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EIS helps retrenched workers get back on their feet

 | October 30, 2017

Socso says Employment Insurance System will provide support to those who lose their jobs.

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KUALA LUMPUR: The Employment Insurance System (EIS), which will come into effect next year, will not only provide a safety net for retrenched workers but also valuable support services.

Tasked with managing the EIS, the Social Security Organisation (Socso) said the insurance scheme would involve 430,000 employers and 6.6 million employees.

It covers workers who have been retrenched but not those who resign voluntarily, Socso’s EIS chief Mohd Sahar Darusman told FMT in an exclusive interview.

The EIS also does not apply to those who do not have their contracts renewed, employees terminated for disciplinary reasons and those who have reached the mandatory retirement age.

There are two phases to the EIS implementation, with the first phase starting in 2018 and the second phase starting in 2019.

First phase

Beginning Jan 1, 2018, employers and employees will each have to contribute 0.2% of an employee’s base salary which goes towards an accumulated EIS fund.

The fund will be used for retrenchment payouts and support services from 2019 onwards.

The contributions to the fund is capped at a salary level of RM4,000 a month, which means that although a person may earn more than RM4,000 a month, his contribution is fixed at 0.2% of RM4,000.

“We will take one year to build this fund and our projection of collection for 2018 is RM479.5 million,” Sahar said.

He said the amount would only be utilised for those retrenched from 2019 onwards.

“Although there are some who calculate that based on a 100% collection, we can collect some RM600 million, the reality is that usually, we will be able to collect less than 100% as there will be some employers who don’t comply or workers who resign voluntarily and stop contributing until they get a new job.”

For the first phase of the EIS, Putrajaya has allocated RM122 million for retrenchment payouts for 2018. These payouts are known as interim benefits.

“For those retrenched in 2018, we will give them a fixed amount of RM600 a month for a maximum of three months of unemployment,” Sahar said, adding that Putrajaya would unveil more details on the interim benefits soon.

Second phase and support services

Under the second phase of the EIS, which starts on Jan 1, 2019, Socso will provide retrenchment payouts known as a job search allowance and support services. The job search allowance is based on a scaled amount.

Depending on how long a retrenched worker has been contributing, they could get up to a certain percentage of their last drawn salary for three to six months.

For the first month, it is 80%, then 50%, 40%, 40%, 30% and 30% in the successive months until the sixth month of searching for a job, or sooner if the person is successful in landing a job.

“When a person is retrenched, they are to come to Socso and claim their first job search allowance,” Sahar said.

Socso will then interview the retrenched worker and work with various government and private recruitment agencies to help find him or her a job.

“We will monitor the interviews that they are called for and liaise with the potential employers. If they get a job any time before the sixth month, then we stop paying the job search allowance for the subsequent months due.

“If they secure a job before six months, we will give them an Early Re-employment Allowance, which is 25% of their remaining job search allowance entitlement.”

Additionally, Sahar said if Socso or potential employers found that a retrenched worker needed to take a course to learn new skills or improve on their skills, Socso would pay for the training, capped at RM4,000.

“On top of that, while they undergo training, they will receive between RM10 to RM20 per day for a maximum of six months.

“The key success to the EIS is our support services and the monitoring of the support services,” he said.

Sahar said it was the support services which would eventually ensure retrenched workers gain re-employment.

“The EIS is a safety net, not a welfare programme. We want to make sure that people make the effort to get re-employed, that’s why our monitoring of the support services is crucial.

“If the retrenched workers don’t make an effort to gain re-employment, they will not be able to collect the benefits.”

The EIS bill was passed in Parliament last week.

EIS: Safety net or unnecessary cost, asks MEF


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