KUALA LUMPUR: The Federation of Malaysian Manufacturers (FMM) is against the introduction of unemployment insurance saying it views the scheme as penalising well-managed companies by adding unnecessarily to their cost of doing business when they are forced to contribute to a scheme which is to bail out delinquent companies.

In a statement, FMM said only a small number of employers defaulted in payment of retrenchment benefits even at the height of the financial crisis in 1998. “Unpaid retrenchment benefits at RM25mil was only 5% of total retrenchment benefits pyable as the vast majority of 95% was duly paid out.”

The Star had reported on Monday that National Economic Council member Datuk Seri Dr Chua Soi Lek said the unemployment insurance scheme would be shelved for now.

Prime Minister Datuk Seri Najib Tun Razak directed International Trade and Industry Minister Datuk Seri Mustapa Mohamed and HumanResources Minister Datuk Seri Dr S. Subramaniam to shelve the scheme at a council meeting on Monday, said Dr Chua, who is also MCA president.

Dr Chua said the insurance scheme required further deliberation not just to avoid an increased financial burden on businesses, but to ensure that no other issues would arise during implementation.

FMM said there were alternative options namely, amend the Companies Act to give priority of payments to workers ahead of all creditors, including government taxes, as well as carry out strict and swift enforcement on delinquent employers.

“There is also great concern that such a scheme would ultimately turn into an economically disastrous social welfare net with increasing contribution rates and longer support periods, leading to the creation of dole mentality and voluntary unemployment in the country.”