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.

RATIONALE FOR THE ESTABLISHMENT OF THE SCHEME

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.

MODALITIES OF THE PROPOSED SCHEME

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.

SUBMISSION

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