On 2 November, Finance Minister Lim Guan Eng tabled Malaysia’s 2019 budget before Parliament. Guan Eng’s budget has been buoyed by positive economic news: global exports are performing better than expected, and inflation and unemployment are predicted to remain stable into 2019. Meanwhile the Malaysian economy is projected to grow at a rate of 4.9% in 2019, driven by private sector expenditure.
Supported by those factors, Malaysia’s 2019 budget has been designed to reinvigorate the country’s reputation as an “economic tiger” with specific measures designed to target unemployment. While the current unemployment rate in Malaysia is only 3.4%, the government is seeking to address the problem of long-term unemployment with the 2019 budget, boosting salaries and benefits, and promoting the interests of entrepreneurs. With that in mind, key measures of the 2019 budget are as follows:
The Human Resource Development Fund
The HRDF will launch two programmes which target school-leavers - promoting skill acquisition and increasing personal marketability amongst graduates.
Retirement Age Workers
The budget includes specific measures to encourage employers to take on workers of retirement age - and for post-retirement age employees to join the workforce. These measures include:
- From 1 January 2019, the Employer Provident Fund (EPF) employer contribution will be lowered to 4% (from 6%) for retirement age workers.
- An additional proposal suggests the employee contribution to the EPF for retirement age workers be lowered to 0%.
- A tax deduction for employers who employ retirement-age workers, and ex-convict workers, on salaries of up to RM4,000.
The budget offers aid for pensioners who have retired from government employment. Under new measures:
- Ex-civil service pensioners on pension of RM1,000 or less will receive a one-off payment of RM500.
- Around RM10 million will be allocated to provide a wider range of healthcare benefits and services for retired ‘contract of service’ officers.
Minimum Wage & Labour Laws
From 1 January 2019, Malaysia’s minimum wage will rise to RM1,000 per month. The budget also includes a commitment from the government to review labour laws with the intention of addressing poor, discriminatory, and unlawful conduct by employers - and to improve the labour market and the welfare of workers.
The budget creates a new B40 Health Protection Fund which will offer insurance for a ‘top four’ critical illnesses up to RM8,000. RM100 million has been allocation to a health screening programme for individuals in B40 households, along with RM20 million for free mammograms, HPV vaccinations, and pap smear tests for women.
Foreign Worker Levies
The budget reduces levies on foreign workers in the agricultural or plantation industries to RM3,500 (from RM10,000). The levies apply only to employees who have worked in the industries for 10 years or more.
From 1 January 2019, Malaysia’s Employment Insurance System (EIS) will come into effect, and function to assist employees who have lost their jobs. The 2019 budget includes funds for the EIS to:
- Compensate workers who have lost their jobs.
- Provide a skills and training allowance.
- Maintain Social Security Organisation (SOCSO) offices in 54 locations.
Only 53.5% of women participate in Malaysia’s workforce (as opposed to 77.7% of men). Of those non-working women, 2.6 million cited housework as the reason they were not in employment. After research revealed that a 30% increase in female workforce participation would boost the Malaysian GDP by up to 12%, the government included specific budgetary measures to realise that goal:
- RM10 million has been allocated to develop 50 childcare facilities in government buildings across Malaysia. Private sector employers will be encouraged to take similar steps to encourage participation.
- A commitment has been made to boost female participation in higher levels of the Malaysian workforce: women currently hold only 30% of leadership roles and only 36% of senior public-sector roles.
- The government will encourage public listed companies to increase the number of women on boards of directors. The budget includes an objective for private sector companies to ensure women make up 30% of their boards by 2020.
Incentives for Entrepreneurs
Billions of RM in government funds has been allocated to investment in venture capital organisations, green technology development, digital initiatives, and the halal food industry. RM2 billion will be allocated using the Business Loan Guarantee Scheme to help small and medium size businesses investing in automation.
To learn more about Malaysia’s tax and business landscape, browse activpayroll’s Malaysia Global Insight Guide...