NB: This article is updated as of the date of publication stated above. As this situation is novel and the government’s response to the outbreak is continuously developing, this article may not necessarily include updates or developments after this date. In situations of doubt, you are advised to check for updates directly with the government authorities.

 

Undoubtedly, with the COVID-19 and the Movement Control Order in place, many businesses or companies are experiencing financial difficulties. These challenges are expected to continue beyond the Movement Control Order.

In response, the Government of Malaysia has announced various stimulus packages in an attempt to assist the economy. On 27 March 2020, the Prime Minister announced a further stimulus package known as the “Pakej Prihatin” (unofficial translation: Care Package), the main objective being to benefit all Malaysians and that no one is left behind in these trying times.

This package appears to be targeted mainly at individuals, such as providing cash handouts to those in the B40 and M40 group, and to e-hailing drivers.  The package also includes reductions in costs of living such as discounts on electricity bills and free internet.

What do employers get?

One aspect of the stimulus package that employers ought to take note of is the “Progam Subsidi Upah” (unofficial translation: Wage Subsidy Program).

Under this program, which will be implemented by PERKESO:

  • Employers who experienced revenue loss of more than 50% since 1 January 2020 can claim a sum of RM 600.00 per employee earning less than RM 4,000.00 per month and provided the employee is registered with and contributing to the Employment Insurance Scheme (EIS)
  • This subsidy is for 3 months from April 2020.
  • A condition of the subsidy is that employers cannot terminate any employees or undergo any salary reduction or leave deduction exercise

The Ministry of Human Resources has stated that the payment of the subsidy will be credited directly into the employer’s account within 7 days of application and approval via www.perkeso.gov.my starting 1 April 2020.

Further details such as how the application is to be made and how the loss of revenue will be calculated, measured or proven, are unavailable at the time of writing of this article.

Commentary

At this juncture, short of more clarity, it appears that the nature of the program and the entire stimulus package is more akin to a welfare program that focuses on handouts to individuals.

Notwithstanding the Prime Minister’s comments that this program is to protect job security, this economic stimulus package will provide little comfort to employers and business owners who are already struggling with the economic challenges brought about by the COVID-19 outbreak. The wage subsidy, while better than nothing, appears to come with strict criteria that may disqualify most employers and businesses.

This, coupled with the existing policies announced by the Ministry of Human Resources that employers must continue to pay their employees their full wages without deduction or utilisation of their annual leave, may do little to assuage concerns by employers.

An unintended consequence of this could be that businesses, having little incentive to maintain their headcount costs, may be forced to downsize or cease operations all together. This will be a worse outcome for employees overall, and cash handouts may provide little relief in the absence of a paying job.

***

This article was written by Donovan Cheah and Yan Nie Th’ng. Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific 2017, 2018, 2019 and 2020, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.

Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory.  Have a question? Please contact us.

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