Publications

Overview:

Malaysia’s economy has grown steadily over the past several years, improving from a 4.2 percent GDP in 2002 to a 7.7 percent GDP in 2004. Currently, the fastest growing sectors in the country include the healthcare, information technology and logistics industries. As of 2004, Malaysia’s population totaled nearly 24 million, with a workforce of around 10 million and unemployment rate of approximately three percent.

Pension System:

The Employees Provident Fund Act was set up in 1951 as a pension system for all employees in Malaysia. It requires monthly contributions from employers (12 percent) and employees (11 percent). All workers in Malaysia are required to participate in the Fund except for expatriates, those who are self-employed and domestic servants. Pension contributors can check their balance at any time by submitting an inquiry in writing.

Contributors who reach the age of 55 are eligible to receive their pension funds. In addition, eligibility also requires that an employee have contributed to the Fund for at least five years. Pensions may be drawn before the age of 55 if (1) a contributor leaves Malaysia permanently, or (2) requires the funds for the purpose of seeking medical treatment, subject to approval from a medical board in Malaysia.

National Health Insurance Scheme:

Due to rising healthcare expenditure, the Malaysian government has recently announced that it will implement a new National Health Insurance Scheme (NHIS). The NHIS will be managed by the National Healthcare Financing Authority and will require mandatory contributions from most citizens and eligible non-citizens. While the new scheme will mark the end of free universal healthcare in Malaysia when it goes into effect around the end of 2006, it is expected to provide better healthcare and healthcare facilities in Malaysia, and also offer financial risk management for those facing high medical fees.

The NHIS will be based on a “community-rated” model, where the cost of healthcare will be spread across the population, with the rich and healthy helping to subsidize the poor and sick. Specialized packages will be available for those citizens who desire better healthcare service with more options, such as a choice of private hospital or public healthcare facility. The Malaysian government hopes this cost-sharing model will allow all citizens access to quality healthcare and help alleviate the government’s financial burden due to rising healthcare costs.

The details of the NHIS are still being developed, including the mandatory contribution amount, contribution ceiling, type of healthcare packages that will be available, and how the hospitals will receive funds, among others.

However, since most private companies provide healthcare to their employees, some private sector employers are concerned that this new scheme could place an additional financial burden on them. According to the Malaysian Employers Federation, 98 percent of private companies provide medical treatment to executives, 57 percent provide hospitalization coverage, and 53 percent provide dental benefits. Under the NHIS, private sector employees may also be required to contribute towards the scheme.

Foreign Workers Insurance Scheme

In an effort to protect foreign workers in Malaysia, the Ministry of Human Resources (MOHR) recently established the Foreign Workers Insurance Scheme, requiring all employers in Malaysia to insure their workers with one of four approved insurance companies. Manpower Department director, General Datuk Ismail Abdul Rahim, emphasized that policies from other insurance companies in Malaysia are not valid and will violate the Workmen’s Compensation Act. Employers may choose from Lonpac Insurance, the Malaysian Assurance Alliance, Mayban General Assurance or Kurnia Insurans.

These four insurance companies will establish an Electronic Network System linked to the Department of Manpower, providing for efficient administration and enforcement by the Department. Additionally, the System will allow the Department of Manpower to quickly identify any employers who fail to meet the new insurance requirements. An employer who violates this policy could receive a fine of RM 20,000 (US $5,200), a two-year jail sentence, or both. The insurance premium for this new Scheme will hold at its present RM72 (US $19). Of course, foreign companies can also supplement an employee’s Malaysian insurance plan with an overseas plan, under an umbrella policy.

Foreign Worker Induction Course

Effective November 1, 2004, all foreign workers who enter Malaysia and intend to stay for less than one year must enroll in an induction course, according to the regulation established by the MOHR. Annually in Malaysia, companies hire about 300,000 to 400,000 foreign workers. The new induction course for these workers was created to provide basic and useful knowledge about Malaysia, such as customs, labor laws and employment regulations.

The induction course is sixty hours long and consists of three modules. The first course will help foreign workers communicate better in Bahasa Malaysia. The second course will provide information on the customs, culture and religious beliefs in the country. Finally, the new workers will be introduced to Malaysian labor laws, immigration and employment regulations.

Employers will be required to collaborate with a Malaysia training provider to organize the induction course for their foreign workers, which will be held at a training center. The Ministry had granted a six month transition period to employers, which lasted until April 30, 2005. Employers are not required to hold induction courses for any new foreign employees who joined their company prior to November 1, 2004. 

Workplace Smoking Regulations:

In order to provide a cleaner and healthier environment in the workplace, the Department of Occupational Safety and Health (DOSH) began drafting new guidelines on indoor air quality and smoking regulations. This decision came as a result of increasing influence from other countries which have already implemented smoking restrictions in the workplace. The new regulation, which is expected to go into effect in late 2005, will specify what constitutes good indoor air quality in the workplace. Currently, the Occupational Safety and Health Act requires employers to maintain good air quality, but does not provide specific standards or measures of quality.

DOSH will develop the new regulations by examining the standards set in other countries and also through consultations with Malaysian employers and unions. One main issue will be whether offices should have designated smoking rooms – a provision strongly supported by the Malaysian Trade Union Congress. Presently, some government offices in Malaysia have “smokers’ corners” for the workers, which are often tables with ashtrays, and do not help to improve the workplace air quality.

The DOSH intends for the new regulation to be very direct, clearly stating where workers can and cannot smoke, as well as specific standards for air quality in offices. This should help prevent employers from avoiding or challenging the new regulation. Moreover, employers who fail to follow the regulation, once in effect, will be punished by receiving a fine of up to RM 10,000 (US $2,600), a jail term of up to one year, or both. Continuous offences will be punishable with fines of RM 1,000 (US $260) per day.

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