Coming on the heels of the PRIHATIN package, the Malaysian Prime Minister has unveiled Short-Term Economic Recovery Plan (PENJANA) worth RM35 billion on 5 June 2020, in aiding the re-opening of more economic sectors in the country. Under PENJANA, bulk of the allocation is crafted towards job security including improving cash flow for businesses by providing recruitment incentives, enhancing gig economy, re-skilling and upskilling of employees.

PENJANA is expected to have the effect of jumpstarting the country’s economy post Covid-19, to empower the people, propel businesses and stimulate the economy. The government should be applauded for these stronger and more sustainable initiatives under PENJANA to address the woes of employers and employees in Malaysia.

Enhanced Wage Subsidy Programme (EWSP)

To promote employee retention and reduce layoffs by employers, the previous 3-month WSP introduced under the PRIHATIN package will be extended for another three months with subsidy of RM600 per employee for all eligible employers (limited to 200 employees per company).

The conditions for WSP have been loosened and appear favourable to the employers. Under the previous WSP, employers opting for WSP is subject to conditions that employers are not allowed to retrench, instruct employees to take unpaid leave or to implement pay-cut during the 6-month period (3-month subsidy and 3-month post subsidy period). The current WSP is enhanced to allow employers receiving the subsidy to also implement reduced work week (with corresponding pay-cut) and reduced pay (with maximum allowable reduced pay of 30%). The effective date for the enhanced WSP is from Mid-June 2020 to September 2020. However, further clarifications are required from the authorities on the application of existing conditions towards EWSP.

For tourism sector and businesses which are prohibited from operating during Conditional Movement Control Order (CMCO), employers are eligible to apply for the EWSP even if the employers have mandated employees to take on unpaid leave, on the condition that employees receiving the subsidy directly. Previously, the subsidy payment will be credited to employers within 7-14 days upon approval, to subsidise employers of the employees’ salaries. However, it is unclear as to how should the subsidy payment be received by employees directly or credited to employees directly under the EWSP.

Financial Incentives to encourage hiring of the unemployed

The government has also introduced recruitment incentives to combat the high unemployment rate attributed to the adverse impact of Covid-19. The government will provide an incentive of RM600 per month, for businesses which provide apprenticeship for school leavers and graduates. The incentive will only be provided up to a maximum duration of 6 months.

An incentive of RM800 and RM1,000 per month will be given to businesses which employ unemployed workers of below 40 years old and 40 years old and above respectively. Similarly, businesses will only be incentivised up to 6 months. Training allowance of RM4,000 per individual will also be extended to those retrenched but not a contributor under the Employment Insurance System (EIS).

The recruitment incentives will be open for applications from mid-June 2020 to 31 December 2020.

Improved Reskilling and Upskilling Programmes

Employees must be equipped with skills critical to remain resilient and relevant in the post-pandemic era. The government is dedicated to enhance employability and competitiveness of unemployed workers and youths (particularly school leavers and fresh graduates) through its initiatives under PENJANA.

To enhance employability of youth, the government will provide 1-to-1 matching fund of RM250 million to co-fund place-and-train in addition to other upskilling programmes with Human Resources Development Fund (HRDF). Immense support will be accorded to Securities Industry Development Corporation (SIDC) programs such as Capital Market Graduate Apprenticeship program, Islamic Capital Market Graduate Training Scheme (ICM GTS) and training subsidy of up to RM 3,500 over the next 6 months. The Government will also optimize training facilities such as those under MARA, Community Colleges, Institut Kemahiran Belia Negara (IKBN) and Institut Latihan Perindustrian (ILP). The Government relaxes conditions for PROTÉGÉ Ready to Work (RTW) programme to develop and equip selected graduates to perform as a high potential talent for any organization that they will serve in the future.

As to provide upskilling for unemployed workers, the government will also initiate public private collaboration on upskilling in sectors such as E&E and ICT for key investors (MIDA, the corridor authorities) and incentivise further studies by focusing on short courses in local universities. Entrepreneurship programs delivered by MOA, MARA, MEDAC will also be leveraged. The government will also provide training subsidy of up to RM 800 monthly for 6 months through SIDC.

Support for Gig Economy

The government will facilitate policies to support the growth of gig economy and the welfare of gig economy workers. Amongst others, a matching grant of up to RM50 million will be provided for gig economy platforms which contribute for their gig workers towards PERKESO’s employment injury scheme of up to RM162 and EPF’s i-Saraan contribution of up to RM250 yearly. The government will also provide MDEC with RM25 million for the Global Online Workforce (GLOW) program which will train Malaysians to earn income from serving international clients while working online from home.

Flexible Work Arrangement (FWA) Incentives

Under PENJANA, the government encourages the new normal of work-from-home by providing support to both employers and employees. Employers who implement FWA or undertake enhancement of their existing FWAs will be given further tax deduction. It is vital for businesses to ensure that employees have sufficient access to technologies to properly embrace the new normal of remote working.

“Perquisites” are taxable under paragraph 4(b) of the Income Tax Act 1967, as part of the gross income from employment. Presently, any gift of notebook, mobile phone or tablet by employers to employees is treated as perquisites to the employees and is taxable in the hands of the employees. Under PENJANA, tax exemption up to RM5,000 is given to individuals who receive mobile phone, tablet and laptop from their employers under the FWA. The government will also provide special individual income tax relief up to RM2,500 to employees on the purchase of handphone, notebook and tablet. Clarity is required from the authorities on whether the special individual income tax relief will be given on top of the current lifestyle relief (a tax relief of up to RM2,500).

With the increasing number of Malaysians working from home, PERKESO will also provide coverage for workers involved in accidents while working at home under the Employment Injury Scheme.

To ease the transition to the new normal of working-from-home, the government will also support working parents through the subsidy of child care expenses. There will also be incentives to encourage child care centres to comply with the new normal and to incentivise certification of early education practitioners.

National Employment Services Job Portal Upgrade

The government will also upgrade the National Employment Services under PERKESO through enhancement of the job portal and employment placement services. The government will also collaborate with private job sites for employment matching to improve employment opportunities.

PENJANA solving Unemployment

The Department of Statistics forecasted Malaysia’s unemployment rate to reach 5.5% in 2020. Some analysts had even projected that unemployment rate may hit above 10%, which would have grave social-economic repercussions. Thankfully these forecasts were made before PENJANA was announced and the jury is still out on whether it would “Make Malaysia Great Again”.

Leonard Yeoh is a Partner and Pua Jun Wen is a Legal Associate with the legal firm, Tay & Partners.

Leonard Yeoh
Partner
T: +603 2050 1973
M: 012-321 6893
leonard.yeoh@taypartners.com.my

Pua Jun Wen
Associate
junwen.pua@taypartners.com.my