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Towards Unemployment Benefits in Malaysia

Facilitating and Supporting the Design of an Unemployment Insurance System in Malaysia

As part of the policy measures for intensifying human capital development, the 2010 New Economic Model (NEM) includes various policy measures that will contribute to increased flexibility in hiring and firing workers. To mitigate the social and financial impact on retrenched workers the NEM recommends “enhancing the workers safety net through the introduction of unemployment insurance" which will integrate upgraded employment services as well as up-skilling and retraining programmes.

The Government of Malaysia has requested technical assistance from the International Labour Organization (ILO) to support and facilitate the design of an unemployment insurance system. This system will aim at providing adequate income-security and facilitating re-employment of those unemployed.

On 23 December 2011, an agreement between the Government of Malaysia and the ILO was signed launching the implementation of the Project “Supporting and Facilitating the Design of an Unemployment Insurance System in Malaysia”. The Project involves the Ministry of Human Resources (MoHR), the Social Security Organization (SOCSO), the Malaysian Employers Federation (MEF) and the Malaysian Trade Union Congress (MTUC). Efforts will be put to facilitate consensus building on the features of unemployment insurance in Malaysia.

The project will be rolled out in two phases:

(1) The first phase comprises (i) an international comparative and benchmarking review of protection and proactive measures for unemployed workers; (ii) a review of the macroeconomic the labour market indicators; and (iii) stocktaking of existing measures to protect the unemployed in Malaysia. Several options for an UI system in Malaysia will be discussed in a Tripartite Workshop, in May 2012.

(2) A feasibility study including options for the institutional set-up, financial parameters, a draft law revision (including implications on provisions related to the retrenchment pay), and an implementation plan for the introduction of an unemployment insurance system in Malaysia will be conducted. Findings of the feasibility study will be discussed during a Triparite Forum, in September 2012.

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