Neither of the two would benefit the majority of employees, MEF Executive Director Shamsuddin Bardan told FMT. He acknowledged that employers would not benefit either.

The  proposal for the retrenchment fund was made by Parti Sosialis Malaysia (PSM). For the fund, PSM said, the government should provide seed money, with employees and employers contributing to it. For the insurance scheme being mulled by the government,  the proposal will see employees contribute a percentage of their salaries with employers making matching contributions. The idea is to help retrenched workers survive for six months on 50 per cent of their salaries.

With both proposals, Shamsuddin claimed, hundreds of millions of ringgit would be collected every year but the payout to retrenched staff would not reach even 20 per cent of that amount. He said he based his calculation on past retrenchment figures.

“The issue is that some companies are not paying the retrenchment benefits like they are supposed to,” he said. “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 proposed a different scheme to help retrenched employees, saying it would benefit all parties.
His scheme, he said, would see employees, employers 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 the equivalent of one month’s pay for all their staff into a company account.”
He said the government could set aside an allocation for retrenchments, and based on a worker’s income records, disburse a month’s wages to those who are retrenched.

In this way, he said, any employee in the private sector who is retrenched could get up to three months’ wages on top of their retrenchment benefits.

“Funds from employers and the government would be disbursed only when a worker is retrenched. Companies would then not lose money. For employees, if they do not get retrenched, they will have an additional month’s salary upon retirement.”

Calls for a safety net for retrenched workers have grown in recent months following a string of factory closures around the country.