Scale up employment-retention strategy to combat Covid-19 impact

LETTER | Malaysia needs a massive employment-retention strategy as a response to the economic shocks of Covid-19. This is to ensure households have enough resources to ride out the pandemic in the next few months as firms take cost-cutting measures.

The government has introduced one version of that via the RM600 pay-out to employees who are forced to take unpaid leave. 

This is an additional coverage for the Employment Insurance Scheme (EIS), which is strictly speaking for employees who are retrenched.

It is a good initiative, and the right way to think about the issue, but sorely inadequate for a few reasons.

First, there are other forms of labour reduction measures that will be undertaken by firms i.e. reduction in hours or wages that would not amount to retrenchment or unpaid leave.

Second, it doesn’t include the bulk of self-employed and non-standard workers who have not contributed to the EIS. 

However, with some categories of self-employed workers registered with Socso’s Self-Employment Social Security Scheme, there is a way of tracking and channelling cash aid to this group.

Third, the pay-out rate of RM600 is below the minimum wage and constitutes about 26 percent of the average wage. As replacement income, this amount may not be sufficient to help affected employees, especially those with financial commitments and debt obligations.

The two immediate things that the government can do is first, extend the EIS coverage to employees affected by wage cuts as well as self-employed workers, similar to how it has extended benefits to employees on unpaid leave, and second, double the pay-out amount to RM1200.

In order to broaden the coverage and increase the pay-out, this requires fresh injections from the Federal Government into the EIS. The current allocation to help employees on unpaid leave is RM120 million. At minimum, this amount needs to be tripled.

Enhancing employment retention is crucial to ensure that households do not suffer irreversible loss in livelihoods due to short-term shocks and help them bounce back faster to productive life when the crisis is over.

Christopher Choong is the Deputy Director of Research, KRI. This is the personal opinion of the author and does not necessarily represent the official views of KRI.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.