Social Security: Concept And Reality With Reference To Malaysia

by Noorsafariza Aminaldin

The objective of social security is to preserving the quality of life of the individual and his or her dependents as a result of old age and contingencies such as injuries, occupational disease, and invalidity, the need of the health and medical attention and death. Currently social security scheme are based on the social insurance, general or ear-marked taxes and social assistances. The challenge for the social security is financial sustainability and social cohesion support by politic will. In response to financial sustainability challenge, current modalities have centered on four main approaches:
a) Funding through general tax revenue or ear- marked taxes
b) Social pooling through social insurance, that is, mandatory contributions from the target group(s)
c) Private insurance schemes and pension plans which have a commercial element; and
d) Social assistances programs financed by the government budget
Malaysia has a mixed system of social security comprising state and private scheme, statutory labour law’s obligatory requirement on the part of employers as well as state social assistance programs. Currently, Malaysia have four social security schemes administered by government agencies, that is, the Employment Injury and Invalidity Pension Schemes under the Social Security Act, 1969 and mainly retirement scheme under the Employees Provident Fund Act, 1951 and the Workmen’s Compensation Act, 1952 which provides coverage for foreign workers in Malaysia under an insurance scheme paid by employers.
The Social Security Organization ( SOCSO), established under the Employee’s Social Security Act 1969, ensure timely and adequate assistance to workers who have suffered injury, occupational diseases, invalidity or death as covered by the provisions of the Act. SOCSO offers two social insurance protection schemes, namely, the Employment Injury Insurance Scheme and the Invalidity Pension Scheme. The Employment Injury Insurance scheme provides an employee with protection for industrial accidents, occupational diseases and commuting accidents. Benefits provided are Medical Benefit, Temporary Disablement Benefit, Permanent Disablement Benefit, Constant Attendance Allowance, Dependant’s Benefit, Funeral Benefit, Rehabilitation Benefit and Education Benefit. SOCSO’s Invalidity Pension Scheme provides an employee with 24-hour coverage in the event of invalidity or death resulting from whatever cause. Benefits provided are Invalidity Pension, Invalidity Grant, Constant Attendance Allowance, Survivors Pension, Funeral Benefit, Rehabilitation Benefit and Education Benefit.
Since 1st April 1993, foreign workers who are not permanent residents of Malaysia are covered under the Workmen’s Compensation Act 1952. This Act aims to assist workmen who had lost their capacity or ability to work due to injury suffered in the course of their employment. Under this Act, his/her employer compensates the injured workman or his/her dependants and the employer, in turn is required to insure for him/herself in respect for such liability. Since 1st November 1996, the Foreign Workers Compensation Scheme was established under the Workmen’s Compensation Act 1952. Under this scheme, employers have to insure their foreign workers. If employers fail to provide insurance coverage for each worker, they can be fined or jailed or both. The benefits under the scheme include 24-hour daily coverage, ex-gratia payment for injuries leading to death, a compensation payment if a worker dies or if he/she is permanently disabled and a repatriation cost in the event of death or permanent disablement.
The Employees Provident Fund (EPF) Act, 1951 provides a compulsory savings scheme that seeks to protect the rights of employees to retirement savings and to enhance the value of their savings for post-employment financial security and well-being. The statutory rate of contribution for employer is 12 percent of the employee’s monthly wage while employee’s contribution is 9 percent of monthly pay. The EPF also provides for withdrawal schemes for medical, housing and trust funds even prior to retirement age to cater to the present-day needs of society. In addition, the EPF provides Physical or Mental Incapacitation Withdrawal Scheme for members who are disabled from continuing to work. Under this scheme, they can take out all their savings immediately. Upon the death of a member who was still contributing to the Fund, his savings are automatically given to whomever the member had nominated as his beneficiary. If there is no beneficiary, the next-of kin will receive the money. As part of its social responsibility, the EPF also pays death and disability benefits. The EPF scheme was originally conceived as a forced savings scheme for old age with monthly contributions from the worker and his/her employer. As a result of evolving social pressures, contributors are now allowed to withdraw their savings for specific purposes.
The extant coverage of the social security schemes, labour legislations and social assistance programs in Malaysia has obvious gaps. Generally, the formal schemes cover contributors only up to the age of 55 years old. Thus, the aged will have to depend on either their savings or social assistance programs, both for daily subsistence or medical expenses. There are no formal family or child assistance social security schemes. Other than the payment of termination benefits required by the labour laws, there is no unemployment insurance. Minimum wage exists only for workers in certain occupations based on the recommendations of wage councils established under the Wages Councils Act, 1947 (Malaysia, 1947). In addition, formal social security schemes have largely excluded the self-employed group. Where, the informal sector forms a substantial economic sector, it may be concluded that a substantial section of the population encounters difficulties in maintaining their standard of living in times of economic distress. Among the critical pressures on the population’s standard of living is the provision of health care.
Currently, the health care system is largely based on public funding of services provided by public health institutions. This has placed a burden on the government budget. Extension of the coverage for social security is critical in ensuring social inclusion. Public issues or problems require public solutions. Social security is a matter in the public domain and hence requires not only involvement of the traditional tripartite parties, that is, employees, employers and the government but also contributions from civil society as a whole. This is because NGOs (non-government organizations) have augmented government institutions in the provision of social services. Therefore, there is a need to improve coordination among the various service providers in order to avoid duplication and misallocation of scarce resources.