Monday, February 23, 2009

BN fails workers in Malaysia - still no National Retrenchment Fund after 10 years.

There is still no 100% protection for workers in Malaysia who are retrenched and/or terminated by their employers.

We have the Employment (Termination and Lay-off Benefits) Regulations 1980...

But alas, only workers who have worked for more than 12 months are entitled, and this is not right..

The calculations of these benefits, which have to paid out within 7 days from the date of termination, are as follows:-

'An employee is entitled to lay-off benefits not less than the following: 1 to 2 years service - 10 days wages for each year service. more than 2 years but less 5 years service - 15 days wages for each year service. 5 years service or more - 20 days wages for each year service'
But, even those entitled may not get anything because the employer has no money to pay the employee..

And that is why, MTUC came up with the proposal for a National Retrenchment Scheme. The MTUC forwarded the memorandum below in 1998,



This Memorandum is being submitted by the Malaysian Trades Union Congress (MTUC) for the consideration of the Government in view of the escalating levels of retrenchments in the country brought by the sudden economic downturn.


Though the rate of retrenchments in Malaysia is much lower than that witnessed in South Korea, Thailand and Indonesia, this is by no means any less serious than that faced by these countries. There is still cause for concern as our population base is 20 million, and the social impact of retrenchments may probably hit us harder.

According to the Ministry of Human Resources, a total of 28,890 workers were reportedly retrenched up to 9 May 1998. The quantum of statutory benefits to be paid to them computed for the period January to March 1998 amounts to RM100, 813,459,57. According to statistics complied by the MTUC, up to 35,000 workers have been laid off till date, and this does not include the informal sector workers. Many workers have not been paid their separation benefits upon the termination of their respective contracts of service.

The problems becomes serious when companies voluntarily wind up their operations, abruptly close down their business without prior notice, are put under receivership or relocate their operations to other countries.

The issue reaches crisis levels when these companies renege on their legal and contractual obligations to their workers by defaulting on statutory contributions to the Employees Provident Fund (EPF) and to the Social Security Organisation (SOCSO) as well as payment of retrenchment benefits pursuant to the Employment (Termination and Lay–Off Benefits) Regulations, 1980. In several cases, even terms and conditions stated in collective agreements entered into between unions and employers have been dishonoured.

The MTUC is aware that a number of irresponsible companies waste their funds by undertaking expensive office renovations and purchasing luxury cars for their managers and executives. They then retrench their workers, citing lower profits or accumulated losses as their reasons.

More than 85 percent of the affected workers are not members of unions and are ignorant of their rights under the labour laws. Since they are not unionised and do not know how to go about obtaining assistance, they have little opportunity to mobilise any effective collective action in order to protect their interests.

Enforcement procedures are often long, slow and inadequate. They yield little success if the companies have already relocated their operations to other countries, if their assets have been foreclosed by creditors, or if their directors have been declared bankrupt.

8. (a) Section 292 (1) of the Companies Act considers workers as "unsecured creditors". It gives priority to only workers’ unpaid wages as unsecured debts when companies are wound up.

The Act does not expressly include their unpaid overtime wages, bonuses, insurance premiums, health care and retrenchment benefits [although the words "workers’ compensation under any written law" have been used in section 292 (1) (c)] in the event companies are wound up or placed under receivership.

9. (a) The often unpredictable boom-recession cycle in economic affairs has made it extremely difficult for workers to plan their careers and the future of their families with any measure of certainty, as they do not know when they will be deprived of their livelihoods.

In many cases, both husband and wife who are breadwinners have been retrenched without prior notice at the same time. The impact of such uncertainty is more severe on workers who are in their latte forties or early fifties and have large families to support. They will find it difficult to secure alternative jobs during their advanced years upon being retrenched.

Given the greater emphasis placed on private sector participation in national economic activities, coupled with the downsizing of public sector involvement in infrastructure development and services, workers’ fear for the unknown will not only become worse but will also severely affect their productivity.

There is therefore a pressing need to set up a social safety net in order to cushion the impact of retrenchments on workers and their families. The MTUC proposes that a National Retrenchment Scheme be set up for this purpose.


The Scheme should be constituted under the aegis of the Social Security Organisation (SOCSO), which has 5 million members at the moment.

Employers and workers should each required to make a statutory contribution of RM1.00 per worker per month towards the Scheme. The contributions will grow at the rate of RM2.00 per worker per month, and contributions from the existing 5 million SOCSO members will be able to yield RM10 million a month, or RM120 million a year to the Scheme. This is another form of compulsory savings for workers, and will also help to increase national monetary reserves.

The funds so collected should be invested in Government guaranteed securities and in such other appropriate private placements that are reliable, adequately capitalised, yield high and competitive dividends and are well managed.

4. (a) The funds as well as the proceeds from these investments could be utilised to pay the retrenchment benefits of workers who have been deprived of their separation benefits. The quantum of such benefits should be pursuant to the Enployment (Termination and Lay-off Benefits) Regulations, 1980, or according to the terms and conditions of their respective collective agreements, if the same are higher.

The Fund could also consider paying retrenched workers a fixed monthly allowance to support their families until they get a new job.

5. (a) Retrenched workers should be required to register themselves with the Employment Exchange. They shall, upon being duly registered, be eligible to apply for the fixed monthly allowance suggested under 4(b) if they have been continuously unemployed for more than three months upon being retrenched.

Workers who refuse to accept alternative employment offers, or who reject job opportunities made available to them by the Employment Exchange, will be disqualified from receiving any assistance from the Scheme.

6. The Scheme should be managed by SOCSO.


The MTUC is hopeful that this Proposal to establish a National Retrenchment Scheme would be considered favourably by the Government. On our part, we are willing to extend every cooperation and assistance to the concerned parties in order to make this Scheme a reality.

Date : 26 May 1998
But, alas the government did not take up the idea - and today, if the employers fail to pay the workers retrenchment and termination benefits, the workers are at a loss.

If SOCSO was managing this fund - then, if the employers do not (or cannot) pay the workers the said benefits, the workers could get some monies from the National Retrenchment Fund.

In Thailand, when you lose your job (i.e. when retrenched, terminated..and even on resignation), you are entitled to get some payment from SOCSO. For those retrencehd, this is 50% of your wages (but not more than 15,000 Baht per month) for 180 days, and for those who resign, it is a lower percentage. See my earlier posts:-50% salary for 8 months for the unemployed...M'sia should follow Thailand in this, and If you lose your job, SOCSO pays you for 6 months maximum in Thailand

SOCSO is the one who will be making the pay-outs of the benefits - and as such, workers have a 'safety net' to rely on...It will be GUARANTEED 100%...

The proposal of MTUC was made in 1998, but alas the UMNO-led BN government did not do anything, and now in 2009 we are facing another financial crisis, and tens of thousands of workers may end up losing their jobs.

Whilst, the Malaysian Government did nothing to secure worker's welfare - they went ahead and set a Human Resource Development Fund, and collects from employers a certain sum per worker. This money is available to employers for 'worker training programs' ... In fact, with regard the levy paid by the employer to this fund, the government of Malaysia, who seems to be encouraging 'retrenchment' of workers, gave employers good news that they can take back the extra levy paid easier in the event of retrenchment. See my earlier post entitled HR Minister must be concerned more for the poor worker...

Today, we are told that there is still no such scheme that would really assist workers who have lost jobs...

And, it seems that this serious issue of workers welfare is not a priority of the government . MTUC tells us that the National Labour Advisory Council had not met in 2 years.

They should be meeting once a month at least, should they not?

The setting up of the National Retrenchment Fund, proposed by the Malaysian Trades Union Congrees (MTUC) more than 10 years ago to provide financial assistance to sacked workers, is as good as off.

It is learnt that officials from the Human Resources Ministry, Malaysian Employers Federation (MEF) and MTUC have not been able to agree to the terms in setting up the fund.

Sources said the three parties have not met for the past two years although close to 20,000 Malaysians have lost their jobs in recent weeks alone.

“Ministry officials cannot explain why companies that

have been managed well and following related laws need to contribute to the fund,” the source said.

MEF executive director Sham-suddin Bardan admitted that employers were still against the fund although there were reports to the contrary by officials.

The MTUC had proposed each worker contribute RM1 monthly to the fund while employers pay the same amount for every worker but the then prime minister Tun Dr Mahathir Mohamad said the Government would consider the proposal if the amount to be contributed by both parties was halved.

It was then agreed that the Social Security Organisation (Socso) would be responsible to discuss the matter with workers’ and employers’ representatives.

Attempts to get comments from Socso chief executive officer K. Selvarajah drew a blank.

MTUC secretary-general G. Rajasekaren, who admitted that the National Labour Advisory Council had not met for two years, said it was strange that authorities were not getting things moving.

The MTUC, he said, would pursue the matter with the Government.- Star, 23/2/2009,Still no fund to help those sacked

The Malaysian Government looks into the welfare of those who lose their jobs. They allegedly have training programs, during which the worker attending receives RM500-00 from the government, and sometimes the potential employer also pays something to the worker. (Well, all this was mentioned in the TV program called 'HELLO Malaysia', which saw the host talking to a former HR Minister and the current MTUC President).

But, the problem is that there is nothing in black and white ....Nothing that is in the law, regulations, etc... that makes this entitlement of RM500 per month whilst undergoing re-training, is there

This is the biggest problem in Malaysia - policy...cabinet decisions...are all most of the time not written down (or gazzetted).

There was a policy that all plantation workers will have to be provided with houses -- and this too was a policy that we only got from newpaper reports. The moment, one tries to claim a right based on that policy - the good old Minister and government officials just turn around and say that there was no such policy - or that the newspapers got it wrong.

We need to have certainty with regard to rights and entitlements of workers, Malaysians, etc...and we need it now.

I also hope that the National Retrenchment Scheme and Fund be immediately put in place within the next 3 months...

In the interim, maybe the government should provide a reasonable sum to be put into some interim 'National Retrenchment Fund' to assist workers who are being retrenched. For those who have yet been paid their Retrenchment and Termination Benefits, the workers shall be paid out with money from this fund - and the government shall then take on the task of pursuing the employer and/or directors to recover the monies paid out.

By-elections...and struggle for political power seem to be occupying too much time of governments, and this must stop...and the welfare of workers and the people in Malaysia should now be the priority.

1 comment:

amoker said...

am equally aghast. Till now, the HR mninister is still sleeping though he promised the fund to be set up