Happy Labour Day? Reflection on Current Malaysia Labour Force

Information on the Current Condition of Malaysia Labour Force (Data, Statistic & Insights)


First of May is a day where labours around the world are honored and celebrated for their commitment, dedication, and achievement (except for the US and Canada, which falls on the 1st of September). Today, 1st of May 2020 should mark a very different Labour Day, by paying tribute to our local heroes, the front-liners who have been fighting to keep all of us save during the Covid-19 and the MCO periods, such as the healthcare workers, the police officers (PDRM), the army force (ATM) and those who risk themselves to be in the essential services to provide us with the necessities such as the riders, couriers, and grocery store workers. Their immense sacrifices, invaluable dedication, and unwavering efforts in managing the changes in our lifestyle impacted COVID-19 is an honorable act of a real-life hero.


More than Half of the World's Labours are at Risk

Today is also a day that calls for a reflection on the fragility of the global economy which had mercilessly placed more than half of the world's labours at risk of losing their jobs and income.


At this point in time, the world has witnessed more than one global unprecedented crisis, health crisis, and labour market crisis, that may continue to escalate and caused even more labours to lose their jobs, especially those working in the identified highly-affected economic output sectors such as accommodations, wholesale, manufacture, retails and especially travel tourism that has hit near-zero revenue.


The increased numbers of labours who are pressured by the need to put food on the table for their families would, unfortunately, increase, contributing to the economic recession.


According to the Statistics of Labour Force in Malaysia , there is a total of 15.34 million workers in Malaysia as of February 2020. (source: Labour Force & Social Statistic). Our country records a relatively low unemployment rate of 3.3% (as of February 2020) comparing to other developing countries in Asia such as Brunei (9.1% as of December 2019) and India (7.8% as of February 2020). Unfortunately, the increasing number of businesses that are affected by the pandemic, the total number of unemployment in Malaysia is expected to rise.


Government responses and measures implemented during this period of time become crucial to determine the future landscape of the economy and also contributes directly to the recovery phase that we will have to go through after the lift of the MCO. The policies implemented by the Malaysia government to support enterprises, jobs and income, are produced below for recapped:-


Financial assistance to identified target groups

  • Special allowances for frontliners

  • Income replacement for hospitalised patients who are infected with COVID- 19 and quarantined B40 PUIs (Bottom 40% of the population in terms of income group) One-off cash assistance for the eligible employees in the private sector, government-scheme plantation settlers, farmers, fishermen, small traders and those categorised in the M40 (middle 40% income group) and below, civil servants, including contract workers, e-hailing and taxi drivers

  • Unemployment assistance to B40 entrepreneurs and people who lose their jobs

  • Allow for pre-retirement withdrawals from the Employees Provident Fund up to RM1,500

  • Rental exemption for Projek Perumahan Rakyat (PPR) and Perumahan Awam and six-month moratorium for rent-to-own units


Payment of salaries and extension of the contract of public contract services workers

Wage Subsidy Programme to assist employers in retaining their workers

  • RM 13.8 billion for tiered wage subsidy programme as of 06 April 2020, to companies with local workers earning RM4,000 and below and registered since 1 January 2020.  The Government will provide salary ranging from RM600 to RM1200 per month up to 3 months depending on the size of enterprise and number of workers.For employers who chose to receive this assistance, they will be required to retain their employees for at least 6 months, which is for a period of 3 months upon receiving a wage subsidy and 3 months later


Deferral of payments, restructuring and rescheduling of employer contributions for all companies

  • Reduction in the Employees Provident Fund employees contribution

  • 25% reduction in foreign workers' levy payments by all companies with work permit expiring April 1 to December 31, 2020. The reduction in levy payments does not apply to domestic workers

  • Introduce a tiered-discount for electricity bills with rates ranging between 15% and 50% according to electricity usage

[source:https://www.ilo.org/global/topics/coronavirus/country-responses/lang--en/index.htm#MY}


M40 (Middle-Income Group) Employees Are At Risk


Praise the Government for its attention-focused on B40 (which refers to the bottom 40% of the country's income group which earns less than RM4,360 in monthly household income). However, the PRIHATIN stimulus package clearly favour the B40 over the M40 (which refers to the middle 40% of the country's income group which earns between RM4,361 and RM9,619.), especially in dealing with retention of employment.


The Wages Subsidy Programme (click here to read more) is an initiative by the Government to assist the employers to retain employees in the B40 because employers may apply for subsidy of wages for employees with a monthly salary of RM4,000 and below. The condition is that after receiving such subsidy, employers are not allowed to dismiss or reduce the salary of such employees for 3 months, starting from April 2020.


Wage Subsidy Programme creates Unfair Advantage

If the Wage Subsidy is increased to expand its coverage to all employees or at least half of the M40. The measure taken by the Government in leaving the M40 out would mean that M40 employees are not protected from retrenchment or salary reduction as conferred by the Wage Subsidy Programme to the B40 of earning RM4,000 and below.


Our Wages Subsidy Programme, encourages the retention of B40 population employees and that would mean the M40 population employees would be an employer's target to retrenched or have their salary reduced since their wages are not subsidized. This itself is an unfairness arise from the bias-advantage granted to the B40. The principle of retrenchment would have be unfairly circumvented by the Wages Subsidy Programme because B40 employees are not in the consideration despite if they are the last-in and they should be the first-out (LIFO principle). The employer can easily depart from this golden rule by retrenching the M40 employees, especially employees of the same position but with slightly higher pay or long-serving employees that have their salary accumulated and increased throughout the years of working with the employers.


Wages Subsidy Will Save 3.3 Million Employees, But Only Until June

Our Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz announced that up to April 26, the government had approved applications from 195,000 employers involving 1.5 million employees. This would mean that our Government has through this Wage Subsidy Programme (Program Upah Subsidi), managed to retain at least 1.5 million workers until the month of June.


This Wage Subsidy Programme has a total allocation of RM5.9 billion, which is estimated to benefit 3.3 million workers, which is about 20% of the labour force in Malaysia as of February 2020. This would mean that 3.3 million workers would remain in employment at least until the month of June. The question now would be whether businesses in Malaysia are ready to deal with a different landscape of the economy after the lift of the MCO and remain sustainable to retained their employees after this June?


Business Longevity Determines Employees Prosperity

The Government is needed to act efficiently to ensure business continuity and shall see that one-off cash payment is only a short term strategy to assist the B40 & M40, or even to stimulate the economy. People without a job would not be able to survive and if too much of the population relies on the Government to provide the basic necessities, this would lead to an increase in poverty and retard the country's economy. Below is the information on the National Caring Aid (Bantuan Prihatin Nasional) is produced for recapped as below:-


  • RM10bil will be given to the B40 and M40 group, including private workers, farmers and fishermen.

  • RM1,600 to four million households earning RM4,000 and below;

  • RM1,000 for households earning RM4,000 above;

  • RM800 for single Malaysians aged 21 and above earning RM2,000 and below;

  • RM500 for single Malaysians aged 21 and above earning between RM2,000 and RM4,000.

It is undeniable that such one-off cash payment is very important to ensure that more people are not taken by a sudden blow from the impact of Covid-19. However, if such is done at the expense of providing any relief to businesses. With the stand of the law, in which no employers shall forcefully reduce employees' salary or to put them on unpaid leave, many employees in the B40 and M40 have found themselves to be in a better economic advantage. This is because they are receiving financial aid and at the same time having their salary paid or some might even take this opportunity for side incomes as they are not able to attend to work.


What about relief for the Businesses?

Businesses are the key here to a healthy and prosperous economy, as they the providers of the labour force and contributor of taxes. With the outcry and disappointment after the announcement of the 1st stimulus economic package, our Government has reviewed and then introduced an RM250billion Stimulus Economic Package to provide more relief to the businesses in Malaysia, which includes the Wage Subsidy Programme and an additional allocation of RM4.5bil for SME and micro-entrepreneurs.


In order for a business to sustain, cash flow is vital. Hence the Government has implemented the following measures [source: MOF-PRIHATIN 27 March 2020]:-


  1. The Employees Provident Fund (EPF) will introduce the Employer Advisory Services programme from 15 April 2020. This service includes options for deferring payments, restructuring, and rescheduling of employers’ contributions. The measure is expected to provide cash flow to employers which is estimated at RM10 billion, benefitting over 480,000 SMEs and affected companies while securing more than 8 million jobs.

  2. Exempt payment for Human Resources Development Fund (HRDF) levy across all sectors for six months beginning April 2020. This measure is expected to assist companies’ cashflow with a total savings of RM440 million. The HRDF levy is a mandatory levy payment collected by the Human Resources Development Fund (PSMB) imposed on employers from certain industries. The purpose is to enable employee training and skills upgrading of the Malaysian workforce. (To learn which industries should make HRDF levy payment, click here); and

  3. Deferment of income tax installment payments for all SMEs for three months beginning 1 April 2020.

  4. The Government will also provide a RM50 billion guarantee scheme up to 80% of the loan amount for financing working capital requirements. The programme will be managed and is subject to credit evaluation by Danajamin. The facility is targeted at viable businesses in all sectors facing difficulties following the COVID-19 outbreak. The minimum guaranteed loan size is RM20 million per company.


However, after examining the economic stimulus package, many employers are still in doubt whether they are able to sustain their business without having to downsize their operation, The crisis is not a temporary phase that happens during the MCO period but also after the lift of the MCO with the economic rescission waiting ahead.


Compulsory Payment of Full Salary May Lead to Loss of Job

When the Government decided that no assistance shall be given to employers to implement any kind of salary reduction during the MCO period, many businesses have proved that they are not able to survive due to the cash flows. As such, retrenchment may be the only possible resort when salary reduction is not a mutual agreement between employers and employees. This may at first sign seen to be a step taken to protect the employees but in fact, the Government is putting their jobs at risk because if an employer is not able to survive, they have the prerogative to cease the business and this would mean that the employees would be out of a job. With the market condition, it would be difficult for a labour to search for a job unless in the essential service which may, at least for now, provide more working opportunities.


Employment Retention in Singapore

In comparison to the Employment Retention measure implemented by Singapore, employers in Singapore may ask employees to take up to 50% of their annual leave and that temporary lay off is possible hence leaving the employer with room to breathe as they may cut down on the operation cost.


Malaysia Employment Retention Turns Out to be an Aid for Unfair Retrenchment

In a legal standpoint, the employers in Malaysia have better ground, compared to Singapore, to prove that the retrenchment is exercised in good faith as employers have no other measures but to pay for employees' full salary (unless mutually agree). They now have the excuse of not implementing other alternatives such as reduction of salary or working hours as these measures are not allowed to be taken by the Government. They need not explain or satisfy the Court as to why those alternatives are not taken prior to retrenchment but simply because they were not allowed.


Wage Subsidy Programme in Singapore

Singapore has also implemented Wages Subsidy which subsidizes 75% of gross monthly of the first $S4600 paid in April 2020. This means that the employers enjoy subsidy of a maximum of $3450 (even if the employee's salary is more than $S4600). For subsequent months, only the aviation and travel industry continues to enjoy a 75% subsidy while the food industry receives 50% and the other sectors are to receive 25%. With the non-discriminated subsidy applies, the overall retention of employees would not be biased.


The overall landscape of the Labour Market in Malaysia is still unclear but the implemented relief is hope to be able to cushion businesses and labours in Malaysia from the blow of this unprecedented global crisis.



141 views

Award-Winning Law Firm in Kuala Lumpur, Malaysia

Our latest update on Facebook

Featured on

©2012-2020 by Shang & Co. Advocates & Solicitors

  • Black Instagram Icon