It was reported in the local papers a few days ago that the Government is prepared to set up a retrenchment fund. This “big” news did not trigger much reaction nor raised many/any eyebrows.
This is because the Government has been talking about setting up such a fund since 2007 but there has been little progress thus far - see table below.
| Date | What the Government Said….. | Source |
| Oct-11 | Government is prepared to provide a retrenchment fund but needs to first devise a mechanism to sustain it.
“We have always wanted to start the fund. It’s just that we do not know how long (the fund should support its receivers)” “(There are) people who are forced into unemployment when some enterprises suddenly closed and are unable to take care of the needs of the workers, including the payment for retrenchment” “We cannot keep using public money to help the workers out. Maybe in the initial period it is ok but subsequently, we need a sustainable system”
| News article quoting Human Resource Minister |
| Mar-10 | “We are already in the process of introducing the Retrenchment Fund for private sector workers”
| News article quoting Human Resource Minister @ certificate presentation ceremony for training course conducted by the ministry |
| May-09 | The setting up of the Retrenched Workers Fund will be likely realised after the International Labour Organisation (ILO) completes its risk assessment report on it by the end of this year
"We are open on this, if what the ILO suggests meets our needs and can be implemented, the government is willing to go ahead with it".
| News article quoting Human Resource Minister @ Titiwangsa MIC delegates meeting |
| May-09 | The government, through the Human Resources Ministry and the minister concerned, was continuing discussions with all parties involved.
| News article quoting PM |
| Oct-08 | The Government is in the midst of studying the implications of setting up a retrenchment fund for workers before going ahead with it “ The ministry has held discussions at various stages and we have now asked actuarial and International Labour Organisation experts to help us” “The study will take six months after which we will make a decision and implement the fund based on its findings” | MOHR website article - Human Resource Minister, Parliament reply |
| Jan-07 | The government would go ahead with its plan to set up a retrenchment fund for workers despite objections from the Malaysian Employers Federation (MEF), | News article quoting Human Resources Minister @ ground-breaking ceremony of Socso HQ |
At this rate, I very much doubt that Malaysia would see the implementation of such fund any time soon.
Why is the proposed Fund all about? How would it help retrenched workers?
· Retrenchment Fund is also known as “Unemployment Benefit Scheme” or “Unemployment Insurance”
· Fund was first proposed by Malaysian Trade Union Congress (MTUC) in 1998 following the Asian financial crisis which saw some thousands of workers losing their job
· How workers will benefit (based on MTUC’s proposal)
o Payments of retrenchment benefits to workers where companies fail to do so – e.g. company A closed down and did not have sufficient funds to pay workers, Fund could be used to pay workers their retrenchment benefits as provided by law
o Fixed monthly allowance to retrenched workers (who are continuously unemployed for more than 3 months) till they secure a new job
· MTUC further suggested the Government provide a dees capital of RM 500mil to Fund and employers and workers each contribute RM 1 (yes, only one ringgit) to Fund per worker per month
· Similar funds/schemes have been implemented in China, Thailand, Korea, Japan, Vietnam , India
More economists are getting gloomy on the global economic outlook. Malaysia is also at risk, and may see more workers (especially in the vulnerable export-led sectors) being retrenched in the near future. Let’s hope the proposed Retrenchment Fund is put in place soon
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