MAY 5 — Malaysia and Singapore have rolled out stimulus packages to cushion the impact of Covid-19. Both stimulus packages have catered for different types of assistance to businesses, including loans and financing, tax relief and wage subsidy. Stimulus packages are difficult to be compared accurately across countries due to the respective legal and economic environment in each country.
Wage subsidy/co-funding by the government effectively buys time for businesses to brave through the storm to emerge stronger thereafter. For the purposes of this commentary, we will focus and compare the wage subsidy/co-funding provided by the respective government which has the most direct and strongest effect in preventing short-term unemployment by compensating businesses directly.
The Wage Subsidy Programme (“WSP”) (Malaysia) VS The Jobs Support Scheme (“JSS”) (Singapore)
The Malaysian government has allocated US$3.21 billion (RM13.8 billion) and the Singapore government has allocated US$14.6 billion to subsidise or co-fund workers’ wages during this period of economic uncertainty.
The WSP provides three-month wage subsidy to all companies with local workers earning RM4,000 and below between April 1, 2020 until December 31, 2020, subject to availability of fund and any subsequent reviews by the government. Depending on the size of enterprise, the subsidy amount ranges from RM600 to RM1,200 with limitation on number of eligible employees. Businesses with 76 employees and above must prove 50 per cent or more decline in revenue or income by comparing the numbers in January 2020 against the subsequent months. Eligible employers must retain their employees for at least six months, i.e. three months during the subsidy period and three months post-subsidy.
As for Singapore’s JSS, the government will co-fund 25 per cent of the first SGD4,600 gross monthly wages per local worker for nine months until December 2020. For heavily impacted industries, i.e. air transport, tourism and food services, firms will receive higher co-funding at 50 per cent to 75 per cent of the first S$4,600 gross monthly wages per local workers under the JSS. The enhanced JSS also increased government’s co-funding to 75 per cent for the first S$4,600 monthly salary of all local employees for April and May 2020. Employers are strongly urged not to resort to retrenchments or prolonged no-pay leave during Circuit Breaker.
WSP in Malaysia — effective to prevent job loss?
We will lay down some notable shortcomings of the WSP in comparison to the JSS as follows —
* Application is subject to approval by the government. Unlike Malaysia, no application is needed and Singaporean employers will automatically be entitled to the benefits. This prevents unforeseen hiccups to ensure that all eligible employers will benefit from the government’s plan.
* To prove 50 per cent or more decline in revenue or income. Under the WSP, businesses with 76 employees and above must prove 50 per cent or more decline in revenue or income compared to January 2020 or the subsequent months to be eligible for the subsidy. Almost an impossible condition to be fulfilled by majority of companies.
* Limited number of eligible employees. Regardless of how big a company is, the number of eligible employees will be capped at maximum 200 employees. To many large companies which are responsible for the employment of hundreds or thousands of employees, this may appear insignificant and negligible.
* No special subsidy rate for heavily impacted industries. Aviation, travel and retail industries which potentially bore the brunt of the economic fallout were not given larger reliefs, in which they could end up insolvent due to almost zero revenue and cash flow.
* Subsidy period is only for three months. Experts opine that it may take years before the world economy finds its feet. Therefore, by subsidising employees’ wages for only three months may not be able to rescue businesses from massive downturn. The Singapore’s JSS provides co-funding of wages for nine months. Also, under the JSS, government will co-fund 75 per cent of the first S$4,600 monthly salary of all local employees for April and May 2020.
* To retain employees for six months. Despite the shorter subsidy period, the WSP states that employers are not allowed to retrench, instruct employees to take unpaid leave or deduct employees’ salary for a six-month period. Under such circumstances, genuine cost-cutting measures, i.e. salary reduction or temporary unpaid leave for employees may seem to be more practical for some companies to stay afloat in the long run. In contrast, JSS provides a nine-month subsidy and there is no strict requirement, save for strongly advising against retrenchment and pay reduction.
It is apparent that the WSP has stricter eligibility criteria with lower subsidy amount for a shorter period. The JSS constitutes approximately one-third of Singapore’s budget, with a clear focus on employment support. The Prihatin package may sound significantly large, but only a small portion is actual fiscal spending, with WSP taking up only approximately five per cent of the entire package. Therefore, one should not be too surprised to see that the actual reliefs received by businesses in term of employees’ wage subsidy may not be very substantial. Despite so, Malaysians can surely take comfort in the government’s toughened measures to cushion the effect of Covid-19 outbreak.
*Leonard Yeoh is a partner and Pua Jun Wen is a legal associate at legal firm Tay & Partners.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail.
