enhance their job ability.

Later, the Ministry of Human Resources (MOHR) said that the implementation of the EIS is to help those who are unemployed due to involuntary loss of job. Under this programme, they can receive a certain amount of unemployment allowance (based on their salary before unemployment) while it is compulsory for them to join a job seeking programme. The EIS will be administered by the Social Security Organisation (SOCSO) which is an agensy under the MOHR.

According to the MOHR , although this employment insurance is similar to the unemployment insurance in some other countries, an unemployment insurance focuses on unemployment benefits, while employment insurance is attached with an active labour market programme which helps the unemployed to find a job, while they are receiving unemployment benefits. Therefore the EIS should not be seen as encouraging people to be lazy to work, but pressuring them to work.

According to the proposal of implementing EIS by the MOHR, the participation is compulsory for all employees who are Malaysian citizens and protected by the SOCSO. One must have contributed for a minimum of 12 months within 24 months in order to enjoy the benefits under EIS. Those who voluntarily resigned, those whose employment contract has expired, and those who are mandatorily retired, are ineligible.

The think tank Political Studies for Change (KPRU) wishes to emphasize in this article that the Social Security (Minimum Standards) Convention, 1952 (No. 102) of the International Labour Organisation (ILO) stated that there should be monetary benefits given to the unemployed who are capable and available to work.

While the EIS proposal by the ministry limits the scope of unemployed to those who lost their jobs, KPRU is in the opinion that the concept of unemployed within the SIP should be extended to those who are jobless due to other factors. Such wider concept should be taken into account and given a clear definition so that workers will not face problems in enjoying the benefits under the EIS once this scheme is being in force.

Just as contributing to SOSCO and Employment Provident Fund (EPF) as usual, the employers and employees are required to contribute for the EIS. Each of both are required to contribute 0.25% of the employee’s salary.

While an unemployed is enjoying the benefits under EIS, he or she is required to participate in a job seeeking service and career counselling. They must frequently report themselves on their efforts in job findings.

It is understood that while receiving the unemployment benefits, a person is qualified to recive a job search allowance (JSA) of 30-80% of the monthly salary for 3 to 6 months. The salary limit of JSA is RM4,000 per month. If they manage to get a new job before the end of the period of receiving JSA, they will continue receiving 25% of the JSA for the remaining period, similar to South Korea (which is 50%) .

At the same time, except those with multiple employers, they are also qualified to recive a training allowance (TA) of 25% of the salary before unemployment, this allowance is at a minimum of RM300 and the maximum is RM600, and just as the JSA, the payment for TA is also 3 to 6 months.

In order to prevent laziness in job finding and abuse of this system, all benefits under EIS will be suspended for those who defy the orders and instructions by the authority, such as refusal of suitable job placement service and vocational training order.

The period of receiving benefits under EIS is determined based on the period of conttibution being done, as below:

3 months of allowance: contribution of 12 months
4 months of allowance: contribution of 16 months
5 months of allowance: contribution of 20 months
6 months of allowance: contribution of 24 months

The JSA is reduced over time of a recipient:

First month: 80% of the last salary
Second month: 50% of the last salary
Third and fourth month: 40% of the last salary
Fifth and sixth month: 30% of the last salary





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