Thursday, February 04, 2016

Levy to be paid by Employers of Migrant Worker - not the Worker - Malaysia's NEW and JUST policy?

Malaysian government have most likely changed its policy as to payment of Levy for Migrant Workers(Foreign Workers), whereby it is now justly the Employers that will have to pay this levy. On or about January 2013, the Malaysian government shifted the obligation from the Employer to the worker - based on protest that was received from employers who said that by reason they had to now pay migrant workers minimum wages of RM900 per month, their cost had increased. Unions and civil society groups protested this move - KSIEWTSM makes it 74 saying No to Wage Deduction to recover Levy Payable By Employers

When the Malaysian government increased the levy amount payable by migrant workers, effective 1 February 2015 to double or more than the previous amount payable, I was surprised by the reaction of employer groups who protested this move, complaining an increase in cost. 

I was proud of our Malaysian employers coming to the defence of migrant workers - but then, a closer reading and a little investigation showed that this was because now the policy has changed, and it is back to the employers having to pay the LEVY for migrant workers they hire, and rightly so. 

The FMM[Federation of Malaysian Manufacturers] said the government recently informed employers that the levy burden would be shifted back to them. - Star, 2/2/2016

The levy was introduced as a DETERRENT to employers hiring Migrant workers, instead of local Malaysian workers. But alas, special permissions was being given to some employers to recover the levy amount paid from their workers. In April 2009, the Malaysian government put an end to this practice - and reaffirmed that it is the employers who have the obligation to pay the levy themselves. This was the position, until it was unjustly shifted to migrant workes paying the levy themselves in January 2013.

“…The rationale behind getting employers to bear the levy was to discourage them from employing foreigners…” - Labour Director-General Datuk Ismail Abdul Rahim  [Star, 16/4/2009]

Should the LEVY be increased in this difficult times? I am of the opinion, that it should really not be increased now but maintained the same. Even if there is to be any increase, it should really be no more than 5-15% of the previous rate.

Maybe, there must be limits imposed on the number of migrant workers at the workplace - 20% migrant workers, 80% migrant workers.

Maybe there must be different levy rates imposed the more migrant workers an employer employs. For example, in some countries, to protect local workers, employers who want to employ migrant workers have to pay a LEVY...

For the first 20% - Levy payable per worker RM1,000
For the next 10% - Levy payable per worker RM1,500
For the next 10% - Levy payable per worker RM2,000
Above that         - Levy payable shall be RM2,500
* Maximum number of migrant workers shall not exceed 50% of the total workforce of the employer.

** Maybe even special permission of the Minister of Human Resources should be required for employing migrant workers - there must be proof that the employer really tried his level best to first get local workers.

*** Even when he employs a migrant worker, and there is a claim by the said migrant worker against the employer, the employer will bear the cost of the migrant worker continuing to remain in Malaysia until the labour claim is settled. [Now, when in Malaysia, when migrant worker complains of violation of rights and/or lodges a complaint, so simple for the employer to get rid of the 'problem' - simply terminate and cancel the permit - and the employer evades the consequences of his wrongdoing >> Notice, how there are almost no Labour Court cases or Industrial Court cases in Malaysia commenced by the migrant worker against the Employer. This is one of the reasons why migrant workers are preferred - and Malaysia needs to deal with this problem of access to justice for migrant workers.] 

Now, we have to use the term 'worker' - rather than 'employee', because the 'Contractor For Labour System has yet to be abolished' - It allows employers to use other 'workers' without making them employees, therefore simply avoiding all employer obligations in law, and also effectively weakening trade union bargaining powers for vide collective Bargaining Agreement, only employees, not the 'non-employees' that will benefit. Now, 'not employee workers' cannot even join the in-house trade union.

Hence, if we use the word 'employee' - the employer can simply stay within the quota, and use a lot more workers, who are not 'employees' at the workplace. The more cunning employer may even reduce drastically the number of his own employees, and just get as use workers provided by the Contractor for Labour, the Labour Supplier.

If protection of the Local Worker is the intention and desire of the BN government under Najib Tun Razak, then deterrence must be put in place that makes employing local workers more preferable.  

How much LEVY should the Employer pay per migrant worker?

For a local worker earning minimum wages of RM900, the worker earns RM10,800 per year, and the Employer has to pay an additional 13% for the Employee Provident Fund(EPF), which is RM1,080.

Now, for migrant workers, employers do not have to pay this EPF contribution, hence making Migrant Workers cheaper - this should be corrected. So, the levy payable per migrant workers must certainly be higher than 13% of the income of worker (monthly wages plus overtime).

But, that will not be a DETERRENT - so maybe the levy payable should be 20% the total income of the migrant worker, which I believe may be fair. [Better still if employers start making EPF contributions for migrant workers, which migrant workers can take out when they stop working in Malaysia, and maybe for the levy, employers be required to pay 10% of the total income of the worker]

Maybe LEVY should not be a fixed RM sum - but rather a percentage of the total monthly income, payable every month?

Monday, 1 February 2016 | MYT 12:50 PM

FMM wants foreign workers levy hike to be withdrawn

KUALA LUMPUR: Federation of Malaysian Manufacturers (FMM) has objected to the government’s move to double the foreign workers levy rate from RM1,250 to RM2,500 per worker per year and wants the increase to be withdrawn.

It said on Monday the doubling of the levy rate was “very hefty” since manufacturers were grappling with the challenging economic conditions and rising cost of doing business. It cited causes of rising costs were the new minimum wage level, higher energy costs, higher costs of raw materials inputs and lower sales revenue arising from the weakening of the Ringgit.

The FMM said the government should have called in industry stakeholders to discuss this decision and work together on a more acceptable schedule of increase as well as timing. It added this should have been implemented in phases when the economy improves.

“The Government’s sudden decision to double levy rate for the manufacturing sector with immediate effect is unacceptable. The government has not given due consideration to the significant impact on business sustainability and socio-economic consequences,” it said.

The FMM said the government recently informed employers that the levy burden would be shifted back to them.

“Employers had asked that levy rate should at least be maintained at the current rate until economic conditions are better. The doubling of levy rate is therefore most disappointing. The government has not taken into consideration employers' plea and cooperation,” it said.

The FMM said the sustainability of the businesses and jobs were also at stake, even for local workers when businesses find great difficulty in sustaining their operations.

“The government should look at business sustainability in totality, considering all relevant factors which would have an impact; and not in isolation of issue by issue.

“All issues put together become an insurmountable economic fire which could overwhelm and consume businesses, employees and suppliers throughout out the supply chain,” it said.

FMM said that while businesses were aware of the need to reduce dependency on foreign workers, any changes should be announced earlier and implemented gradually. This referred to the quantum as well as timing of the increase so companies had enough time to adjust.

“Changes and especially hefty changes with significant impact on business costs, should not be made overnight,” it said.

55 industry groups in united stand against foreign worker levy hike

KUALA LUMPUR: Fifty-five industry organisations united in an unprecedented move to call on the government to withdraw the sudden increase in foreign workers' levy that took effect on Monday, decrying the move as detrimental to costs of doing business, which will lead to price increases for consumers. 

International Trade and Industry Minister Datuk Seri Mustapa Mohamed declined to comment on the issue when met at a separate event.

The 55 trade organisations included all notable trade and industry organisations in the country, including the biggest, the Malay Chamber of Commerce Malaysia, the Associated Chinese Chambers of Commerce and Industry of Malaysia, the Malaysian Associated Indian Chamber of Commerce and Industry, the Malaysian Employers Federation, the SME Association of Malaysia and more.

Industry players opined that all sectors will feel the pinch, and estimates showed that the property sector would see a 2%-3% increase in the cost of building a house, a 1%- 8% impact on the profits of listed plantation companies, as well as a 2%-3% rise in costs for the manufacturing sector. 

Instead, representatives from the organisations called for a comprehensive move to legalise the existing four million illegal foreign workers in Malaysia, which would result in a levy collection of RM5 billion for the government.

"We would suggest that RM2.5 billion of the RM5 billion raised be assigned to the government and the balance be reserved for the industries," said ACCCIM deputy secretary-general Tan Sri Teo Chiang Kok). 

He added that the application process to recruit foreign workers has to be streamlined, as the outsourced processes in the recruitment of foreign workers impose unnecessary costs. This calls for a holistic review of the entire application process, outsourcing programs and to address the illegal foreign workers.

Teo said the levy increase ranging from 100% to 300% was implemented without any prior notice or consultation with stakeholders.

"At the end of the day, the costs will be passed on to consumers," he said at a joint media conference here yesterday.

Teo explained that the altruistic purpose of the levy is to level out the supposedly lower wages of foreign workers compared to local workers to eliminate the supposed advantage of recruiting foreign workers instead of local workers. He said the RM2.5 billion that would be added to the government's coffers via the levy hike should not be taken as a source of revenue for the country.

"The levy is imposed to level the playing field so that there is no financial advantage in engaging foreign workers. It's not a revenue source for the government. It's a source to balance the attractiveness of employing local versus foreign workers.

"This is the worst time to increase any levies or fees because we're strained by the economic slowdown. A lot of companies and enterprises are in a challenging position, some are (struggling) for survival. Any added burden may push them to the limit," said Teo.

This is compounded by the imposition of the Goods and Services Tax, falling value of the ringgit and the soon-to-be implemented new minimum wages. In fact with the implementation of minimum wage, industry players opined that there is now no differentiation in foreign workers and local wages.

The Malayan Agricultural Producers Association director Mohamad Audong told reporters that the additional cost per year for agriculture and plantation is RM569 million, while for plantation alone the additional cost is RM338 million.

‘Levy hike to impact construction industry’

KUALA LUMPUR: Construction industry experts warned of additional costs being passed on to property buyers following the increase in foreign workers’ levy.

Master Builders Association (MBAM) even cautioned that the prices of houses could increase owing to this reason.

“The levy hike will impact the construction industry,” said MBAM deputy president Foo Chek Lee.

He said there were about 130 sub-sectors including manufacturing and services, which would pass the cost back to the industry.

“Ultimately, we will pass the additional costs to the end users or purchasers,” he said.

The Government, he added, should instead look into legalising the existing illegal foreign workers.

“By doing so, this will bring in extra revenue to the Government instead of increasing the levy,” said Foo in a press conference yesterday.

MBAM said the construction industry was looking at a 10% increase in labour cost and a 2% increase in overall costs.

“Two per cent is the bottom line for some of us. The profit margin in construction is usually a single digit. 

Some don’t even make 2%,” said former president Kwan Foh-Kwai.

The association’s vice-president Tan Sri A.K. Nathan said the Government should also understand that the construction industry could not operate without foreign workers.

“It is almost impossible to get local workers. This is a fact,” he said.

The association said locals were not willing to work in the construction industry despite the willingness of the industry players to train them.

“Malaysians don’t even want to work as crane operators.

“We are willing to train them and pay as high as RM3,000 a month, but they are not interested.

“They prefer to work in air conditioned areas with short hours.”

He said foreign labourers were usually paid just above the minimum wage, but with overtime, they could take home RM2,000 to RM3,000 a month.

MIC Youth chief C. Sivarraajh said about 80% of small and medium scale enterprises (SMEs) would try to survive the increase in levies by passing the additional cost to customers or shutting their operations.

“Business sustainability is at stake. Jobs are also at stake, even for local workers when businesses find great difficulty in sustaining their operations,” he said in a statement.

The new charges, which were announced on Sunday, would see the foreign worker levy for manufacturing, construction and service sectors being increased to RM2,500.

The levy for those in the plantation and agriculture sectors had been raised to RM1,500.

Previously, the levy was between RM410 and RM1,850, depending on the industry and the location.

Sivarraajh said the Government should have consulted stakeholders before imposing the levy hike.

He said businesses were already paying a hefty cost such as the new minimum wage, higher costs of energy and raw materials, but lower sales as a result of the weakening ringgit.

“Everybody will suffer from the raise – plantation, construction, services – because all sectors employ foreign workers extensively.” - Star Online, 4/2/2015

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