Update: This article was written on 2 August 2017. On 5 August 2017, the Government announced that the Employment Insurance System Bill 2017 would be put on hold to “to allow for more engagements with the stakeholders”
The Employment Insurance System Bill 2017 was tabled for first reading yesterday at the Dewan Rakyat (House of Representatives). We previously wrote about the proposed employment insurance scheme (“EIS“) back in March 2017 when the Government announced their intentions to have the EIS take effect in 2018.
Here’s what we know so far about the EIS, based on the Bill that was just tabled:
- Both employers and employees have to contribute to the EIS; very much like how the current SOCSO and EPF contributions work.
- EIS contribution rates are a fixed amount based on the employees’ monthly salary. The highest insurable salary is capped at RM4,000 a month.
- The Bill comes with 3 schedules of contribution rates (each one higher than the last). The first schedule (lowest contribution rates) will apply when the Bill is in force. However, the Bill states that the Minister of Human Resources will have the right to fix the contribution rates in accordance with the other schedules, every 3 years, after taking into account the resources of the insurance fund. Both employees and employers should therefore expect an increase in contribution rates in the future.
- For example, under the first schedule (lowest contribution rates), for employees earning RM4,000.00 a month, both employer and employee must contribute RM19.75 each to the EIS (total contribution: RM39.50 a month). Under the third schedule (highest contribution rates), both employer and employee must contribute RM29.65 each instead (total contribution: RM59.30 a month)
- EIS allows insured employees to claim unemployment allowance for the period that they are unemployed (up to 6 months). Employees will be assigned an “estimated” or assumed monthly salary which will form the multiplicand for their unemployment allowance. For example, an employee who is earning more than RM4,000.00 will be treated as having an assumed monthly salary of RM3,950.00 (regardless of their actual last drawn salary). The unemployment allowance will be paid at the following rates:
- 80% of their assumed salary for the first month of unemployment
- 50% of their assumed salary for the second month of unemployment
- 40% of their assumed salary for the third and fourth months of unemployment
- 30% of their assumed salary for the fifth and sixth months of unemployment
- Employees cannot claim unemployment allowance if their job loss is due to the following reasons:
- Voluntary resignation
- Expiry of fixed term contract or completion of employment pursuant to terms of the contract of service
- Unconditional mutual separation/termination
- Termination for misconduct
- Other benefits offered under the EIS include:
- Early re-employment allowance
- Allowance for reduction in income
- Training allowance and training fees
Employers should start budgeting for increased payroll expenditure to cover their employer’s EIS contributions.While the amounts may not appear to be signficant if you look at it from a “per employee per month” basis, expenses can increase significantly for an employer with a large and well paid workforce. Employees on the other hand can expect some deductions from their take home salary once the EIS is in place.
The information in this article is current as at the date of posting and there could be more changes to the EIS as the Bill is debated. We will provide more information about the EIS as developments arise.
Have a query? Contact us.