The self-employed deserve better social protection | Daily Express Online

ALTHOUGH the flexibility offered by the gig economy has encouraged more Malaysians to become self-employed in recent years, the Covid-19 pandemic reveals the vulnerability of the social protection system in Malaysia.

With various lockdown measures introduced in the country, more self-employed people are finding it difficult to maintain their business activities.

While many businesses were forced to close temporarily when the Movement Control Order (MCO) began in early March last year, the Department of Statistics Malaysia (DOSM) revealed in its investigative findings that 46.6% of the self-employed had lost their job. Only 5% of the self-employed in Malaysia had enough savings to last at least three months.

Unlike a typical employee who earns a constant monthly salary, the self-employed must find many sources of income to meet the rising cost of living.

ADVERTISING

Traditional employees could also save more as they are eligible to receive fixed bonuses at the end of the year. A self-employed person, on the other hand, has to work harder to maintain their income and savings.

Since self-employed people’s incomes can vary widely, they may not have the ability to commit to annual bonuses or have a good enough credit rating to access loans. When they could not access any loans from formal financial institutions, their last resort was to borrow money from family and friends. Only then, at least, could they cover monthly rent, utilities, and related overhead.

In addition, self-employed workers may be forced to continue working in the event of illness as they are not entitled to any sickness benefit.

Therefore, self-employment is considered a type of vulnerable employment. The self-employed are not covered by work-related social protection (i.e. health insurance and pension funds) or are entitled to certain employment-related benefits (i.e. say paid holidays and sick leave).

According to the DOSM, there are four types of employment status in the country:

1. Employees or those who work for others for remuneration;

2. Self-employed or self-employed;

3. Unpaid family workers or those who work in a family business without pay; and

4. Employers who operate businesses with at least one worker.

As of the second quarter (Q2) of 2021, the self-employed now constitute the second largest group in the Malaysian workforce. Of a total of 15.21 million working adults, 17.2% or 2.61 million are self-employed.

According to the DOSM definition, self-employed refers to a person who operates his or her own farm, business, or trade without employing paid workers to assist in the conduct of the business. Drivers and delivery people, freelancers and food stand owners are also called self-employed.

ADVERTISING

Unlike standard employees who have fixed working hours to respect, the self-employed are those who tend to have irregular working hours. They even have to work nights or weekends.

Physical micro and small businesses, in particular, are relatively more vulnerable to economic shocks as they do not have a strong cash flow compared to large businesses.

Online drivers, delivery people and food stall owners are feeling the pinch of the pandemic even more because they don’t have the luxury of working from home. As they need a physical presence to do their job, movement restrictions resulting from the Covid-19 pandemic have limited their ability to go out and earn a daily wage to survive.

The prolonged lockdown measures have also led to more Malaysians struggling to put food on the table. Some of them had to raise white flags to ask for help due to the loss of jobs and income.

Even though the Malaysian government has put in place numerous stimulus packages for the self-employed to make ends meet, job retention measures tend to be less effective due to a large proportion of self-employed in the country.

Although the total number of employed people decreased from 15.23 million to 15.21 million, Figure 1 shows that the share of self-employed/self-employed employment between Q121 and Q221 generally increased, while other forms jobs have declined.

Stimulus measures that specifically target the self-employed consist of a one-time payment for email drivers and full-time taxi drivers, in addition to microcredit for business owners. The single aid only covers a particular group of self-employed people. On the other hand, the micro-credit initiative is not a direct financial aid but rather a reduction of the associated operational costs.

In addition, the design of the current social security and insurance scheme only protects traditional employees who are listed in the database of the Social Security Organization (SOCSO) and the Employees Provident Fund (EPF). . Although SOCSO plans to address the issue with the Social Security Scheme for the Self-Employed (SESS), the program remains undersubscribed among the self-employed. Apart from the Self-Employment Insurance Scheme (EIS), i-Lestari is also not applicable to self-employed people.

As the verification to determine eligibility for Bantuan Sara Hidup (BSH) is purely based on Inland Revenue Board of Malaysia (LHDN) data, again the self-employed are the most vulnerable who are not included in the social assistance distribution system.

As a result, the only support for the self-employed would be the Bantuan Prihatin Nasional (BPN) one-time cash payment and the annual BSH. If the self-employed do not register their business, they are also not qualified to receive financial assistance specific to small and medium-sized enterprises (SMEs).

In contrast, traditional employees could not only benefit from the i-Lestari provision and the BPN, but they could also receive assistance from the job retention program (ERP), the EIS and the wage subsidy program ( WSP).

ADVERTISING

Therefore, to improve social protection coverage among the self-employed, EMIR Research offers the following policy recommendations to the current administration:

1. Closing the gaps between typical wage earners and the self-employed in social security and insurance programs. For example, the government could expand the benefits of ERP, WSP, utility bill discounts and special tax deductions for rent reductions among the self-employed.

Monthly support similar to that received by traditional employees is worth considering, as it would increase the resilience of the workforce to future economic shocks;

2. Improving the labor market statistics landscape to be more comprehensive and granular, and updating data on labor market developments is key to producing quality data analysis for Malaysia to design people-centred public policies, especially among the self-employed;

3. Provide holistic assessments on current social security and insurance programs with different government agencies (i.e. SOCSO and EPF), improving the social welfare of the self-employed while ensuring that all workers self-employed are protected during retirement;

4. Eliminate bureaucratic processes and delays that prevent the self-employed from accessing the benefits they urgently need; and

5. Amend both the Self-Employment Social Security Act 2017 (Act 789) and the Employment Insurance System Act 2017 (Act 800) to protect the self-employed in the event of injury or illness related to work or in the event of job loss.

Instead of introducing a blanket policy that focuses solely on the dynamic employer-employee relationship, the Malaysian government now has ample opportunity to establish a social protection floor for the self-employed who are going through the public health crisis.

– Amanda Yeo is a research analyst at EMIR Research, an independent think tank focused on strategic policy recommendations based on rigorous research.

Joel C. Hicks