SOCIAL SECURITY PLANNING AND LEGISLATION MAL/74/014 MALAYSIA Project Findings and Recommendations UNITED NATIONS DEVELOPMENT PROGRAMME m INTERNATIONAL LABOUR ORGANISATION Geneva 1978 4£W«f)frPOT^r DECLASSIFIED 3?4of/jk?/ d©/. Y 41561 ISBN 92-2-102001-0 SOCIAL SECURITY PLANNING AND LEGISLATION ML/747014 MALAYSIA Project Findings and Recommendations Report prepared for the Government of Malaysia by the International Labour Organisation acting as executing agenoy for The United Nations Development Programmo UNITED NATIONS DEVELOPMENT PROGRAMME INTERNATIONAL LABOUR ORGANISATION Geneva 1978 TABLE OF CONTENTS Page INTRODUCTION ' k 1 PART I Population, Employment and Earnings 1. 2. 3. 4. 5. Population Gainfully Occupied Persons Employed Persons and.Wages. EPF Statistics Other Statistics « , ; 3 3 3 3 3 PART II Relevant Social Security Measures Labour Code 6.4 Medical Care 5 Workmen's Compensation Ordinance, 1952 7.1 Scope 7.3 Employers' Liability 7.5 Waiting Period 6 6 6 Amount of Compensation 7.6 7.8 7.9 7.10 7.11 7.12 Death Permanent Disablement Permanent Partial Disablement Death Following Temporary Disablement Constant-Attendance of Injured Workman Temporary Disablement 7 7 7 7 8 8 Employment Ordinance. 1955 * „ B.l 8.4 8.5 8.6 8.7 8.9 8.10 8.11 Sick Leave Maternity Protection Entitlement Period Rate of Allowance Limitation Scope of the Sick Leave and Maternity Provisions Exclusion . • 10 10 11 11 11 11 11 11 - 11 - Page PART III Employees' Social Security Act, 1969 9. Progress 10. Scope 11. ? Problems 12. Wages Ceiling . 12.3 ,12 12 13 . 13 Proposal 13 Low Benefit Payments t 13. ! 13.1 13.3, 13. A 13.5 Causes of Low Benefit Payments under Employees' Social Security Act, 1969 Low Wages Dependants Primary Group Secondary Group 14 14 14 14 14 Proposed Solutions 13.10 Disablement 13.14 Dependants' Benefit 13.15 Funeral Benefit , 15 15 15 PART IV Proposals for New Benefits Sickness Benefit 14.4 14.5 Proposed Qualifying Conditions Commencement of Benefit Payment 16 17 14.6 14.8: 14.10 14.12 14.14 14.15 Proposal Duration of Sickness Benefit Proposal Sickness Benefit Rate Proposal Medical Certification for Temporary Incapacity 17 17 17 17 18 18 Maternity Benefit 15. 15. 2' 15.3; 15.4< Qualifying Conditions Benefit Duration Proposal Maternity Benefit Rate 18 1H 18 19 15.5 15.7 Recommendation Maternity Allowance under Employment Ordinance and Maternity Benefit 19 19 - iii - Page Age Benefit * 16. 16.7 16.8 16.10 Introductory Pensionable Age Social Aspects in General International Practice 20 21 21 22 16.11 Pensionable Ages in Various Countries * 23 Relevant Conditions in Malaysia 16. 23 Aged Population 16. 29 Expectation of Life 24 26 Retirement from Gainful Activity 16.32 Law and Practice in Malaysia 16.35 Provisions under the Employees' Social Security Act, 1969 16.36 The Cost Factor 16.40 Proposals 16.45 Contribution Conditio ns 16.47 Proposals 16. 50 Rate of Pension 26 27 27 28 28. 29 29 Maximum Rate of Pension 16.53 16.56 16.57 16.59 Proposal Deferred Retirement Proposal Transitional. Provisions for "Aged" Entrants into the Pension Scheme 16.60 Proposal 16.65 Age Grant 16.66 Proposal 29 30 30 30 30 31 31 Minimum Rate of Retirement and Invalidity Pension 17.1 Proposal • 32 Invalidity Benefit • 18.1 Age Qualification 18.2 Proposal 18.4 Contribution Conditions 18.6 Proposal 34 34 34 3/] 18.8 Invalidity Grant 35 18.9 Proposal 18.10 Benefit Rate 18.12 Current Invalidity Pension Rate and the Proposed Age Pension Rate 18.16 Proposals • 35 35 35 36 - iv - Page Survivors' Benefit 19. Current Provisions 38 Proposals 19.2 Types of Survivors' Benefit 39 19.6 Rate of Periodical Payments 39 19.12 Conditions to be Satisfied by a Widow 19.13 Widow's Pensions and Widowed Mother's Allowance 19.16 More than One Widow Entitled to Periodical Payments 42 42 42 19.18 Orphan's Allowance 43 Lump Sum Payments 19.20 Widow's Grant 19.24 Survivors' Grant • 43 43 Medical Care 20. 20.2 20.4 Introductory Methods of Determining Entitlement to Medical Care Proposal 4 3' 44 44 Maternity 20.7 20.8 20.9 20.10 Conditions for Entitlement Duration of Entitlement Responsibility of Objectives Social Security Organisations Operating their own Medical Facilities 20.16 Proposals for Hospital Care 20.19 Ambulatory/Out-Patient Medical Care ., 44 45 45 45 46 46 PART V The Social Insurance Scheme and the Employees' Provident Fund 21.1 21.5 The Employees' Provident Fund Relevant Statutory Provisions Statistical Information 47 48 21.6 Membership of EPF 21.12 Contribution Income, Withdrawals and Investments 48 50 21.20 Growth Projection 21. 21 East Malaysia EPF 21.22-EPF and Government Finance and Policy 21.26 Recommendations 53 54 54 55 .... - V - Page PART VI Draft Bill 22. 22.3 Introduction C l a u s e 1 -r 57 57 22.4 22.7 22.10 22.11 22.12 Clause Clause Clause Clause Clause 2(5) 2(31) 5(2) 10 13(2)(c) 57 57 58 58 58 22.13 22.14 22.16 22.18 Clause Clause Clause Clause 13(3) 21(5) 25 29(2) 58 58 58 58 22.19 22.21 22.26 C l a u s e 33 C l a u s e 38 C l a u s e s 47 and 48 59 59 60 22.27 22.28 22.29 22.30 22.31 22.33 22.34 22.36 22.37 22.38 22.39 22.40 C l a u s e s 49 t o 51 C l a u s e 52 P a r t V of t h e B i l l C l a u s e 78 S e c t i o n 56(2) of t h e Act C l a u s e 98 F i r s t Schedule Second Schedule T h i r d Schedule F o u r t h Schedule F i f t h Schedule New S c h e d u l e s 60 60 60 60 60 61 61 61 61 61 61 61 ' PART VII Social Insurance and the Proposed Motor Vehicle Accident Compensation Scheme 62 - VI - LIST OP APPENDICES Page APPENDIX I Table 1 - Malaysia: Population Size and Age Structure, 1975-80 Table 2 - Expectation of Life in Certain Countries 63 64 APPENDIX II Table 1 - Malaysia: Employment by Occupation, 1970, 1975 and 1990 65 Table 2 - Employed Persons in First and Second Half of 1975 by Wage Range 66 Table 3 - Employment and Salaries in Manufacturing Sector 67 Table 4 - Manufacturing Survey 1972 - Wage-Class Distribution of Pull-Time Employees in the Last Pay Period of 1972, by Sex 68 Table 5 - Manufacturing Industries - Average Wages by Category of Employed Persons - 1972 69 Table 6 - Malaysia: Employment Status of Population aged ten years and over 70 APPENDIX III The Social Security Scheme: and the Employees' Provident Eund 71 APPENDIX IV Draft Bill 79 APPENDIX V Social Insurance and the Proposed Motor Vehicle Accident Compensation Scheme: • I'.'.'/ INTRODUCTION 1. Following the mission of Mr. K. Thompson, ILO Social Security Regional Adviser in May-June 1974, the Malaysian Government requested the assistance of a legislation expert under the United Nations Development Programme. The DirectorGeneral of the International Labour Organisation, in agreement with the Malaysian Government, engaged Mr. Joseph Vella-Bonnici, previously Permanent Secretary, Ministry of Labour, Employment and Welfare, Malta, to carry out the mission with the following terms of reference (1) to draw up the main and subordinate legislation for a social insurance scheme providing medical care and sickness, maternity and survivors' benefits, within the framework of the existing social security system; (2) to advise on the form of an old-age pension scheme and to draft the necessary legislation covering also the transformation of the existing provident fund scheme in relation to the proposed pension scheme; (3) to advise on the method of extending social security to farmers and fishermen, including self-employed workers. 1.1 Mr. Vella-Bonnici arrived in Malaysia on 23 October 1975. He was attached to the Social Security Organisation in the Ministry of Labour and Manpower. 1.2 This mission was carried out as part of a team of experts of the International Labour Organisation. Between October 1975 and January 1977 the team consisted of the legislation expert (Mr. J. Vella-Bonnici) and an expert on computerisation and administration .(Mr. B.H. Christensen). In February 1977, Mr. S.N. Iyer, a senior actuary of the International Labour Office, joined the team for a period of six months. The reports of the compuberisation and actuarial experts are being submitted separately to the Government of Malaysia. '1.3 In September 1977, an interim report on the legislation project was submitted to the Minister of Labour and Manpower to facilitate discussions before the expert's departure from Malaysia. That report included a draft bill providing for benefits in the event of sickness, maternity, old age, survivorship and for medical care, as well as existing provisions providing for employment injury and invalidity benefits and the legislation previously drafted by the expert to set up the Social Security Organisation as a statutory body. This final report incorporates the said interim report with a number of modifications. 1.4 Subsidiary legislation for the implementation of the new benefits has also been drafted. This will be submitted to the Malaysian Government separately, together with necessary explanations. 1.5 The report is divided into seven parts. The first three parts deal briefly with relevant facts concerning population, employment earnings and the Employees' Social Security Act, 1969The proposals for the new schemes are explained in Part IV, while Part V refers to the Employees' Provident Fund in relation to the proposed social security schemes. Part VI contains certain explanations on the draft bill which is found in Appendix IV of the Report. Part VTI, together with Appendix V, outlines the relationship between the proposed Motbr Vehicle Accident Compensation Scheme and the Social Security Scheme. Programme Review Meetings 1.6 In the course of the mission four programme review meetings were held, namely in May 1976 February 1977 June 1977 October 1977 - 2 - The regional representative of the United Nations Development Programme in Kuala Lumpur, the Ministry of Labour and Manpower, including the Director-General of the Social Security Organisation and the experts participated in the meetings. The Economic Planning Unit of the Prime Minister's department was directly represented in all but the first meeting. The ILO was directly represented at the second meeting by Mr. T.I. Mathew, Senior Social Security Officer, ILO Regional Office for Asia. 1.7 At the last meeting, which was the terminal review meeting, it was noted that the social security legislation project was completed with the exception of the part concerning the extension of social security to farmers and fishermen. It was realised that this part of the project required further investigation and would require the data which would become available from the nationwide census of agriculture which would be available in March 1978. .The UNDP regional representative suggested that there should be a further six months' consultancy service for the continuation of this part of the project. The ILO was subsequently informed by the UNDP regional representative that provision was made for six months' consultancy service in 1978 to make possible further work relating to the formulation of appropriate schemes for farmers and fishermen. Meetings with the Minister 1.8 The expert had periodical meetings with the Minister of Labour and Manpower and the Deputy Minister at which progress was reviewed and special subjects were discussed. After the submission of the interim report, the expert had three meetings with the Minister and Deputy Minister and officials of the Ministry. Other Meetings 1.9 Throughout his stay in Malaysia, the expert had special meetings with several officials of government departments and statutory bodies, employers, leaders of workers and employers and representatives of the medical profession, all of whom helped the expert to understand local conditions. Acknowledgements 1.10 The Director-General of the ILO acknowledges the assistance given to the expert by officials in government ministries and statutory bodies, and the great usefulness of discussions which the export had with employoi-s and trade union leaders. It would not be possible to mention all the persons who have given such valuable assistance in the course of the fulfilment of the mission; but a special expression of gratitude is due to Y.B. Dato Sri Lee San Choon, SPMJ, KMN, Minister of Labour and Manpower and to his Deputy, Y.B.K. Pathmanaban, KMN, for their advice, sympathy and understanding in discussions with the expert. 1.11 The expert received valuable assistance from Mr. Lee Cheng Yan, SecretaryGeneral of the Ministry and his officers. The wholehearted support generously given by Mr. Nik Mohamed Amin, Director-General of the Social Security Organisation as the expert's counterpart is recognised as an outstanding factor contributing to the fulfilment of the mission. The assistance given by other officials of the Organisation and particularly Mr. Chin Fook Kiong, the expert's liaison officer, is also acknowledged. 1.12 The support given by the office of the regional representative of the United Nations Development Programme is greatly appreciated. - 3 - PART I Population, Employment and Earnings population 1. In 1975 the total population of Malaysia was 12,249,000. That of Peninsular Malaysia was 10,385,000. The population between the ages of 15-64 constituted 54.4$ of the total population for the whole of Malaysia. The population for Peninsular Malaysia was slightly higher at 54.9$. The population over 65 years was 3.5$ for the whole of Malaysia, and 3.7$ for Peninsular Malaysia. 1.1 Further details, including the estimated population in 1980 are given in Appendix I, Table 1. Gainfully Occupied Persons 2. The total number of gainfully occupied persons in 1975 was approximately 3-928 million compared to 3.340 million in 1970. This was an increase of approximately 18$. 1.2 Of the total gainfully occupied - Agricultural workers Service and other workers Production workers Total: 47.0 .1.9.2 13.6 73.8 2.2 Further details of gainfully occupied persons in Malaysia are given in Appendix II, Table 1. Employed Persons and Wages 3. As far as it is known, no complete statistics of employed persons, as distinct from gainfully occupied persons are available. Most statistics are based on surveys of selected industries. E.P.F. Statistics 4. The Employees' Provident Fund may be the best available source of information on the number of employed persons in the various groups in the private sector, but these statistics also include employees in the public sector (Government and Statutory Bodies) in respect of whom the EPF contribution is payable. 4.1 Available data for the first half of 1975 showed that there was a total of 1,324,381 employed persons. The figure for the second half of 1975 was 1,152,952. These figures probably show the number of employees in respect of whom at least one contribution was paid in the respective six months period. 4.2 Appendix II Table 2 shows the number of members by wage range. It is obwerved that the totals show a decrease of 171,429 in the second half of the year. The two lowest wage scales (50-99, 100-149) showed a total decrease of 305,647. All the other wage groups showed an increase. This may be due to a number of factors, including the end of the year bonus, and the method of compilation of the statistics. Other Statistics 5. Statistics of employment and salaries in manufacturing industries between 1963 and 1975 are given in Table 3 of Appendix II. Table 4 in the same Appendix shows a breakdown of male and female employees by wage range in manufacturing industries in 1972. 5.1 Table 5 in Appendix II shows average total earnings of the main occupational groups in manufacturing industries in 1972. 5.2 Table 6 in Appendix II which is based on data in the Population Census of 1970 shows a breakdown of employed and self-employed persons as well as of persons seeking first employment and others. The broad division into two main areas, namely gazetted towns with population of 10,000 persons and over, and smaller towns gives an indication of the employment status of economically active persons in the latter towns which include the rural areas. - 5 - PART II Relevant Social Security Measures This part includes a brief description of certain statutory and nonstatutory measures related to social security. The Employees' Social Security Act and the Employees' Provident Fund Ordinance will he referred to in later parts. Labour Code (Chapter 154 of the laws of the Federated Malay States) 6. The Code was consolidated and amended in 1933. The sections of the 1933 Act which were not repealed when the Employment Ordinance, 1955 came into force include provisions for medical care to be provided for "labourers" performing manual labour, including supervisors, on estates. 6.1 The term "estate" means any agricultural land exceeding twenty-five acres in extent upon which agricultural operations of any kind are carried on or upon which the produce of any plants or trees is collected or treated or any mine or other place of employment to which the provisions, or any portion of the provisions, of this Part have been declared to apply to the extent of the provisions so declared to apply. 6.2 Mines and sawmills were subsequently included by Government notices. 6.3 The definition of "dependant" included such of the members of the labourer's family, namely wife, father, mother and children and adopted children under the age of fourteen, as are living with and dependent on him. Medical care 6.4 For the purpose of this Report, the most important provisions are thoue which concern medical care. The Commissioner of Labour is empowered to require an estate employer (a) to construct and maintain at his (employer's) expense a hospital; tb) to enlarge an existing hospital; and (c) to employ a registered medical practitioner. 6.5 The employer is required to treat and maintain in the estate hospital the labourer or dependants at least up to thirty days, after which he may recover from the labourer the expenses in respect of any further period subject to the control of the Commissioner. Where a labourer or a dependant is admitted to a Government hospital, the employer is also liable for the cost of treatment and maintenance up to thirty days. . 6.6 Th'e Code provides for the treatment and maintenance of labourers, etc. in estate group hospitals. On an estate on which the employer is not required to maintain a hospital, he must make provision for the treatment of sick labourers. 6.7 In regard to estate hospitals, "Rules" may be made providing, inter alia, for the nature of hospital accomodation, staff, diets, drugs and surgical and medical appliances. 6.8 Rules have been made providing for three bods for every 200 labourer.'! employed, and for additional beds to accomodate patients suffering from specified conditions such as dysentery. A suitable dispensary is to be provided at each hospital to the satisfaction of the Health Officer. - 6 - Workmen's Compensation Ordinance, 1952 (As amended by Act A361) 7. The Workmen's Compensation Ordinance was last amended (by Act A361 of 1976) with effect from 1.1.1977 and any reference hereunder to previous provisions is intended to mean provisions in force before that date. Scope 7.1 The Ordinance applies to any "workman" employed under a contract of service or apprenticeship, whether by way ol.' manual, labour or 0 Uie.rw.i r.c. Broadly, the following are excluded from this definition: (a) any person employed otherwise than by way of manual labour whose earnings exceed five hundred dollars (previously four hundred dollars); (b) any person whose employment is of a casual nature and who is employed otherwise than for the purposes of the employer's trade or business, not being a person employed for the purpose of any game or recreation and engaged or paid through a club; a domestic servant; an out-worker; any member of the family of the employer who dwells with him in his house; any class of persons whom the Minister may declare not to be workmen for the purposes of this Ordinance. (c) (d) (e) (f) 7.2 In the Ordinance, "member of the family" means wife, husband, parent, grandparent, step-father, step-mother, child, grandchild, step-child, brother, sister, half-brother, half-sister, step-brother and step-sister. Employer's Liability 7.3 Under sections 4 and 15, the employer of an injured workman is liable (a) to pay compensation to the workman or to his dependants, in the event of his death; (b) to pay any expenses incurred in the treatment of the workman, including all ward and treatment fees in the event of hospitalisation and medicines; (c) to pay for the rehabilitation of the workman and the cost of such artificial limbs, wheelchair and surgical appliances (including the-cost of renewal of such artificial limbs, wheelchair and surgical appliances) as are certified by the registered medical practitioner in charge of the hospital to be reasonably necessary and which are in fact supplied to the workman: Provided that the Minister shall from time to time prescribe the maximum amounts for which an employer shall be liable in respect of the several fees and costs related to the medical treatment and rehabilitation. This has been done. 7.4 By definition "dependant" means any member of the family of a deceased workman who wholly or in part depended upon his earnings at the time of his death or would but for the disablement due to the accident have been so dependent: Provided that a person shall not be deemed to be a partial dependant of another person unless he was dependent partially on contributions from that other person for the provision of the ordinary necessities of life. Waiting Period 7.5 (a) An employer shall not be liable to pay compensation in respect of any injury which does not disable the workman for a period of at least four days from earning full wages at the work at which he was employed; and no compensation shall be payable in respect of the first four days of such disablement unless the disablement lasts for a period of at least fourteen days. - 7 - (b) An employer shall not be liable to pay compensation in respect of an injury to a workman resulting from an accident if it is proved that the injury to the workman is directly attributable to the workman having been at the time thereof under the influence of alcohol or drugs, unless such injury results in death. Amount of Compensation Death 7.6 Compensation is payable as a lump sum to dependants as follows: In the event of death (i) 45 months (previously 36) earnings; or (ii) 014,400 whichever is the less. If a deceased workman does not have dependants the lump sum shall be equal to actual funeral expenses or to 05OO/-(previously $100), whichever is the less. 7.7 In the Ordinance "dependant" means any member of the workman's family who is wholly or partially dependent upon the workman's earnings at the time of his death. "Partial dependant" means one who depended partially on contributions of the workman for the ordinary necessities of life. Permanent Disablement 7.8 In the event of permanent total disablement compensation is a lump sum in the case of (1) "adult" over 18 years (i) equivalent to 60 Months' (previously 48) earnings; or (ii) 019,200 (previously 09,600), whichever is the less. (2) "adult" aged 16-17 years (i) 84 months' earnings (previously 72); or (ii) 019,200 (previously 09,600), whichever is the less. (3) "minor" viz. under 16 years (i) 108 months' earnings' (previously 96); or (ii) 019,200 (previously 09,600), whichever is the less. Permanent Partial Disablement 7.9 Compensation in respect of permanent partial disablement is payable at such percentage of the compensation payable in the case of permanent total disablement as is proportionate to the permanent loss of earnings capacity caused by the injury. The compensation payable shall not be less than the percentage indicated in the First Schedule to the Ordinance. Death Following Temporary Disablement 7.10 In the event of the death of the injured workman following a period of total or partial temporary disablement, the total of all payments and the lump sum payable to the dependants shall not exceed 019,200. - 8 - Constant-Attendance of Injured Workman 7.11 When the injured workman requires constant help of another person the amount of compensation is increased by 25$. Temporary Disablement 7.12 In the event of temporary disablement a half monthly payment shall be made during the disablement or during a period of five years, whichever period is shorter, of $135/- (previously #65) or an amount equal to one-third of his monthly earnings, whichever is the less. 7.13 It is observed that (a) the maximum compensation in the event of death ($14,400) corresponds to earnings of $320/- per month; (b) the maximum temporary disablement rate corresponds to earnings of $270/- per month; (c) the monthly temporary disablement rate is equivalent to two-thirds of the monthly earnings. 7.14 The Ordinance provides for the method of calculating earnings but subject to the condition that the earnings shall be deemed to be not less than (i) $105/- a month (previously $80/-) in the case of a person over 18 years; (ii) $90/- a month (previously $65/-) in the case of a person aged 16-17; (iii) $70/- a month (previously $45/-) in the cane of a peruon under 16 years. 7.15 Where permanent disablement follows a period of temporary disablement exceeding 12 months (previously 6 ) , the temporary disablement benefit received by the workman in respect of any period exceeding 12 months shall be deducted from the amount of compensation due in respect of the permanent disablement. 7.16 The foregoing provision means that from 1st January, 1977, the injury benefit period prior to the assessment of permanent disablement has been increased from 6 to 12 months. 7.17 The provisions for medical care and rehabilitation include the following: "(3) Where an injured workman is admitted to or treated at either an approved or a special hospital, the employer shall, in addition to the payment of compensation to the workman or, where the workman's death supervenes, to that workman's dependants, be liable to pay directly to the management of such hospital all ward fees and treatment fees in respect of such workman and the cost of such medicines and of such artificial limbs, wheelchair, and surgical appliances as are certified by the registered medical practitioner in charge of the approved or special hospital to be reasonably necessary and which arc in fact supplied to such workman: Provided that the Minister shall from time to time by notification in the Gazette prescribe the maximum amounts for which an employer shall be liable in respect of the several fees and costs specified in this sub-section. 7.18 The liability of a contractor in the event of sub-contracting is as follows: "19.1(1) Where any person (in this section referred to as "the principal") in the course of or for the purpose of his trade or business contracts with any other person otherwise than as a tributer (in this section referred to as "the contractor") for the execution by or under the contractor of the whole or any part of any work undertaken by the principal, the principal shall be liable to pay to any workman employed in the execution of the work any compensation which he would have been - 9 - liable to pay if that workman had been immediately employed by him ami where a claim has been made to the principal for compensation this Ordinance shall apply as if references to the principal were substituted for references to the employer, except that the amount of compensation shall be calculated with reference to the wages of the workman under the employer by whom he is immediately employed. (2) Where the principal is liable to pay compensation under this section, he shall be entitled to be indemnified by the person who would have been liable to pay compensation to the workman if this section had not been enacted. (3) Nothing in this section shall be construed as preventing a workman from recovering compensation under this Ordinance from the contractor instead of the principal, and a claim made against a principal or a constractor, as the case may be, shall not bar subsequentproceedings under this Ordinance against the other to recover so much of the compensation agreed or awarded as may remein unpaid. (4) This section shall not apply in any case where the accident occurred elsewhere than at or about the place where the principal has undertaken to execute work or which is otherwise under his control or management." 7.19 The Ordinance provides for the worker's right to claim compensation or damages from some person other than the employer as follows: "20.(a) the workman may take proceedings against that person to recover damages and may claim against any person liable to pay compensation under this Ordinance, but he shall not be entitled to recover both damages and compensation; and (b) if the workman has recovered compensation under this Ordinance, the person by whom the compensation was paid, and any person who has been called upon to pay an indemnity under subsection (2) of of section 19 shall be entitled to be indemnified by the person so liable to pay damages as aforesaid and all questions as to the right to and amount of any such indemnity may, in default of agreement, be settled by an Arbitrator." 7.20 The workman's right is restricted to a choice between compensation and common law in the following terms: "41.(1) Nothing contained in this Ordinance shall be deemed to confer any right to compensation on a workman in respect of any injury if he has instituted and is prosecuting a suit for damages in respect of that injury in any Court against his employer or if he has recovered damages in respect of that injury in any Court from his employer; and no suit for damages shall be maintainable in any Court by a workman against his employer in respect of any injury (a);if he has applied to the Commissioner to settle any question in respect of the injury under sub-section (2) of section 27; or (b) if an agreement has been come to between the workman and the employer and such agreement has been recorded under section 28; or (c) if he has recovered damages in respect of the injury in any Court from any other person. (2) If a suit is instituted in any court to recover demages independently of this Ordinance for injury caused by any accident, and it is determined in such suit or on appeal that the injury is one for which the employer is not liable in such suit, but that he would have been liable to pay compensation under the provisions of this Ordinance, the suit shall be dismissed; but the trial court, or if the determination is given on appeal, the appellate court shall, if the workmen so choose, proceed to assess such compensation, but may deduct therefrom all or - 10 - part of the costs which, in its judgement, have been caused by the workman instituting the suit instead of proceedings under this Ordinance; and in any proceedings under this sub-section, when the trial court or appellate court assesses the compensation, it shall give a certificate of the compensation it has awarded and the direction it has given (if any) as to the deduction of costs and such certificate shall have the force and effect of an Arbitrator's order." 7.21 The above restriction applies also to the workman's dependants in accordance with sub-section (3) of section 2 of the Ordinance which reads as follows: "2.(3) Any reference to a workman who has been injured shall, unless the context otherwise requires, where the workman is dead, include a reference to his legal personal representative or to his dependants or any of them or to any public officer whom the Minister may appoint to act on behalf of the dependants of the workman." 7.22 Under the amendment effective from 1st January, 1977, every employer is now required to be insured in respect of any liability which he may incur under the Ordinance, but the Minister is empowered to declare by notification that this requirement shall not apply to any employer or class of employers. 7.23 A notice issued by the Minister on the 25 November, 1976 provides that the provisions requiring employers to be compulsorily insured do not apply to (i) the Government of the Federation; (ii) the Government of each of the States; (iii) Statutory Bodies established by any written law; (iv) Local Authorities as defined in any written law. 7.24 Before the 1976 amendment employers were only required to be insured if they employed workmen in certain occupations. These included felling, cutting, sawing, collection and removal of timber including drivers. Employment Ordinance, 1955 8. The Employment Ordinance, 1955 as" amended by Act A91 of 1971, and Act A360 of 1976, includes provisions for sick pay and maternity allowance. The 1976 amendment came into force on the 1st January, 1977. Sick Leave 8.1 The 1971 amendment provides that an employee who served an employer for a period of not less than twelve months is entitled to sick leave "not exceeding in the aggregate" (a) fourteen days in each year if no hospitalisation is necessary; or (b) sixty days in each year if hospitalisation is necessary, as may be certified; Provided that if an employee is hospitalised for 46 days or less in one year, his entitlement to paid :;.i ok leave for that year f.hnll not exceed the aggregate of fourteen ilayu plus the number of days on which he is hospitalised. 8.2 The 1976 Amendment removed the condition of twelve months' employment for entitlement. 8.3 The employer is to pay sick leave at the ordinary rate of pay. Sick leave is not payable for any period during which the employee receives compensation for temporary disablement under the Workmen's Compensation Ordinance, benefits under the Employees' Social Security Act, 1969, or maternity allowance under the same Ordinance. Maternity Protection 8.4 The 1976 Amendment provides for the payment of a "maternity allowance" as follows: - 11 - Entitlement 8.5 A female employee is entitled to maternity allowance from an employer if (a) at any time during the four months immediately preceding her confinement she was employed by him, and (b) she had been employed by that employer for a period of or periods amounting in the aggregate to not less than ninety days during the nine months immediately preceding her confinement. Period 8.6 A female employee is entitled to the maternity allowance for a period not exceeding sixty consecutive days. This period may commence from any day within a period of thirty days immediately preceding the confinement or from the day immediately following the confinement. Rate of allowance 8.7 The allowance is payable at the employee's ordinary rate of pay, or at the rate prescribed by the Minister, whichever is tho greater. The rate ourrontly prescribed is #4.00 per day. 8.8 It is observed that before the 1976 amendment, the maternity allowance was payable at a fixed rate of #3.00 per day. Limitation 8.9 A female employee is not entitled to any maternity allowance if at the time of her confinement she has three or more surviving children. For this purpose "children" means all natural children, irrespective of age. Scope of the Sick Leave and Maternity Provisions 8.10 Broadly, the above sickness and maternity provisions apply to persons employed (a) in manual labour and their supervisors or overseers; (b) in the operation or maintenance of any mechanically propelled vehicle operated for the transport of passengers or goods or for reward or for commercial purposes; and (c) seamen on ships registered in Malaysia (but with certain exceptions). The provisions also apply to all other employed persons whose wages do not exceed #750/- a month. Exclusion 8.11 The provisions do not apply to domestics. Persons directly employed under a contract of service by any Statutory body or local authority are excluded from the application of the whole of the Employment Ordinance, 1955. - 12 - PART 111 Employees' Social Security Act, 1969 Progress 9. The Employees' Social Security Act covers employees in thirty one social security areas in'Peninsular Malaysia and one each in Satan and Sarawak. The total number of registered employees in April 1977 was 838,660. The number of registered employers in the same month was 23,331. Contribution income and benefit expenditure between 1972 and 1975 were as follows: Contributions and Benefit Expenditure Year Contributions 1972 2 ,294 ,566 1973 1974 1975 7 ,547 755 17 ,774 ,837 22 ,460 ,002 B e n e f i t Expendi t u r e Cash Medi c a l Care Total Proportion (Benefit/ Contribution) 97 ,164 406 ,193 952 ,660 1,311 ,360 170 915 761 535 1,543 280 1,832 ,640 • 7.4°/ 10.0% 73, 355, 590, 621, 751 342 620 280 8.7% 8.8% Scope 10. The Act provides benefits in respect of employment injuries including death benefit (dependants' benefit), invalidity pension and invalidity grant. The invalidity scheme does not include survivors' benefit. 10.1 The Act applies to employers in undertakings having five or more employees. An employee is an employed person earning not more than $500/- a month. 10.2 In 1976 the expert carried our a survey of establishments within all the existing social security areas which yielded the following information. (a Total number of employers registered under the Act in the month of the survey. 22,354 (b Number of employers with less than 5 employees. 20,437 (c Total number of employers at (a) and (b). 42,791 (d Proportion of (b) on total. 47.8% (e Number of employees registered under the Act. 808,739 (f Number of employees in establishments with less than 5 employees. (g Total of (e) and (f). (h Employees at (f) in proportion to total ye at (g 46,417 855,156 5,i - 13 - The general range of monthly earnings in selected centres was found to he as follows: SOCSO Centre Earnings Range Kuala Lumpur Ipoh $ 65 - $250 $ 80 - $200 Petaling Jaya Johor Bahru Melaka Kuala Trengganu Penang $150 $ 80 $106 $ 85 $100 - $200 $400 $375 $250 $300 10.3 Persons who suffer an employment injury are entitled to free medical care. This is provided hy the Organisation through private medical practitioners appointed on the panel of the Organisation as Insurance Medical Practitioners, Government Hospitals and private hospitals. Problems 11. Two of the problems investigated by the expert concern the wages ceiling which restricts insurability, and low benefit payments. Wages Ceiling 12. The scope of the present scheme is limited in general to persons whose wages do not exceed $500 per month (First Schedule paragraph (1) ). 12.1 The most recent available statistics on the distribution of employed persons by wage range are those obtained from E.F.P. given in Appendix II Table 2. The data for 1975 shows the following distribution. In the first half of 1975 Total number of employees given Number of employees earnings over $500 per month Proportion In the second half of 1975 Total number of employees Number earning over $500 per month Proportion 1,324,381 • 81,793 6,2'/. of Total 1,152,952 105,756 9.2$ The higher proportion shown in the second half of the year is partly due to the annual bonus paid in December which may be equivalent to one month's pay or more. 12.2 It is considered that as the social security scheme has been in operation since 1971, the time has come to remove the ceiling altogether. This will be a further step forward towards the sharing of risks and pooling of resources among the largest possible number of workers. Proposal 12.3 It is recommended that the following wage scale be introduced as- a continuation of the existing one. - 14 - Monthly wage scale for the purpose of Insurability, Contributions, and Benefits I Monthly wage group Monthly assumed wage • Exceed Exceed ExceecL Exceeil Exceed Exceed 0500 but 0600 but 0700 but 0800 but 0900 but 01000 not not not not not 0600 0700 0800 0900 01000 0550 0650 0750 0850 0950 01050 Low Benefit Payments Causes of Low Benefit Payments under Employees' Social Security Act 1969 13. Employment injury payments under the present Act have been frequently criticised for being too low. It is therefore important to analyse the circumstances in which low benefit payments are made, and, where possible, to suggest a remedy. i Low Wages I 13.1 | Benefit under the ESS Act is related to wages. Therefore, if the wages of an insured person is low, the benefit is proportionately low. 13.2 J Wages are low for different reasons. The Act does not exclude casual workers (except those whose casual employment is not for the employer's trade or business) and part-time workers. If they work in a covered industry they are insurable. In fact, the first two wage scales are under 030 and between 030 and 050 per month, respectively. If a person in the second wage scale (030 - 050) is injured, his assumed monthly age is 040 per month, and on that basis his temporary disablement benefit at 60$ would be 024 per month or 80 cents per day. Dependants 13.3 Where an insured person earning, for example, between 070 and 0100 per month dies as a result of an employment injury the amount of benefit payable to his dependants is shared as follows: \ The corresponding assumed wage is 085 and the maximum total amount of benefit is 60% of it, which works out to 051 per month. The Act recognises dependants in two groups, those in the second group are entitled if there are none in the other group. For convenience the first group is called the "primary group", and the other the "secondary group". Primary Group I 13.4 ' The dependants in this group and their respective shares of the tota'l benefit available (051 in this example) are as follows: i (i) the widow 3/5 of 051 = 030.60 (ii) a child 2/5 of 051 = 020.40 If thpre are two widows, the widow's share is divided equally between them. If there is more than one child, all shares are reduced proportionately. In effect the widow and children may receive the 051 which the deceased would have received as pension had he been permanently and totally disabled. Secondary Group 13.5 1! This group is divided into two sub-groups which are independent of each other . Each of them must be wholly dependent on the deceased. The only exeption is a widowed mother of the deceased who need not be dependent on the deceased. 13.6 ; The first sub-group may consist of parents and/or grandparents. The share for the sub-group is 30%. If there are two persons each will receive 15%. - 15 - 13.7 The second sub-group may consist of brothers and sisters (in general up to the age of fourteen years), and any other persons claiming to be dependants. Total share of this sub-group is 2/10 of $51. If, for example, there are four of them, each individual share becomes 1/20 of $51 = $2.55 per month. 13.8 If the deceased is, say, a young son, he may be survived by two comparatively young parents, who may be under 40 years of age. If they happen to be unemployed at the time of the death of the insured person, they each become entitled for the rest of their lives to a pension of 15$ of the pension the deceased would have received had he been permanently and totally disabled. 13.9 If a deceased son or daughter is survived by a gainfully occupied parent a claim is generally made in respect of other dependants. Proposed Solutions Disablement 13.10 The problem of low temporary and permanent disablement benefit payments can be solved to some extent by fixing a minimum rate of benefit of $75 per moneth ($2.50 per day). At the current benefit rate of 60% of assumed wage, the minimum benefit rate of $75 per month means, in effect, that an insured person is being guaranteed a benefit on the basis of a wage of $125 per month. 13.11 The wage of a person under 18 years is generally lower than that of an older person. It is therefore proposed that for a person under 18 years a minimum benefit rate of $60 per month ($2 per day) be provided. At the current 60% rate, benefit at $60 per month corresponds to a wage of $100 per month. 13.12 Low periodical payments are partly due to the fact that when permanent disablement is assessed at a low percentage, benefit is in the form of a periodical payment unless in case where the benefit does not exceed 50 cents a day ($15 a month) it is commuted at the request of the beneficiary. The low periodic benefit is one of the causes of criticism of the scheme. 13.13 It is recommended that where the degree of permanent disablement la assessed at less than 20%, the benefit shall be a lump sum payment. In some social insurance schemes benefit is a lump sum when the degree of disablement is less than 30%. A lump sum payment entails only a fraction of the work involved in making periodical payments. The elimination of small periodical payments would save a great deal of administrative work and expense. Dependants' Benefit 13.14 It is considered that the most serious problem arises when two parents of the deceased person receive benefit at the rate of 15% of available benefit. This problem can be solved by making the benefit rate more meaningful. However, a higher rate should be based on. a more realistic situation. Higher benefit should be provided only if a parent who was wholly dependent on the earnings of the deceased satisfies one of two conditions, namely a parent is (a) over pensionable age; or (b) permanently incapable of self-support by reason of physical or mental disablement. This proposal is made in Part IV of this report in respect of survivors' benefit. Funeral Benefit 13.15 Costs of funerals have no doubt increased since 1969 when the Act was passed. A maximum of $500/- is considered fair and reasonable in the present circumstances. It is recalled that the maximum amount of funeral expenses provided under the proviso to paragraph (a) of section 8 of the Workmen's Compensation Ordinance was revised from one hundred to five hundred dollars. - 16 PAliT IV Proposals for New Benefits Sickness Benefit 14. Sickness benefit schemes are intended to assist gainfully occupied persons during periods of suspension of earnings. The benefit should protect the insured person during short-term illnesses. If the benefit is provided for employees, the person claiming it should have completed a period to prove that he is normally an employed person under the scheme. This proof which is specifically mentioned in the Social Security (Minimum Standards) Convention, 1952-*- is generally based on his contribution record. Various sickness benefit schemes have different qualification 'periods. In many schemes which have been in operation for some years it is found that conditions were initially strict and subsequently relaxed on the basis of experience as the scheme developed. 14.1 In 1976 the expert, after consultations with the Malayan Employers' Consultative Association (MECA), carried out a sickness and maternity survey in places of employment registered under the Employees' Social Security Act. It was designed mainly to collect the following data: (a) (b) (c) incidence and duration of sickness; incidence of maternity; the cost of medical care provided by employers. 14.2; The survey was planned to cover at least 1,545 registered employers throughout Malaysia. It was conducted on the basis of a questionnaire issued through the 32 local offices of the Social Security Organisation, each of which was required to collect the information from a predetermined number of employers representing about 10 per cent of registered employers in their respective areas. An effort was made to cover a cross-section of industries in each area. Although the questionnaire was as simple as possible, the collection of information took considerable time. 14.3 tion: Preliminary data of two industrial areas yielded the following informa- Area Kelang and Shah Alam Petaling Jaya Sickness Maternity No. of days per employer per year Male Female No. of cases per 100 women per year Medical care c * t * employee * * J 5.91 5.29 9.23 $79.80 4.90 3.67 6.32 $78.66 Proposed Qualifying Conditions 14.4 It is proposed that an insured person becomes entitled to sickness benefit if (a) not less than three-monthly contributions have been paid in his respect in the relevant contribution period of six months; ILO Convention No. 102, Article 17. - 17 - (b) he is currently employed in insurable employment; (o) he is over 16 years and under pensionable age. Commencement of Benefit Payment 14.5 It is generally considered that loss of earnings for two or three days does not cause serious hardship. In the case of Malaysia, as explained earlier, employees are entitled to 14 days' sick leave (when not hospitalised) at the normal rate of pay from the employer. Proposal 14.6 It is proposed that initially no benefit shall be payable in respect of the first three days of any spell of incapacity for work. 14.7 This proposal is being made not only in the light of what is stated in the preceding paragraph, but also because it would eliminate a large number of claims which would otherwise entail considerable administrative work. In the course of time this could be liberalised in the sense that in the event of a second spell of sickness within a certain period the waiting period would not be imposed. Duration of Sickness Benefit 14.8 Many social security schemes provide for the payment of sickness benefit for an aggregate period of six months. This may be one uninterrupted period or a number of spells of sickness not separated by more than a specified number of days or weeks. When the full period is exhausted, the insured person may qualify again after paying a specified minimum number of contributions after resuming work. This condition is imposed because a sickness benefit scheme is only intended to provide for a contingency of a relatively short duration. 14.9 Although many existing schemes provide for a benefit period of six months, it is a common practice that a new scheme initially provides for a benefit period of three months. Conventi on No. 102 allows the benefit period to be limited to three months within a period of 12 months. The Medical Care and Sickness Benefit Convention, 1969 (No. 130) provides that the benefit period may be limited to 52 weeks in each case of incapacity, or in certain cases, 26 weeks. Proposal 14.10 It is proposed that (a) the benefit shall be payable for a maximum of 91 days (three months) in any "continuous period"; (b) ;i period with two or more spells of illness shall be deemed to be continuous if each spell is not separated by two full calendar months; (c) after exhausting his entitlement of three months' benefit, an insured person qualifies again after resuming employment and paying three monthly contributions. 14.11 This proposal would make it possible for an insured person to have up to six months' benefit in a period of 12 months. One may also consider the possibility that in the case of certain specified diseases like tuberculosis the "continuous period" may be extended to six months. Sickness Benefit Rate 14.12 Convention No. 102 provides that the sickness-,benefit rate for the standard beneficiary should be 45 per cent of earnings; Convention No. 130 provides for a rate of 60 per cent.2 1 Schedule to Part XI. Article 22, paragraph 1. - 18 - 14.13 It is recalled that the temporary disablement benefit rate under the present scheme is 60 per cent of the assumed average wage. There is a school of thought which maintains that the temporary disablement benefit rate should be higher than the sickness benefit rate. Proposal 14.14 It is proposed that the sickness benefit rate shall be 50 per cent of assumed average earnings, Medical Certification for Temporary Incapacity 14.15 Medical certification of temporary incapacity for work, both for the purposes of cash sickness benefit and for temporary disablement benefit (injury benefit), quite frequently presents serious problems in the administration of a social security programme. These arise because of the insistence of some workers on certification for medical leave. Employers are often deeply concerned because of loss of man-days and additional benefit cost, especially where they are legally Liable to pay benefits. Medical practitioners on their part are worried and annoyed when they have to fulfil their obligations under such pressure. As a result of investigations, the expert believes that these kind of problems exist in Malaysia or may arise as the social security programme is developed. He is therefore proposing in the draft legislation that the Organisation should have the power to verify temporary incapacity for work and recommends that such powers be exercised on the basis of planned scrutiny of the relevant claims. It is hoped that such verification will be accepted by all interested parties, and particularly by medical practitioners and tho large majority of honost, workers as n nocessary control. Maternity Benefit Qualifying Conditions 15. It is generally considered that a woman should complete a period of insurance to acquire the right to maternity benefit. This is recognised in Convention No. 102. 15.1 It is proposed that a woman shall be entitled to maternity benefit if not less than six-monthly contributions have been paid in respect of her in the ten consecutive months preceding her confinement. Benefit Duration 15.2 The maternity benefit period should be such as to allow the woman to abstain from work before and after confinement to be able to take care of her own health and her baby. A total period of 12 weeks would be up to the standard required in Convention No. 102. The Maternity Protection Convention (Revised), 1952 (No. 103) sets the same minimum period, but it also stipulates that the benefit period after confinement should in no case be less than six weeks.^ ' Proposal 15-3 It is proposed that a woman shall be entitled to maternity benefit for a period not exceeding 91 consecutive days (viz. 13 weeks). Such period shall not commence earlier than six weeks before the expected date of confinement. The woman should forfeit maternity benefit in respect of any day on which she performs remunerative work as an employed or self-employed person. 1 Article 51. 2 Article 3, paragraph 3. - 19 - Maternity Benefit Rate 15.4 Social security programmes have adopted different rates of maternitybenefit. In some countries the rate is equivalent to the normal rate of pay of the woman. In most countries the rate is much lower, but generally not below 50 per cent of the normal rate of pay. Convention No. 102 1 requires a rate not below 45 per cent of earnings, while Convention No. 103 specifies a rate not less than 66 2/3 per cent of the woman's previous earnings. Recommendation 15.5 Taking into account the current employer's liability under the maternity protection provisions in the Employment Ordinance, it is recommended that the maternity benefit rate shall be equivalent to two-thirds of the average assumed monthly wage. 15.6 It is to be observed that the rate of two-thirds is higher than the rate of 50 per cent proposed for sickness benefit. This is being done to ensure that the proposed benefit will not be inferior than that currently provided as a liability of the employer. A woman who is entitled to maternity benefit should not be entitled to maternity allowance under the Ordinance. 15.7 The proposed maternity benefit compares with the benefit provided under the Employment Ordinance as shown hereunder Proposals Maternity Allowance under Employment Ordinance : and Maternity Benefit Employment Ordinance Proposed Benefit Coverage Employed persons whose wages do not exceed $750 per month Persons insured under the Social Security Act with no earnings limit (as proposed) Qualifying conditions 1) Six months' contributions in the ten consecutive months immediately preceding confinement Employed by the employer at any time during the four months' preceding confinement 2) Aggregate of at least 90 days employment with the same employer in the nine months immediately preceding confinement, and 3) Has less than three surviving (natural) children Benefit duration 60 days 91 days Benefit Maternity allowance at 100 per cent of wage 66 2/3 per cent of assumed average monthly wage Schedule to Part XI. Article 4, paragraph 6. - 20 - 15.8 The total amount of benefit payable under the proposed scheme will be slightly higher than the total allowance payable under the Employment Ordinance, and the higher the wage the greater will be the difference. 15.9 In general, the only qualifying conditions proposed will be more favourable than those under the Employment Ordinance. The six-monthly contributions required may be paid in employment with different employers in different months within the ten months' period. The contribution requirement is necessary if abuse of the scheme is to be minimised. 15.10 The fact that the maternity benefit will not be the employers' liability may make it easier for a married woman to obtain and retain employment. Age Benefit Introductory 16. For several years increasing numbers of workers in Malaysia have become entitled to a lump sum on retirement from employment. The amount of the lump sum depends upon various factors, of which two important ones may be mentioned, namely (a) the aggregate period of employment which a worker has during his working life; and (b) the level of his earnings throughout that period. The shortest aggregate period of employment may well be found among the low-income workers and this is why a lump-sum arrangement to meet the contingency of old age may by itself be inadequate. 16.1 It does not appear that in Malaysia any detailed study has been made to determine how workers make use of the lump-sum payments they receive on retirement from employment. In the circumstances, one can only guess whether the average worker is more likely to use the lump sum to meet his immediate and most pressing social needs, or to make some long-term arrangement to assure himself and possibly his wife, of a steady income in old age. 16.2 Employees' Provident Fund statistics show that in 1975, 19,158 members received over $57,339,000 when they withdrew their balances at the age of 55 years. The average amount per head was over $2,992. Although there must have been several thousand persons who had more than that amount, there was no significant change in the number of annuity policies in the private insurance sector. Statistics published by the Director-General of Insurance showed that there were only 36 annuity policies at the end of 1975 and 38 at the end of 1976. (Incidentally, the purchase price of an annuity of $100 per annum - $8.30 per month for an annuitant only, viz. no dependants, payable monthly, payment commencing one month after purchase was quoted as follows (i) (ii) man aged 55 years - price $1,132; woman aged 55 years - price $1,237.) 16.3 There is a widespread belief that enterprising persons look forward to a lump sum to start businesses on their retirement. It is not known how many of these persons manage to build thriving businesses in their remaining period of activity so as to assure themselves of a steady income. In the course of inquiries about needy elderly persons, the expert learned that a proportion of such persons were petty traders some of whom may have invested their lump-sum payments in a business. 16.4 A student of the development of social insurance would find that most of the industrialised countries recognised' the need for a steady income in old age as far back as the nineteenth century when they were going through their developing stages. Germany is a typical example where the principle of compulsory social insurance for age pension was adopted in the year 1889. - 21 - 16.5 The International Labour Organisation did not take long to initiate studies and diecusralone nt. the annual Oont'oreniioei which led to the adoption, in 1933, of Convention No. 35 concerning compulsory old-age insurance in industrial or commercial undertakings, in the liberal professions, and for outworkers and domestic servants. In the same year, the Conference also adopted Recommendation No. 43 concerning the general principles of invalidity, old age and widows' and orphans' insurance. These two instruments in themselves were a great achievement because at the time many of the developed countries were in the throes of the great economic depression and had many short-term problems, particularly unemployment, to cope with.. The Organisation continued to inspire member States to endeavour to achieve a better quality of life for their senior citizens. In fact, since 1933, provisions regarding old-age benefit figured in no less than 11 Conventions including the Minimum Standards Convention, 1952 and Convention No. 128 concerning invalidity, old-age and survivors' benefits, 1967. 16.6 In the Asian region there may still be a school of thought which does not recognise the great need for steady periodic payments in old age. This appears to stem from the concept of mutual help within the family. However, it is pertinent to recall that the Sixth Asian Regional Conference recognised the fact that protection previously extended by the family group was being lost through migration.1 As stated earlier, statistics in Malaysia show that large numbers of elderly persons seek public assistance. There is no indication how many more are in need of such assistance but refrain from asking for it and this is not peculiar to Malaysia. Pensionable Age 16.7 When a scheme for age pension is planned, the age at which the pension can be received, generally referred to as "pensionable age", is a crucial issue which has to be determined in the light of various important aspects. The expert submitted two papers to the Minister explaining these aspects. Social Aspects in General 16.8 Guidance relating to social aspects in general is provided in International labour Instruments. The following provisions are-relevant to this issue. Social Security (Minimum Standards) Convention, 1952 (No. 102): "Article 26 1. The contingency covered shall be survival beyond a prescribed age. 2. The prescribed age shall be not more than 65 years or such higher age as may be fixed by the competent authority with due regard to the working ability of elderly persons in the country concerned. 3. National laws or regulations may provide that the benefit of a person otherwise entitled to it may be suspended if such person is engaged in any prescribed gainful activity or that the benefit, if contributory, may be reduced where the earnings of the beneficiary exceed a prescribed amount and, if noncontributory, may be reduced where the earnings of the beneficiary or his other means or the two taken together exceed a prescribed amount.". Invalidity, Old-Age and Survivors' Benefits Convention, 1967 (No. 128): "Article 15 1. The contingency covered shall be survival beyond a prescribed age. ILO, Report II, Sixth Asian Regional Conference, Tokyo, Sept. 1968, p. 67. - 22 - 2. The prescribed age shall be not more than 65 years or such higher age as may be fixed by the competent authority with due regard to demographic, economic and social criteria, which shall be demonstrated statistically. 3. If the prescribed age is 65 years or higher, the age shall be lowered, under prescribed conditions, in respect of persons who have been engaged in occupations that are deemed by national legislation, for the purpose of old-age benefit, to be arduous or unhealthy." Recommendation Concerning Income Security, 1944 (No. 67): Paragraph 12 of the "Guiding Principles and Suggestions for Application" contained in the Annex to the Recommendation reads as follows: "Old-age 12. The contingency for which old-age benefit shoiild be paid is the attainment of a prescribed age, which should be that at which persons commonly become incapable of efficient work, the incidence of sickness and invalidity becomes heavy and unemployment, if present, is likely to be permanent. (1) The minimum age at which old-age benefit may be claimed should be fixed at not more than 65 in the case of men and 60 in the case of women: provided that a lower age may be fixed for persons who have worked for many years in arduous or unhealthy occupations. (2) Payment of old-age benefit may, if the basic benefit can be considered sufficient for subsistence, be made conditional on retirement from regular work in any gainful •occupation; where such retirement is required, the receipt of casual earnings of relatively small amount should not disqualify for old-age benefit." 16.9 It is observed that international labour Conventions Nos. 102 and 128 quoted above, which were adopted in 1952 and 1967 respectively, indicate a more flexible approach than Recommendation No. 67 which was adopted in 1944. This modified approach is considered to have been influenced by an increasing awareness of the future growth of the aged population. It has also been recognised that a pensionable age, once fixed, can only be raised with the greatest difficulty. International Practice 16.10 Every country has its own peculiar social, economic and political conditions. For this reason;, it would not be advisable to adopt any particular approach to a problem simply because it has been adopted elsewhere. The main objective should be to apply standards adopted in international labour instruments in the context of local conditions and within the flexible limits indicated in the said instruments. However, in so far as the pensionable age issue is a common problem, a general survey of practice in various countries can be of some assistance. 16.11 A survey of pensionable ages prescribed under pension insurance schemes for employees generally or for industrial employees, and under universal pension and social assistance schemes covering 84 countries in 1967, revealed the following distribution: - 23 - Pensionable Ages in Various Countries Age 70 68 67 67-62 65 65-50 65-60 Note: Number of countries Age Number of countries 2 1 2 1 15 1 13 63-60 1 2 15 19 8 3 1 62-57 60 60-55 55 55-60 50 Where two ages are shown, the first is for men and the second for women. 16.12 The above table is accompanied by the following observations: "It is interesting to find that the process of balancing the various considerations should have produced, in a group of countries differing widely in demographic constitution and in wealth, so dense a concentration at the ages of 60 and 65. This result is perhaps influenced by the fact that some countries with a small aged population happen to be too poor to afford a comparatively low pensionable age. It is • indicative of the vagueness of the notion of old age and of the character of parliamentary discussions that all but 8 of these 84 schemes fix the pensionable age at a multiple of 5. Yet the quantum of five years has substantial financial implications; the same pension may cost the scheme 40-50 per cent more at 60 than at 65 because of difference in the numbers of persons surviving beyond those ages. The reason which determined the choice of 67 and 70 happens to be known: the existence of an exceptionally numerous aged population in countries where a social assistance or universal scheme has to protect a large peasant class of limited taxable capacity." 16.13 Practically all the Asian countries which have an old-age pension scheme have adopted a pensionable age at 60 years. Most of them adopted the age of 55 years for women. 16.14 In the Philippines the pensionable age is 60 years for both men and women, and up to the age of 65 years it is subject to retirement, except that a limited amount of earnings is allowed. 16.15 In Japan pensionable age under the Employees' Pension Insurance Scheme is 60 years and subject to retirement. This is said to have taken into consideration the fact that, in general, retirement age is about 60 years. On the other hand, under the National Pension Programme which is also a contributory scheme, whose coverage includes self-employed persons, the pensionable age is 65 years for men and women, without any retirement condition. 16.16 Iraq, Iran, the People's Republic of China, USSR and North Viet Nam have pensionable ages of 60 and 55 for men and women respectively. 16.17 In Australia pensionable age is 65 and 60 for men and women respectively. In New Zealand pensionable age is 60 for both sexes, but for unmarried women unable to work, it is 55 years. 16.18 Algeria, Egypt, Morocco, Libya, Saudi Arabia and Tunisia have pensionable age at 60 years for men and women and all, except Algeria, stipulate retirement from covered (or insurable) employment. ILO, A Workers' Education Manual. Geneva, 1970. 24 - 16.19 In European countries, 60 and 55 years (men and women) are the lowest pensionable ages. This is the case in Italy, Hungary and Prance (60 years for men and women). In other European countries pensionable ages range up to 65 and 60 years for men and women, respectively, with Denmark, Norway and Sweden having pensionable age at 67 years. 16.20 In the American'continents, pensionable ages range generally from 65 to 60 years. 16.21 Many of the countries indicated have adopted a lower pensionable age (generally five years lower) for men who have worked for a specified minimum number of years in arduous or unhealthy occupations, such as underground work. Some countries having a high pensionable age, such as Sweden (67 years) and the United States (65 years), provide for an earlier pension at a reduced rate. 16.22 It is emphasised that surveys of practice under social security systems have to be treated with great caution. The development of these systems has no doubt been influenced by local social, economic and political situations. However, it is safe to conclude that the age of 60 years (with the age of 55 for women in some countries) is the lowest widely adopted pensionable age. Relevant Conditions in Malaysia: Aged Population 16.23 "Aged Population" is a relative term. There cannot be any standard definition to indicate the age at which a citizen is to be considered as forming part of this group. This group has to be identified in the light of local conditions and according to local demographic statistics. In the following tables the term "aged population" in regard to Malaysia is given two arbitrary interpretations, in the sense of two alternative ways of looking at the population likely to be retired from gainful activity. 16.24 The following table shows changes in the structure of the population aged 50 and over which took place between 1957 and 1972. Peninsular Malaysia: Elderly Persons: All C ommumties Year Aged 50 years and over Aged 55 years and over Aged 50 years and over Both sexes Males Females Number Percent of total population Number - Percent of total male population Number Percent of total female population 1957 677 883 10,.79 252 631 7.80 295 914 9.73 1972 1 027 719 11 .09 383 704 8.23 503 132 10.93 16.25 The following two tables show the population of Peninsular Malaysia in the working age group under two different assumptions. Tho first assumes rotiroment from gainful activity at the age of 60 years. The second assumes retirement at 55 years. Persons over those age groups are considered, for the purpose of this discussion, to constitute the aged population. - 25 - 60 Peninsuliar Malaysia - 14721 Age group Total Males Females 4 741 883 2 353 833 2 388 050 Aged population (60 years and over) 508 757 261 931 246 826 Percentage of working population 10.7$ 11.1?5 10.3/o Working population (15-59 years) Working Population up to Age-, 55 Peninsular Malaysia - 1972^ Age group Total Males Females 4 506 185 2 232 060 2 274 125 Aged population (55 years and over) 744 455 383 704 360 751 Percentage of working population 16.59° 17.27° 15. 99° Working population (15-54 years) 16.26 The following table shows the proportion of persons in the labour force who were in the upper age groups 55-65 years plus. Total Labour Force and "Aged Persons", 1970 Peninsular Malaysia labour force Females Males Age group Number 51 and over 55-59 60-64 65+ 55 and over Source: 9° of total males age 15 and over Number 1 907 003 87 822 _ 4.6 869 819 30 661 65 531 65 890 3.4 3.5 21 867 17 153 219 243 11.5 69 681 Total 9° Of total females age 15 and over Number _ 3.5 2.5 2.0 8.0 Soci.al Statistics Bulletin, 1972 Social Statistics Bulletin, 1972, Appendices B and E. 7° of total persons age 15 and over 83 043 4.3 3.1 3.0 288 924 10.4 2 776 822 118 483 87 398 - 26 - From the preceding table, it may be noted that 288,924 persons (over 10 per cent) of the labour force in 1970 were age 55 or older. This tends to refute the notion that persons over the age of 55 years generally retire from gainful activity. 16.27 The original statistics on which the above table is based show that out of the 288,924 persons in the labour force in the three age groups covering persons age 55 and over, only 1.5 per cent were unemployed. 16.28 It may also be observed from the same table that there were 118,483 persons in the labour force in the age group 55-59According to the same statistical source, only 1.5 per cent of the persons in this age group were unemployed. Expectation of Life 16.29 Pensionable age has to be related to expectation of life in the country concerned. It is a matter of great interest in general and it must be considered for the purpose of determining the cost factor of a pension scheme. 16.30 The expectation of life in Peninsular Malaysia at selected ages is given in the following table, which also shows the increase which has taken place between 1957 and 1972. Expectation of Life - All Communities"' Peninsular Malaysia Year Age Years Male Years Females Years Both Sexes Years 1957 1972 45 24.0 26.9 27.1 31.3 25.6 29.1 1957 1972 50 20.4 22.9 23.4 27.1 21.9 25-0 1957 1972 55 17.1 19.4 19.9 23.4 18.5 21.4 1957 1972 60 14.1 16.1 16.7 19.8 15.4 18.0 1957 1972 65 11.5 13.8 13.8 17.2 12.7 15.5 16.31 It may be useful if the expectation of life in Malaysia is compared, to the extent possible, with expectation of life in other countries. For this purpose the expectation of life in a few selected countries is given in Appendix I, table 2. Retirement from Gainful Activity - Law and Practice in Malaysia 16.32 There are no statutory provisions regulating retirement from employment under a contract of service in the private sector. However, it appears that the age of 55 years is considered to be the age at which employees should be retired. In a number of collective agreements examined, this age is generally referred to as the "normal" retiring age and sometimes the age of 50 years is mentioned in regard to female employees. However, most of these agreements provide for the possibility of extending employment beyond the "normal" age at the employer's invitation or by mutual consent. Social Statistics Bulletin, Peninsular Malaysia (1972), table 14. - 27 - 16.33 Under the Employees' Provident Fund Ordinance, a member (man or woman) may withdraw all the amount standing to his credit at the age of 55 years. 16.34 In the public sector, the normal retiring age is 55 years for males and females. This is regulated under the Pensions Ordinance. It is recalled that government employees are exempted from year to year from the operation of the Employees' Social Security Act, 1969, but this exemption does not apply to persons recruited directly by statutory bodies. Provisions under the Employees' Social Security Act, 1969" 16.35 The Act provides for an invalidity pension for which contributions are being paid. The pension becomes payable from 1 January 1977. In accordance with the provisions of the First Schedule to the Act, paragraph 12, an employee who completes his fifty-fifth year of age is no longer insurable for the invalidity •pension. This age, which applies to both men and women, would have to be raised should a higher pensionable age be chosen. The Cost Factor 16.36 Age benefit invariably develops as the predominant cost element in a social insurance scheme. The cost of this benefit is a major factor in determining the contribution required to finance the scheme. If the contribution is too high, the portion payable by the insured person may cause serious hardship to the worker. The portion of the contribution to be paid by the employer in respect of his employees may bring about unfavourable economic repercussions if it is too high. 16.37 One of the principal determinants of the cost of an age-benefit scheme is the age at which the pension is to be payable. The following table provides an indication of the effect of various retirement ages on the amount and the ultimate cost of the pension. It is assumed in column 2 that at each age the insured person has earned a benefit of 100 units per annum payable from age 60. This column shows the amount of annual pension the insured person would receive were he not to wait until age 60 to receive the benefit, but instead begin to receive it at the ages shown in column 1. Column 3 shows the increase in the ultimate cost of providing an annual pension of 100 units at the ages in column 1 compared to providing it at age 60. Pensionable Age and Cost of Age Pension Aee when „;T r„«V0„.i„„ pension begins Amount of annual pension (units) (1) (2) 50 55 56 57 58 59 60 47 67 72 78 05 92 100 160 65 (deferred pension) Increase in cost to provide 100 units W ' (3) 113 49 39 28 10 9 37 - 28 - The deferred pension refers to the case of a person who becomes entitled to a pension on reaching pensionable age, say 60 years, but postpones his claim for pension till he attains the age of 65. It is customary in age pension schemes to provide for an increase in the pension in proportion to the members' years of contribution after pensionable age. The above table only shows that because of such postponement, a pension of 100 units at 65 would cost 37 per cent less than a similar pension at age 60. 16.38 It is observed from the above table that a pension of 100 units payable at age 60 would cost 49 per cent more if payment starts at age 55. Alternatively, if the cost of a pension at age 55 is to be the same as a pension of 100 units at age 60, the rate of pension at age 55 would be 67 units. In other words, a pension at 55 would be less adequate. 16.39 It should be noted that the above table is not based on Malaysian data. Precise estimates of the Malaysian experience will be provided by the actuary. It is unlikely, however, that the cost estimate ratios shown in column 3 will vary substantially. Proposals 16.40 In the light of the aspects considered in the foregoing paragraphs, it is proposed as follows. 16.41 Pensionable age should be 60 years for men and women. However, with regard to current practice in Malaysia, if the age of 60 is considered too high (especially for women) it may be provided that where a person satisfies the minimum contribution conditions for an age pension before the age of 60 he or she may claim an age pension but not before attaining his fifty-fifth birthday. For the reason explained above, such a pension must be at a rate lower than that which would be payable at 60. The rate of such reduced pensions will be determined by the actuary. 16.42 The age pension should be subject to the condition that the pensioner retires from gainful activity. However, the pensioner should not be made to feel that he is no longer of use to the community, nor should he be deprived of the opportunity of supplementing his income to a limited extent. He should be allowed to undertake employment which may be restricted by regulations to a limited number of hours of work per week or month, or in some other appropriate manner. 16.43 Insured persons who satisfy the contribution conditions for a pension on reaching pensionable age should be able to earn an increment in the form of an appropriate increase in their pensions for every 12 contributions actually paid after pensionable age. 16.44 The Minister should be enabled to prescribe a lower pensionable age for persons who complete a specified period of insurance in occupations which are particularly strenuous or hazardous. Contribution Conditions 16.45 A qualifying period of insurance is an essential condition for an age pension under a social insurance scheme. This ensures that the persons protected are those for whom the scheme is intended. In general, it should prevent persons approaching pensionable age from procuring a pension possibly even by obtaining some nominal insurable employment. This possibility becomes greater under a scheme which covers also casual and part-time employment, as in tho case of Malaysia. 16.46 Convention No. 102 allows an age pension to be payable after a period of 30 years of insurance; but it also requires that a reduced pension should be payable after the completionpOf 15 years of insurance.1 Convention No. 128 contains the same condition. "••Article 29, 1(a) and 2(a). 2 Article 18, 1(a) and 2(a). - 29 - Proposals 16.47 It is proposed that the minimum qualifying conditions for an age pension will be as follows: (a) not less than 36 monthly contributions actually paid since entry into insurance; and (b) not less than 180 monthly contributions paid and credited. 16.48 A contribution shall be credited in respect of an insured person, without being actually paid, for every complete month during which GUCII person is entitled to sickness benefit, maternity benefit or temporary disablement benefit. 16.49 Such credited contributions shall be valid for pensions. Credited contributions may also be allowed in respect of complete months during which a person is in'receipt of invalidity pension. However, the application of this arrangement will depend upon the harmonisation of the invalidity pension with the proposed scheme. This will be discussed later in this report. Rate- of Pension 16.50 The higher the rate of pension the more meaningful and attractive it will be. On the other hand, the higher the benefit rate, the higher will be the required contributions if the scheme is to be self-financing. Persons criticising the benefit rate tend to overlook the cost effect. 16.51 Convention No. 102 requires a minimum pension of 40 per cent for a man with a wife of pensionable age (considered to be the standard beneficiary).! The later Convention No. 128 requires a minimum rate of 45 per cent for the standard beneficiary.2 16.52 It is proposed that the rate of pension shall be as follows: (a) a rate of 40 per cent when the minimum contribution conditions are satisfied; (b) an increase of 1 per cent for every 12 monthly contributions paid and credited over and above the minimum of 180 paid and credited contributions. Maximum Rate of Pension Proposal 16.53 It is proposed that the maximum rate of age pension shall be 60 per cent. 16.54 On the basis of the proposed rate of pension, the maximum rate of 60 per cent will be reached when a person completes 35 years of insurance. This rate is the same as for permanent total disablement resulting from an employment injury. In regard to the period of 35 years, it has to be explained that an ago pension should normally be earned by contributions throughout the insured person's working lifetime. If normal working life is taken to be the period between the ages of 16 and 60 years, it covers a period of 44 years. 16.55 Under the present scheme, the maximum rate of invalidity pension is 65 per cent. This is being discussed later in this report. Schedule to Part XI. Schedule to Part V. - 30 - Deferred Retirement 16.56 It is customary to provide for persons who elect to continue to work in insurable employment after reaching pensionable age. A person may be unable to complete 35 years of insurance before reaching pensionable age. He should be given an opportunity to increase his pension rate if he chooses to continue in insurable employment. Proposal 16.57 It is proposed that a person who continues to pay contributions after attaining pensionable age shall earn increments in addition to the pension rate which he has earned up to pensionable age. This will only be allowed in the case of a person who satisfies the minimum contribution conditions when he reaches pensionable age. 16.58 The formula for this increment will be worked out by the actuary. When the pension is eventually claimed, the pension shall be calculated on the assumed. average arnings for the 36 months immediately preceding the claim. Transitional Provisions for "Aged" Entrants into the Pension Scheme 16.59 An age pension scheme is generally based on the assumption that an insured person pays contributions throughout his working life. However, the introduction of a pension scheme would have no significance for the first generation of insured persons if worthwhile benefits are not attainable by those who are not very far from the age of retirement from work at the time the scheme is implemented. It is therefore accepted by social security planners that some transitional provisions must be made for persons who become insured under such schemes at ages which would not normally allow them enough time to satisfy the minimum contribution-,conditions. Such arrangements are also required in Conventions Nos. 102 x and 128. 2 Proposal 16.60 It has been proposed that pensionable age should be 60 years for men and women. Subject to the condition that no person shall be entitled to an age pension unless he has actually paid at least 36 monthly contributions, persons who become insured under the pensions scheme at the age last birthday indicated in column (l) of the following table shall be entitled to an age pension if, by the time they reach pensionable age, the number of contributions shown in column (3) have been paid or credited in respect of them. Column (2) of the table is included only for information. It only shows, on average, the remaining number of months to pensionable age for each age in column (l). 16.61 It is observed that a person who is 55 years when he becomes insured will only be required to have 45 monthly contributions of which 36 must be actually paid to satisfy the minimum contribution condition. 16.62 Persons who become entitled to an age pension under the transitional arrangements shown in the table should not be entitled to claim an age pension before reaching pensionable age. 16.63 The proposed arrangement is a transitional one, and applies to persons age 41 to age 55 at the inception of the scheme (in a particular area). It cannot remain open indefinitely so that at any time in later years a person may procure employment, say at an age over 50 years and qualify for an age: pension. Nevertheless, even under the proposed transitional arrangements, the resulting pensions which will be payable after short periods of contributions will be a heavy burden on the scheme. Article 29, 5. Article 18, 4. - 31 - T r a n s i t i o n a l Arrangements for Aged E n t r a n t s into Pensions Scheme Age ( l a s t b i r t h day on appointed da y (1) 55 54 53 52 51 50 49 48 47 46 45 44 43 42 41 Remaining months a t l a s t birthday . less (2) S ^ H l S ^ ™ £ & f cSEJibSiona necessary to qualify (3) 54 66 70 90 102 114 126 138 150 162 174 186 198 210 222 45 55 65 75 85 95 ' 105 115 125 135 145 155 165 175 180 S1X m o n t h s 16.64 When a pension scheme becomes universally applicable to the persons intended to be protected (for example, all employed persons), column (3) in the above table would apply only to persons at the ages shown on the appointed date. In the case of Malaysia the aged entrant concession should be applied according to the extent of coverage attained when the pensions scheme is introduced. Age Grant 16.65 When the pensions scheme is introduced, contributions will be compulsory for all persons in covered industries, but some persons may not be able to qualify for an age pension. In such cases a lump sum should be payable. Proposal 16.66 Insured persons who will not satisfy the minimum conditions on the date they attain pensionable age shall be entitled to a lump sum payable on the basis of the following formula: "X" per cent x average wage x number of contributions actually paid, where "X" per cent shall be a percentage determined by the actuary. Average wage shall be the average of the assumed average wages corresponding to the last 12 contributions paid. - 32 - Minimum Rate of Retirement and Invalidity Pension 17. Retirement pension is generally earned after a long period of insurance. The minimum rate of 40 per cent, as proposed, is earned after a period of 15 years of insurance (except in the case of a pension earned under the transitional provisions). An insured person's wage may even lie lower towards the end of his working career than it was a few years before. It is a matter of social justice that an age pension scheme include some sort of minimum benefit to assure a low wage earner of an adequate pension which at least meets subsistence needs, if not a somewhat higher standard. This social objective may be attained by the adoption of various possible methods consisting mainly of the adoption of (a) an amount as a flat rate of pension; or (b) a formula related to the period of insurance completed. The second approach may commend itself to the school of thought that a person who has participated in a scheme for a longer period than another should have some reward. It may also be more appropriate in a system which does not provide for any other flat rate periodical payments. Proposal 17.1 It is proposed that the minimum rate of retirement pension should be based on the following formula: Rate of pension = percentage earned through the period of insurance- under the scheme x standard amount For example, 40 per cent has been proposed for a person who completes the minimum period of 15 years for a retirement pension. A person who completes a longer period would naturally have a higher percentage. 17.2 It is proposed that the "standard amount" will be a monthly amount which will be fixed by the Minister by regulations or by order published in the Government Gazette. The Minister will be at liberty to adopt an amount which may bear some relation to the average wage of (i) (ii) (iii) an unskilled adult labourer; a semi-skilled worker; or a skilled worker. The Minister would not be expected to commit himself to determining what is the average wage of any of the above three classes of workers. This is why the term "standard amount" is being suggested. Any other term which may be considered to be more appropriate may be adopted. 17.3 It is recommended that the standard amount be reviewed from time to time to take into account changes in average wage levels. 17.4 It is proposed that the same formula be applied to determine the minimum amount of invalidity pension. In this connection it should be noted that casual and part-time workers will be insurable as they also are at present. Since the earnings of these workers are generally very low, the proposed minimum rate arrangement would be particularly beneficial to them. 17.5 The fixing of the standard amount is a matter' of policy to be determined by the Minister. However, it is an element which has to be taken into account in the costing of the scheme. For this purpose it has been tentatively agreed with the actuarial expert that the following standard amounts will be considered as monthly wages: $130, $150, $170, $200 The pension which would be payable as a result of the adoption of any of the above "standard amounts" is shown in the following table. - 33 - Minimum Pensions at Selected Rates Standard amount Period of insurance years Rate of pension Amount of pension per month based on standard amount of $ 130 $ 150 170 200 Amount of Pension: (i) Transitional according to age at entry . 3 9/12 to 14 7/12 40 52 60 68 80 (ii) 15 40 52 60 68 80 (iii) 20 45 58.5 67.5 76.5 90 (iv) 25 50 65 75 85 100 (v) 30 55 71.5 82.5 93.5 110 (vi) 35 60* 78 90 102 120 Notes * Proposed m;ucimum rate is 60 per cent. (1) In regard to the amounts of pension shown in the above table in respect of the various periods of insurance, it should be borne in mind that, the standard amount applicable on the launching of the scheme will be reviewed periodically as the Minister may deem appropriate on the basis of actuarial advice. (2) The minimum amount of pension will be guaranteed even to an insured person who works only on a part-time or casual basis. (3) Once a pension is awarded it will be subject to periodical review to take account of substantial changes in the general level of earnings resulting from changes in the cost of living, as proposed in clause 27 of the Bill to establish SOCSO as a statutory body. 17.6 It is recommended that once a standard amount is adopted it should then be reviewed regularly on the basis of actuarial advice. Revisons in the levels Of benefits should be made with reference to substantial changes in the general level of earnings or in the cost of living. Invalidity Benefit 18. The present scheme provides for an invalidity pension or a lump-sum payment (invalidity gr.ant). The latter is payable to an invalid who has paid at least 12 contributions, but who does not satisfy the contribution requirement for a pension. The invalidity benefit scheme does not provide for any benefit to survivors of an invalid pensioner. It does not form part of a comprehensive benefit scheme. These circumstances are relevant to the explanations and proposals which follow. Ref. Convention 102, Article 65, paragraph 10 and Article 66, paragraph 8. Convention 121, Article 21. Convention 128, Article 29. - 34 - Age Qualification 18.1 The following limitations are in force: (a) a person cannot become insured under the invalidity scheme if he is over 50 years on the appointed day; (b) an insured person cannot claim invalidity benefit after he attains the age of 55. It is observed that at present there is no minimum age at which a person can be insured, and there is no provision in regard to a minimum age at which a person may claim invalidity pension. Proposal 18.2 It is proposed that a person shall be entitled to claim invalidity benefit if he is over the age of 18 years and under pensionable age. 18.3 The above proposal is to be treated.'.as forming part of the complex of proposals which are being made in the following paragraph to harmonise the invalidity benefit with the age benefit, and in particular: (a) the proposed basic invalidity pension rate; and (b) the transitional provisions for aged entrants into the proposed pensions scheme. Contribution Conditions 18.4 In the present scheme (section 17) there are two sel;s of contribution conditions, namely: (1) (2) Full qualifying period (a) 36 monthly contributions paid during the 60 consecutive months immediately preceding the month in which the claim for pension is made; or (b) paid contributions equivalent to not less than two-thirds of the number of complete months falling between the date of first entry into insurance and the date of claim, subject to a minimum of 36 paid contributions. Reduced qualifying period Paid contributions equivalent to not less than one-third of the number of complete months between the date of first entry into insurance and date of claim, subject to a minimum of 36 paid contributions. 18.5 The condition at (l)(a) above requires the insured person to contribute an average of 7.2 months in every year of the last five consecutive years before invalidity. The alternative conditions at (l)(b) require an average contribution of eight months in every twelve months throughout the period from first entry into insurance (which may consist of interrupted periods of insurance). Proposal 18.6 It is proposed that there be only one set of qualifying conditions which are somewhat more liberal than the existing provisions for a full qualifying period, as follows: (a) a minimum of 36 contributions paid since entry into insurance; and (b) not less than 36 paid and credited contributions in the 72 consecutive months immediately preceding the month in which the claim is made. - 35 - 18.7 The above proposal would have the following advantages: (a) it would give the insured person coverage for up to three years after leaving insurable employment, as compared with a possible break of up to two years under current provisions; (b) it requires an average contribution of six in every twelve months in the last 72 consecutive months instead of 7.2 months out of every 12 months; (c) the proposal also introduces a condition favourable to insured persons, because for the purpose of the pension credited contributions would be reckoned, while only paid contributions are considered at present. Invalidity Grant 18.8 Under Section 21 of the Act an invalid is entitled to a grant if he does not satisfy the contribution conditions for a full or reduced qualifying period and provided he has paid not less than 12 monthly contributions. The grant is an amount equal to the contribution deducted from the wages of the insured person plus interest at 4 per cent in accordance with the regulations. In effect, therefore, the grant is a refund of the contributions paid by the insured person himself plus interest thereon. Proposal 18.9 It is proposed that an invalid who does not satisfy the relative contribution conditions for a pension receive an invalidity grant computed on the same formula as the age grant. Benefit Rate 18.10 follows: Section 20 of the Act provides that the rate of pension shall be as (a) where a person satisfies the full qualifying period, the pension shall be made up of a basic rate equal to 40 per cent of his average monthly wage, increased by 1 per cent of the average monthly wage for every 12 monthly contributions paid in excess of the first 36 months up to a maximum rate of 65 per cent; (b) where an insured person only satisfies the reduced qualifying period, a basic pension of the average monthly wage increased by 1 12 monthly contributions paid in excess of provided that the pension shall not exceed conditions for a equal to 25 per cent per cent for every the first 36 months 39 per cent. 18.11 It is observed that where the full qualifying period is satisfied after 15 years of paid contributions the pension rate would amount to 52 per cent (viz. 40 per cent plus 12 per cent in respect of 12 years' paid contributions after the first three years). Current Invalidity Pension Rate and the Proposed Age Pension Rate 18.12 The present invalidity scheme is largely a scheme on its own. It did not have to fit into the pattern, of a wider programme which includes other benefits, in particular, age and survivorship pensions. The following table shows invalidity pension rates under current provisions compared (on the basis of years of contribution) with the proposed retirement pension. - 36 - Current Invalidity Pension and Proposed 1S-XJ '' J. •H snsion Retirement 71 J . . . r Number of years of contribution Current inval:id:i-ty pension rate Proposeid retirement pension rate * 3 15 20 40 52 57 28* 40 45 28 65 65** 53 60** 35 This is only a notional rate to indicate the base of the pension formula. Actually the minimum rate of retirement pension payable after the completion of 15 years of insurance or under transitional provisions will be 40 per cent. Maximum amounts under the two schemes, respectively. 18.13 It is observed in the above table that (a) an insured person who pays three years' contribution in a period of five consecutive years may receive an invalidity pension of 40 per cent at any age under 55 years; (b) a person who pays 28 years' contribution may receive an invalidity pension before pensionable age at the rate of 65 per cent, as compared with a proposed retirement pension of 53 per cent after the same period of insurance on reaching pensionable age. The gap indicated in paragraph (b) above would produce a distorted pension structure, and would have serious implications for the operation of the scheme. 18.14 It is considered most important that the various provisions of a pensions programme - age, invalidity, survivors' and to a certain extent employment injuries should constitute a unified structure. The inconsistencies indicated between the current invalidity pension and the proposed retirement pension should be removed either by revising the proposed retirement pension formula or the present invalidity formula. 18.15 The proposed retirement pension formula is designed on the basis of the estimates of the contribution income which is likely to be available on the assumption that a contribution to the Employees' Provident Fund is to continue. The actual cost of the scheme will be determined by the actuary. The resulting rates would meet the standards set in Convention No. 1 0 2 . It would not be advisable to start a self-financing pensions scheme at a higher level of benefits, at least until the policy in regard to the EPF contribution is determined. (This matter is discussed in Part V of this report.) Proposals 18.16 It is proposed that invalidity pension and retirement pension rates be harmonised as follows: (a) The basic rate for invalidity pension will be 28 per cent after three years' paid contributions. This would be the same as the notional basic rate for retirement pension. - 37 - (b) The pension rate will be calculated on the sum of the credited as well as actually paid contributions. These credits will be given in the event of complete calendar months during which a person is entitled to sickness benefit, maternity benefit or temporary disablement benefit. At present no credited contributions are allowed in the event of temporary disablement benefit which is currently the only benefit paid in respect of temporary incapacity for work. However, the condition for a minimum of three years actually paid contributions will continue to apply. (c) The pension rate resulting from the paid and credited contributions will be increased by a number of years of insurance equal to one half of the difference in complete years between the invalid's age at the last birthday preceding the invalidity and 45 years. This proposal is in accordance with the concept that on average an invalid is likely to have greater family responsibility in the period before the age of 45 years. It may be argued that such responsibility may remain up to tho a^o of 45 years. However, it must be borne in mind thab t;hc hifth'T benefit which is paid in recognition of such responsibility will not be withdrawn when such responsibility becomes less or even ceases altogether. (d) The maximum pension rate for invalidity should be the same as for retirement pension which will be 60 per cent. At that rate it will also be the same as the present maximum rate for permanent total disablement. 18.17 The following table shows the effect of the above proposals. It shows in column (6) the rate of invalidity pension which a person would receive if he enters insurable employment at the age of 17 years and becomes an invalid at any of the ages indicated in column (1). The table also shows in column (7) the retirement pension rate corresponding to the contributions paid and credited in column (2). The invalidity pension rate payable under th3 present provisions in the Act is shown in column (8) but actually the rate could be lower because column (2), on which the rate is based, includes credited contributions which are not allowed under the present scheme. Proposed Invalidity Pension Rates at Selected Ages Proposala Age at invalidity Contributions paid and credited* Basic rate Remaining years up to age 45 * (1) (2) (3) (4) 20 22 25 30 32 35 40 45 3 5 8 13 15 18 23 28 28 28 28 28 28 28 28 28 33 35 28 28 25 23 20 15 13 10 5 - 50 52 * Credits at half period in col. (4) Invalidity pension rate Retirement pension rate Present invalidity pension rate * (5) * * (6) (7) * (B) 12.5 11.5 10.0 40.5 41.5 43.0 7-5 6.5 5.0 2.5 - 45.5 46.5 48.0 40 43 48 53 50.5 53.0 58.0 60.0** 58 60** 40 42 45 50 52 55 60 65** 65 ' 65 of which not less than three years' contribution must be actually paid. 3€3E maximum rate. - 38 - 18.18 In regard to the above table it is explained that the person who lias a continuous period of insurance up to the age of 40 after which he becomes an invalid would receive a pension at 50.5 per cent. However, if a person who has completed only three years' insurance becomes an invalid at the same age (40 years) he would only receive a pension of 30.5 per cent made up of 28 per cent earned after three years' paid contributions and 2.5 per cent under column (5). Thus the proposed formula will give an advantage to the person who has completed a longer period of insurance. 18.19 The invalidity pension at the proposed rate will meet the standard set in Convention No. 102.-1 However, it will not meet the standard in the later Convention No. 128 2 which requires an invalidity pension at the rate of 50 per cent after the completion of 15 years of insurance. 18.20 The foregoing proposals regarding invalidity pension have been put forward in the light of the following considerations: (a) They are necessary in the interest of a consistent and unified social insurance programme. (b) They include more favourable qualifying contribution conditions and introduce the system of credited contributions. (c) The invalidity pension will carry with it benefit to survivors, and not to the invalidity pensioner only. (d) The amount of invalidity pension will be subject to a minimum rate which will result in a distinct advantage to low wage earners who may easily be earning much less than the standard amount when they become invalids. (e) The benefit under the present provisions has only become payable from January 1977 in regard to the areas first covered. (f) The harmonistation of the rates should reduce the problems which would certainly arise w.i th insured peraonn if there is a substantial difference between the invalidity pension and Ike age pension. Survivors' Benefit Current Provisions 19. The Employees' Social Security Act only provides for a periodical payment to survivors of an insured person who dies as a result of an employment accident. This benefit is referred to as dependants' benefit. 19.1 Dependants' benefit is payable to persons specified under the definition of "dependants" in section 2(3) of the Act. Section 26 of the Act divides the dependants specified by the definition into two groups, by providing that only if there are no dependants in the first group, the benefit will be payable to dependants in the second group. For the sake of clarity, it is proposed to identify dependants in the two groups which result from the provisions of section 26 as "primary dependants" and "secondary dependants", respectively. Primary Dependants: (i) (ii) (iii) a widow; minor legitimate or adopted son, an unmarried legitimate or adopted daughter; if wholly dependent on the earnings of the deceased insured person at the time of his death, a legitimate or adopted son or daughter over 16 years who is infirm and incapable of earning any wages. Schedule to Part XI. Schedule to Part V. - 39 - Secondary Dependants: (a) a widowed mother whether actually dependent on the earnings of the deceased insured person or not at the time of his death; (b) if wholly dependent on the earnings of the deceased insured person at the time of his death (i) (ii) (iii) (iv) (v) (vi) (vii) a parent other than a widowed mother; a minor illegitimate son, an unmarried illegitimate daughter or a daughter-' legitimate or adopted or illegitimate if "'married and a. minor or if widowed and a minor; a minor brother or an unmarried sister or a widowed sister if a minor; a widowed daughter-in-law; a minor child of a predeceased son; a minor child of a predeceased daughter where no parent of the child is alive; or a paternal grandparent if no parent of the insured person is alive. In the Act a minor is a person who has not completed his sixteenth year of age, which is interpreted to mean a person who has not attained his sixteenth year. Proposals Types of Survivors' Benefit 19.2 It is proposed that the survivors' benefit be of two types, namely: (a) a periodj.cal payment by way of a pension or allowance; or (b) a lump-sum payment hereinafter referred to as survivors' yrant. 19.3 Survivors' benefit shall be a periodical payment where the deceased insured person at the time of his death (a) was in receipt of an invalidity or retirement pension; or (b) would have been entitled to receive invalidity pension or, having reached pensionable age, retirement pension, had he claimed such benefit. 19.4 Survivors' grants shall be payable where the deceased insured person at. the time of his death would have been entitled to invalidity grant or age grant had he claimed such benefit. 19.5 Survivors' benefit shall be a lump-sum payment in the case of the widow of a deceased insured person who satisfies the conditions specified in paragraph 19.3 above, but the widow herself does not satisfy the relevant conditions for a pension or allowance. Rate of Periodical Payments 19.6 The maximum rate of survivors' benefit payable by way of periodical payments shall be based on the rate of invalidity pension or retirement pension referred to in paragraph 19.3 above and calculated as proposed in paragraphs 16 and 17 of this report. 19.7 The following table shows how the shares of available benefit are allocated to dependants (dependants' benefit) according to the present Fourth Schedule and also the proposals for persons entitled to survivors' benefit under the new schemes. - 40 - Present Dependants' Benefit and Proposed Survivors' Benefit Share of available benefit As in Fourth Schedule in respect of employment injuries Dependants Proposed for new survivors' benefits Primary: (i) (ii) widow son/daughter under 14/16 y e a r s W (2) (6) 60$) 40/o) (iii) widower^ ' Secondary: (a) widowed mother 30fo (b) (i) 30# parent 30$ k I) ^ 40$ (8) or (ii) (iii) 19.8 paternal grandparent 30/o (4) 30$ (9) other male/female under 14 years 20$ (5) 20$ (10) The following explanations refer to the above table. Conditions under Current Provisions (1) Up to 16 years if attending education. In the case of an unmarried son or daughter who is wholly dependent on the earnings of the deceased insured person and unable to earn any wages because of infirmity, benefit continues as long as the infirmity lasts. (2) If total shares exceed 100 per cent, each share.is reduced proportionately. (3) If there are two parents, each parent is entitled to 15 per cent. (4) By definition a paternal grandparent is entitled to 30 per cent only if there is no parent. In the event of two paternal grandparents, each is entitled' to 15 per cent. (5) If there is more than one person, the share is divided equally. Proposals for the New Benefits (6) Conditions will remain as in (2) above, except that (a) it is proposed that the widow herself will have to satisfy certain conditions which are. specified later in this report; and (b) benefits to sons to the age of 16 up to the age of continued, as is or daughters will be payable generally up years, or if attending full-time education, 18 years or until such education is disexplained later. - 41 - (7) A widowed mother will be entitled to 30 per cent if she does not satisfy the conditions indicated below. (8) A parent will be entitled to 40 per cent (two parents would receive 80 per cent between them) if (a) over pensionable age; or (b) under pensionable age but permanently incapable of self support by reason of permanent physical or mental disablement. It is explained that this proposal is designed to attain two objectives, namely: (i) (ii) (9) to make the benefit to parents much more meaningful, viz. up to 80 per cent between two parents, instead of up to 30 per cent between them as at present; to avoid what the expert considers to be an anomalous situation whereby two comparatively young and able-bodied parents acquire a pension for the rest of their lives at 15 per cent each if they happen to be unemployed when an insured son or daughter dies, as can happen under the current employment injuries provisions. It is proposed that the condition referred to in (4) -above will apply to the new benefit. (10) The condition at (5) above will apply, but for the sake of uniformity, since other dependants are mainly brothers and sisters, the benefit will be extended up to the age of 16 years without any further extension. (11) A widower is being included in the primary group subjoeL Lo such conditions as may be prescribed both for the purpose of death benefit and survivors' benefit. In effect this is a corollary to the present provisions in section 27 of the Act and to Regulation 94. 19.9 Under the above proposals, the persons in the group of secondary dependants will only be entitled to benefit if the deceased insured person does not leave a widow, whether entitled or not, or a son or daughter. In the main, the question of benefit to secondary dependants will arise in the case of an unmarried insured person. 19.10 The parents of an insured person who dies through any cause including an accident or after receiving an invalidity pension may be entitled to receive a pension based on the invalidity or retirement pension to which the deceased would have been entitled at the time of his death, if they were wholly dependent on the earnings of such person and satisfy the relevant conditions. This will mainly help parents maintained by unmarried children. It is advisable that the invalidity pension be more meaningful and that the qualifying conditions be realistic so that they will result in benefits being paid in circumstances where the need is likely to be great. Under the proposals these needs will be more adequately met. 19.11 The concept of dependency in the Asian tradition must be recognised by the social security scheme. However, the concept is being adapted to changing conditions, and its application should not be overstretched; otherwise the result will be that social security benefits are spread out to such an extent as to become meaningless and a'source of criticism of the social security system on the ground of insignificant payments. Furthermore, a long-term benefit should not be awarded on the basis of what should be a temporary situation, as is the case of comparatively young able-bodied "dependent" parents. This is really the realm of public assistance or a social insurance unemployment benefit scheme. - 42 - Conditions to be Satisfied by a Widow 19.,12 It is proposed that a widow be entitled to benefit in the form of a periodical payment as follows: Widow's Pensions and Widowed Mother's Allow ancT 19.13 (1) (2) (3) A widow shall be entitled to a widow's pension if at the time of her husband's death' (a) she is over 40 years; or (b) she is permanently incapable of self-support by reason of physical or mental disablement. A widow who does not have a child by her late husband shall not be entitled to a pension if (a) she married her late husband after he became entitled to a retirement pension or an invalidity pension; and (b) her husband's death occurs less than three years after the date of their marriage. A widow's pension shall cease to be payable if the widow remarries. 19.14 A widow who at the time of her husband's death is not entitled to a widow's pension shall be entitled to a widowed mother's allowance if on that date (a) She has the care of a legitimate or adopted child who (i) (ii) (b) is under 16 years; or is permanently incapable of self-support by reason of physical or mental disablement; or she is pregnant by herniate husband. A widowed mother's allowance shall be payable at the same rate as a widow's pension and!as long as the conditions at (a) or (b) are satisfied. 19.15 (1) A widow, who on the death of her husband, receives a widowed mothers' allowance in respect of a child in accordance with paragraph 19.14 above shall be entitled to a widow's pension on attaining 40 years if on that date she still has the care of such child. (2) A widowed mother's allowance shall cease to be payable if the widow remarries. More than One Widow entitled to Periodical Payments 19.16 Where two or more widows of the deceased insured person satisfy the relevant conditions for a widow's pension or a widowed mother's allowance, the pension or allowance payable to a widow shall be shared equally among the widows. 1 19.17 Under the above proposals, a married woman who at the time of her husband's death has attained the age of 24 years and has a child is assured of a pension for life or until she remarries if her husband dies. On the other hand, thejproposals are based on the concept that an able-bodied young widow without family responsibility need not receive a social security benefit. - 43 - Orphan's Allowance 19.18 The children of a deceased insured person shall be entitled to benefit as follows: (1) Each unmarried legitimate or adopted son or daughter of the deceased shall receive an orphan's allowance until he attains the age of 16 years. (2) In the case of a son or daughter who continues full-time education after the age of 16 years, the allowance shall be payable up to the age of 18 years or up to the date when full-time education ceases, if this occurs earlier. (3) An unmarried legitimate or adopted son or daughter who is wholly dependent on the earnings of the deceased insured person at the time of his death by reason of physical or mental disablement shall be entitled to receive the orphan's allowance as long as the disablement lasts. (4) An orphan's allowance shall cease on marriage. 19.19 In the above proposals, the age for entitlement to benefit is being extended by two years over the present provisions. This should also apply in the case of dependants' benefits (viz. in respect of employment injuries). Lump Sum Payments Widow's Grant: 19.20 A widow's grant shall be payable to a widow who at the time of her husband's death would have been entitled to a widow's pension or a widowed mother's allowance had she satisfied the relevant conditions: provided that where the deceased insured person leaves more than one widow, and widow's pension or widowed mother's allowance is payable to any one of them, no widow's grant shall be payable to any other widow of the deceased. 19.21 In the case where there are two or more widows entitled to the grant, the grant shall be shared equally among them. 19.22 A widow's grant shall be a lump sum equivalent to the amount of widow's pension which the widow would have been entitled to receive in respect of a period of 12 months had she satisfied the relevant conditions for such pension. 19.23 A widow who married her late husband after he became entitled to an invalidity pension or an age pension shall not be entitled to widow's grant if her husband's death occurs less than three years after the date of their marriage. Survivors' Grant: 19.24 Survivors' grant will be payable in the circumstances indicated in paragraph 19.4 above and in respect of persons who would have been entitled to a periodical payment. Medical Pare: Introductory 20. Convention No. 102 requires medical care of a preventive or curative nature to be provided to protected persons in the event of a morbid condition, whatever its cause, and pregnancy and confinement and their consequences. Convention No. 103 specifies pre-natal, confinement and post-natal care by qualified midwives or medical practitioners as well as hospital care where necessary.1 Convention No. 130 sets a somewhat higher standard particularly with the inclusion of dental care and medical rehabilitation.2 Article 4, paragraph 3. 2 Article 13. - 44 - 20.1 Many social insurance programmes include medical care. This is particularly the case in countries which seek to advance their medical services as rapidly as possible. Compulsory health insurance has been recognised as a most effective means of achieving this objective. In countries where there is no free (or almost free) comprehensive personal health service for all citizens or where health care facilities are inadequate, social insurance medical care provides two distinct advantages to persons covered by the scheme, namely: (a) It enables large numbers of persons who cannot afford to obtain medical care protection through private insurance to acquire such protection through social insurance, and this protection is available (subject to certain conditions) as of right. (b) If personal health care becomes more accessible to low income workers it becomes possible for them to avoid (or at least delay) complications resulting from certain degenerative diseases. Methods of Determining Entitlement to Medical Care 20.2 Social insurance systems providing medical care have adopted different methods of establishing entitlement to this benefit. In certain industrialised countries which do not have a national health service, the only condition for entitlement is that a person is in insurable employment or a member of a scheme. This is suitable for these countries where continuity of employment is quite normal. 20.3 In other countries entitlement is based on entitlement to cash benefits. In some countries the entitlement to medical care is extended even when the right to cash benefit is exhausted in respect of the illness for which cash benefit was paid. Propolsal 20.4 It is recommended that insured persons will be entitled to medical care under the following conditions: Short-term illness: Persons who satisfy the relative conditions for entitlement to sickness cash benefit (viz. basically persons who have paid at least three monthly contributions in the last complete period of six months (the relevant contribution period)). Duration of Entitlement: Six months (viz. throughout the benefit period). 20.5 The ultimate objective should be that medical care under social insurance be extended to the immediate dependants of the insured person. However, it is recommended that this be considered after the lapse of some years during which SOCSO would acquire experience in the administration of this benefit. 20.6 Medical care should also be provided to persons who receive a retirement pension. It is appreciated that the incidence of morbidity among such persons is bound to be high, however the coverage of these persons can be partly financed through contributions deducted from the pension. Maternity Conditions for Entitlement 20.7 It is proposed that entitlement to medical care will be based on entitlement to maternity cash benefit (six monthly contributions paid in the last ten consecutive months preceding confinement). - 45 - Duration of Entitlement 20.8 i (i) throughout the maternity benefit period of 91 days commencing 42 days before the expected day of confinement; and (ii) for a further period not exceeding three months in respect of medical care needed directly as a result of the confinement. Responsibility of Objectives 20.9 The inclusion of medical care in a social insurance programme means that the Social Security Organisation must assume the responsibility to provide the medical care to which the insured persons become entitled by law when they satisfy the relative conditions. The contributory nature of social insurance imposes on the Organisation administering the programme the dual obligation to ensure by all possible means that (a) the quality of personal health care provided within the stipulated limits of the programme is up to the standard required; and (b) the method adopted for providing such care is the most economic and as expeditious as possible. Social Security Organisations operating their own Medical Facilities 20.10 When a system of medical care under social insurance is planned, the second major issue to be resolved is the system to be adopted for the provision of this benefit. 20.11 In a number of Latin American countries social security organisations have established and maintain their own hospitals and clinics. For example, in Peru, Mexico and Venezuela large hospitals were built to provide medical care exclusively to insured persons. However, since the early 1960s, the need has been felt to co-ordinate these personal health services with the public health programme. • 20.12 In India, -where personal health care under the social insurance programme was introduced in 1952, the social insurance institution during the first 12 years of the scheme relied mainly on the reservation of beds in public hospitals. Laker it was considered expedient that the social insurance institution build 11,3 own hospitals. 20.13 Social insurance medical care schemes in most developing countries have established health centres in order to deliver ambulatory services efficiently. These health centres are particularly useful where public health facilities are inadequate both in densely populated areas and in the sparsely populated areas where transportation is difficult or expensive. The advantages of these centres include (a) -the possibility of employment of para-medical staff who, at lower cost and working under supervision, can save the more expensive time of the physician; and (b) the provision of curative and preventive services which may help to reduce hospitalisation, which is particularly important if few beds can be maintained for the purpose of observation or convalescence and for normal maternity cases. 20.14 SOCSO is empowered under the Employees' Social Security Act to establish and maintain its own medical facilities, including hospitals. Section 39 of the Act provides as follows: "39. (l) The Organisation may establish and maintain such hospitals, dispensaries and other medical and surgical services as it may think fit for the benefit of insured persons. (2) The Organisation may enter into agreement with any government, local authority, person, private or individual in regard to the provisions of medical treatment and attendance for insured persons, in any area and payment of the cost thereof." - 46 - 20.15 It is important to emphasise that whatever services are operated by SOCSO, there should be the maximum co-ordination with the public health programme in the planning as well as the operation of the various medical facilities. This is one of the most important recommendations contained in the 1971 report of a Joint ILO/WHO Committee on Personal Health Care and Social Security.1 Proposals for Hospital Care 20.16 It is recommended that SOCSO should, in principle, make the maximum use of facilities in public hospitals for inpatient care of insured persons. The most practical arrangement would be to agree with the Ministry of Health on a rate per bed-day for all treatment and maintenance. If this is not possible, an additional charge may be payable in respect of a limited number of specified major operations. 20.17 If it is considered necessary, for reasons of different standards of socia'l behaviour, that there be some distinction in accommodation in wards, variable rates' per bed-day may be fixed according to the standard of the ward. Allocation to the type of ward may be related to the level of the assumed monthly wage corresponding to the contributions on the basis of which entitlement to the benefit is acquijred. 20.18: It should be open to insured persons to choose to go to a private hospital. Such persons may be reimbursed an amount per hospital day which may either be at the same (rate payable in a government hospital or some other appropriate rate. j Ambulatory/Out-patient Medical Care 20.19i Ambulatory or out-patient care has to be considered under various aspects which include (a) the availability and the use to be made of out-patient departments in government hospitals and of government clinics and dispensaries; (b) the establishment of SOCSO clinics; (c) the participation of private medical practitioners. Service provided through (a) and (b) above is usually referred to as the "direct system"• When service is provided under some form of arrangement with private practitioners, the system is known as the "indirect system". 20.20 The system to be adopted must be one which takes into account local conditions. The choice may be between one system and the other or a combination of both.; A decision can only be taken after appropriate consultations with the interested parties, and an objective assessment of the relative merits of the two systems is made. World Health Organisation Technical Report Series, No. 480. - 47 - PART V The Social Insurance Scheme and the Employees' Provident Fund 21. The UNDP social security project document requires recommendations on the co-ordination of the new social security scheme with the Employees' Provident Fund, and on the method of conversion of EPF balances. The Fund has been in operation for over 25 years, and a study of relevant circumstances was an absolute prerequisite to any valid proposals. In order to present this important question in its proper perspective, it is considered that certain details resulting from this study should be given as background to the proposals. The Employees' Provident Fund Relevant Statutory Provisions 21.1 The Employees' Provident Fund Ordinance, 1951, applies to employed persons who have attained the age of 16 years, irrespective of the level of the wage; but the following groups are excluded: (a) nomadic aborigines; (b) domestic servants, other than those engaged by any registered society or corporation or in any licensed'business incorporated under any written law; (c) domestic servants who do not indicate option to be members of the Fund; (d) an out-worker; (e) a casual worker, being a person who has worked for the same employer without a break in his employment for a period of less than one month and has not mutually agreed with his employer that their several liabilities to pay monthly contributions shall commence with his employment; (f) persons in prison, under detention or in any approved school or mental hospital or leper settlement; (g) any person employed principally for the purpose of catching fish in maritime waters or employed in any capacity on any vessel used for catching fish in maritime waters. 21.2 The current contribution rate, which came into force on 1 August 1975 is based on monthly wage as follows: employer employed person - 7 per cent 6 per cent The rate actually payable is a fixed amount related to wage scales with a uniform rate of $20 up to.$3,000 per month. Over that amount the rate is $7/- by the employer,and $6/by the employed person respectively, for every $100/- or part of $100. x 21.3 The Ordinance provides that money standing to the credit of a member may be withdrawn when a member (a) has died; (b) has attained the age of 55 years; (c) is physically or mentally incapacitated from engaging in any further employment; All amounts given in this year are in Malaysian ringgitf$) unless otherwise specified. (d) is about to leave Malaysia; (e) has attained the age of 50 years he may be allowed to withdraw, once only, a sum representing one-third of the amount standing to his credit. 21.4 The Employees' Provident Fund Ordinance was extended to cover Sabah and Sarawak in 1969 under a separate Board. But the Chairman and the General Manager are common to both Peninsular Malaysia and Sabah and Sarawak (East Malaysia). The Employees' Provident Fund (Amendment) Act, 1977, amalgamated the two funds under one board for the whole of Malaysia. Statistical Information 21.5 The information contained in paragraphs 21.6 to 21.22 refers to the operation of the EPF in Peninsular Malaysia. Information about Sabah and Sarawak is given in paragraph 21.22. Membership of EPF 21.6 From 1 December 1970, employees whose wages exceed $500/- per month became liable to the EPF contribution. Membership and number of employers since 1969 is shown in the following table. Numbers of Members and Employers • 1969-75 Year 1969 1970 1971 1972 1973 1974 1975 21.7 No. of members 1 1 2 2 2 2 2 853 955 064 185 339 484 626 000 000 000 000 000 000 599 No. of employers 55 121 58 000 60 000 63 000 67 000 71 000 n.a. Membership of EPF at the end of 1975 was as follows: - 49 - Membership of EPF at the end of 1975 .. ^ Sex and Age Group Total Age Male Female Unknown f> Number 450 255 210 204 145 110 71 88 16-25 26-50 51-55 56-40 41-45 46-50 51-55 Above 55 Not available GRAND TOTAL Note: 031 555 650 455 119 574 915 809 325 134 110 100 64 41 30 33 216 779 097 941 494 004 645 042 45 73 42 36 22 14 8 15 801 441 365 341 229 165 111 137 755 856 457 015 378 535 620 612 000 970 164 407 991 913 180 463 31 17 14 13 8 8 4 5 100 1 492 686 840 218 259 184 2 592 088 12 991 3 343 18 177 34 511 1 505 677 843 561 277 361 2 626 599 It is likely that the last age group should read 51-54. 21.8 It is noted that in the preceding table that there were 54,511 males and females who could not be placed in any age group. At the end of 1974, the number of such persons was 71,060. Considering that total membership increased steadily throughout the years, it may be concluded that the 54,511 members whose age was unknown were the upper age groups. 21.9 It is also noted from the above table that there were 137,463 members over the age of 55 years. In the previous year, the corresponding fitfuro war, 101,416 in 1974. Thus there was an increase of 56,047 (36 per cent) over Unprevious year in this age group. The General Manager of EPF. believed that the majority of those persons would still be in employment. 21.10 In the four years 1972-75 the numbers of balance.3 withdrawn at the age of 55 years in relation to total membership were as follows: Total Membership and Withdrawals at age 55 (years 1972-75T Total membership Year All age groups 1972 1973 1974 1975 2 2 2 2 185 359 484 626 000 000 000 599 Withdrawals at age 55 years Age group 51-55 % of Number total Number 107 95 75 111 14 17 21 19 048 445 005 180 5 4 5 4 881 555 225 158 $> of total in age group 14 19 28 17 - 50 - 21.11 In connection with the above table, the numbers of members who could not be placed in an age group were as follows: Year Numbers 1972 71 946 71 414 71 060 1973 1974 1975 34 511 The much higher percentage of 28 per cent shown in the last column of the table in paragraph 21.10 may be due to the fact that, among the withdrawals, there was a substantial number of rnomboro whoso ago wan unknown. '(?h.1.M v.l>)w in .supported by the drop shown from 1974 to 1975 in the figures in this paragraph. Contribution Income, Withdrawals and Investments 21.12 Contribution income since 1969 was as follows: EPP Membership and Contribution Income 1969-75 Contribut ion Year No. of members 1969 1970 1 853 000 1971 1972 1973 1974 1975 1 2 2 2 2 2 955 064 185 339 484 626 000 000 000 000 000 599 Income million $ Yea:rly average per member $ 156 187 224 259 263 270 84.19 95.65 108.53 118.54 112.44 108.70 - n.a. It is recalled that from 1 December 1970, the upper ceiling of $500 per month was removed. 21.13 The grounds for the withdrawal of individual balances in 1975 were analysed as follows: Grounds for Withdrawals in 1975 Ground for withdrawal Number Death Age 55 years Incapacity leaving Malaysia Age 50 years (one-third of credit) 5 028 19 158 * 14 118 12.4 47.1 3.3 2.5 34.7 40 652 100.0 1 333 1 015 Amount ($) 11 57 3 4 22 517 326 539 449 778 658 676 133 668 303 100 179 869 - 51 - 21.14 The number of withdrawals and the amount paid by the Fund in the last five years are shown in the following table: Withdrawals from EPF 1969-75 Year Number 1969 1970 56 44 57 35 39 43 40 1971 1972 1973 1974 1975 Amount (thousand)$ 291 559 209 826 178 920 652 81 563 72 986 62 520 66 77 91 99 857 769 432 768 21.15 In each of the years from 1953 to 1959 (the provisions of the EPP Ordinance came into effect in July 1952 )the rate of interest of 2.5 per cent was declared on the closing balance of the member for the year.. In I960, amendments were made to enable the Board to declare higher rates of interest not exceeding a rate recommended by the actuary and approved by the Minister of Finance. At the same time the basis for. crediting interest was changed from the credits of members at the end of each year, to the credits as they stood at the commencement of the year. The rates were as follows: Rates of Interest: Year 1953-75 Rate (#) From 1953-1959 " 1960-1962 2.5 4.0 " " 1963 1964 5.0 5.25 " " " " " 1965-1967 1968-1970 1971 1972-1973 1974-1975 5.5 5.75 5.8 5.85 6.6 21.16 The rates of interest and the balances due to members after crediting year-end interest since 1969 are shown in the following table. - 52 - Rate of Interest and Balance due to Members 1969-75 Year Balance due to members including interest (thousand) Rate of interest Unpo 3table contributions (thousand) • $ 5.75 5.75 5.80 1969 1970 1971 1972 1 2 2 2 5.85 5.85 6.60 6.60 1973 1974 1975 914 135 419 749 I 323 L 748 520 377 434 566 n. a. 335 390 077 572 3 091 415 5 467 728 4 012 000 Interest is calculated on the balance at the commencement of each year. 21.17 table. The levels and distribution of EPF balances are shown in the following Number of Members by Sex and Credit Range at End of 1975 Male Female Unknown Total Credit No. Below $1,000 $1,000-$1,999 $2,000-$2,999 $3,000-$3,999 $4,000-$9,999 Above $9,999 * No. 821 214 176 412 60.5 13.0 107 564 80 345 146 907 25 Oil 7.9 5.9 10.8 541 85 45 29 38 1 357 453 Zero balances GRAND TOTAL 1.9 100 * No. 043 808 72.4 11.4 6.0 4.0 493 7 185 5.1 1.1 169 47 19 11 16 2 895 540 747 964 100 fo 013 594 287 825 394 897 267 010 No. * 1 532 122 309 546 64.6 13.0 7.2 4.4 6.1 1.2 171 894 121 978 201 794 35 093 100 2 372 427 63.3 17.8 7.2 148 224 95 597 10 351 254 172 1 505 677 843 561 277 361 2 626 599 5.1 8.5 1.6 100 9.7 21.18 The investments and interest, including staff housing loans, but not cash at bank, from 1969 to 1975, as shown in balance sheets, and income and expenditure accounts, were as follows: - 53 - Investments and Interest 1969-75 Year 1969 1970 1971 i972 1973 1974 1975 Investments (thousand) Interest (thousand) $ $ 009 374 305 376 3 167 500 3 553 701 4 Oil 865 105 681 118 549 134 781 158 447 103 653 214 149 n.>a. 1 2 2 2 977 194 485 808 In the Economic Report 1976-77, it is stated that in 1976 the investment income of EPF is expected to reach $285 million. 21.19 The type of investments and their redemption value at the end of 1975 were as follows: Types of Investments and Redemption Value Description Amount (thousand) $ Malysian govt, securities Other government securities Debenture loans Loans on mortgages Mortgage loans for staff housing Shares in public companies 3 759 39 205 2 066 040 338 481 3 741 2-199 365 It is observed that the total amount in government securities shown in Lho .['.iral two items, $3,798 million, is equivalent to over 94 per cent of the total amount of investments. Growth Projection 21.20 The General Manager of the EPF, Mr. Lee Siow Mong, in his message dated 16 October 1976, in the publication "Employees' Provident Fund, 1951-76" commemorating the Fund's twenty-fifth anniversary gave this estimate: "The average working life of a worker under normal circumstances is about 35 years, and therefore, the potentials of the Fund will go on growing at least until the year 2005. The Fund has already reached astronomical proportions now with investments totalling over $4,000 million. It is therefore not difficult to visualise what the Fund would be like by the year 2005. Given political and economic stability, the Fund would double itself in 1981 reaching over $8,000 million." - 54 - East Malaysia EPF 21.21 Statistical information about the- EPF in East Malaysia (Sabah and Sarawak) is more scanty. The latest available statistics are those in the annual report, for 1973. Total contributions received during 1973 Total amount standing to the credit of members after crediting the year-end interest was Interest credited to members accounts at Total members accounts at end of 1973 Number of withdrawals during 1973 Amounts withdrawn Total investment in Malaysian government securities Add advance deposit with Bank Negara, Malaysia Total $28,835,409 ; $103 million 5 1/4$ 205,946 2,197 $1,439,478 $104,763,700 $832,000 $105,595,700 EPF and Government Finance and Policy 21.22 The EPF plays a very important role in the Government's domestic borrowing. This emerges very clearly from the following extracts from the Economic Report 1976-77 (pp. 55-57). "The composition of domestic debt changed very little during the period ^Second Malaysia Plan). The Employees' Provident Fund (EPE) and the Post Office Savings Board together provided about 50 per cent of federal government financing requirements ... In 1976, federal government domestic debt increased by a further $1,506 million to reach $10,261 million while foreign debt increased by $425 million to amount to $2,849 million. Total outstanding debt thus rose to $13,110 million (+17.3 per cent). Government securities accounted for 83 per cent of total domestic debt and stood at $8,561 million in 1976, an increase of 16 per cent over 1975. The major portion of government securities is held by the Employees' Provident Fund with a share of 53 per cent ($4,550 million) ... The EPE remains the main source of domestic borrowing in 1976. Borrowing from the Fund comprised about 41 per cent of total domestic borrowing, with an increase in its holding of government securities by 30 per cent to reach $620 million. The large rise in EPF's holdings is a consequence of the impact of the increased rates of contribution which became effective from 1 August 1975 and the increase in the number of contributors with the growth in employment. Income accruing from its investments in government securities also increased partly as a result during 1974. In 1976, the EPF's investment income is expected to reach $285 million accounting for about a half of its total investible funds. The increase in investment income coupled with the continuing expansion in the workforce would thus provide a steady and reliable inflow of non-inflatory funds from the EPF to finance development expenditure during tho Third Malaysia Plan." 21.23 The table in paragraph 21.19 shows that over 94 per cent of EPF investments are invested in government securities. 21.24 The Social Security Organisation is also mentioned as a source of finance for domestic borrowing. The statement in the same Economic Report 1976-77 reads: "The Social Security Organisation (SOCSO) which purchased $11 million of government securities in 1975 purchased another $14 million in 1976. This was due to higher contributions resulting from the expansion of SOCSO's activities into new areas and a larger investment income." - 55 - 21.25 The activities of EPF are being substantially expanded. The Employees' Provident Fund (Amendment) Act, 1977 which received Royal Assent on 16 May 1977, enables the Fund to introduce the following measures: (a) A self-employed person may become a member. Such a person may elect to pay contributions at the monthly rate specified in a new schedule to the Ordinance by giving one month's notice. (b) When a member of the Fund has entered into an agreement to purchase a "low-cost house", the EPF Board will authorise not more than one payment of a sum not exceeding the "prescribed percentage" of the purchase price of a "low-cost house" or the amount standing to the credit of such member, whichever is less, to the vendor of the house. (c) Before attaining 50 years a member may opt to receive a periodical payment, instead of a lump sum payment of his balance, on attaining 55 years. When this option is made, a member canno I. exercise his statutory right", to withdraw one-third of his balance on attaining 50 years. This provision is to come into force on such date as the Minister of Finance may appoint by notification in the Gazette. The periodical payments shall be prescribed by the Minister. (d) In the event of death of a member of the Fund, an amount additional to his credit is to be paid. The amount is to be calculated in accordance with a formula to be prescribed by the Minister of Finance. (e) The Board is enabled to establish an annuity scheme for temporary employees of statutory and local authorities under the "new scheme". This scheme refers to the revision of salaries and terms and conditions of service of employees in the statutory and local authorities pursuant to the recommendations of the Royal Commission appointed by the Ynag di-Pertuan Agong. Recommendations 21.26 The terms of reference in the original project document referred to in the beginning of this part appeared to be quite straightforward. However, subsequent developments referred to above indicated the possibility of a modification in government policy regarding the transfer of EPF balances to social security funds. For this reason it was felt that government policy guidelines should be sought on the issue. Accordingly, on the 20 May 1977 a memorandum was submitted to the Minister of labour and Manpower, through the Director-General of the Social Security Organisation. The memorandum contained proposals on which government policy guidelines were solicited. A copy of the memorandum including a supplementary note by the social security actuary are in Appendix III. Briefly, the proposals are as follows. 21.27 In the absence of government guidelines, it is assumed in the light of recent developments, that the EPF contribution will continue to operate as in the past, but perhaps at a lower rate. Under this assumption the situation generally will be as follows: (a) EPF members insured under the social insurance scheme will receive their EPF balances when they qualify for them, and will be given the option to convert their balances into life annuities based on the amounts of such lump sums; (b) the same persons will earn entitlements to social security benefits on the basis of their contributions from the date they join the new scheme. - 56 - 21.28 In the present circumstances, the compulsory or wholesale transfer of EPF balances to the social insurance scheme cannot be usefully considered. Such an eventuality depends entirely on government policy in regard to the EPF. The only1 advice which can be offered is to indicate two possible alternatives both of which are based on the purely hypothetical assumption that when the new social security scjeme comes into force, the EPF contributions in respect of persons insured under that scheme will cease. The alternatives based on such an assumption! would be as follows: Alternative (l): Insured persons who are members of the EPF (a) will receive their EPF balances when they qualify for them, and they will be given the option to covert the said balances into life annuities based on the amounts of their EPF lump-sum benefits; (b) will earn entitlement to social security benefits on the basis of thoir contributMonn from thu date they join the now nchome. Alternative (2): Insured persons who are members of the EPF will have their EPF balances transferred to the new scheme. They will be credited with contribution periods prior to the inception of the scheme in accordance with the amounts of their individual EPF balances. 21.29 In the interest of furthering the development of the social insurance scheme, the proposals have been formulated on the assumption that the EPF contribution] will remain, perhaps at a reduced rate. The proposals have been designed to produce a relatively modest pensions scheme which will meet minimum international standards. t - 57 - PART VI Draft Bill Introduction 22. The main legislation has been drafted to provide the framework for all the social insurance benefits to be provided not only for employed persons but also for any other gainfully occupied persons, including farmers and fishermen for whom the Government may wish to give social insurance protection. The draft Bill is appended as Appendix IV. 22.1 Several new sections were inevitably required to provide for the new benefits. The Bill is intended to produce a consolidated Act, hence the provisions relating to the establishment of the Social Security Organisation as a statutory body have been incorporated in the Bill. It will be appreciated that present provisions and related provisions in the new benefits especially invalidity and age pension, dependants' benefit (viz. death benefit) and survivors' benefit, had to be harmonised in substance as well as in drafting. The Bill would be quite long and complicated if too many details were included. • 22.2 An endeavour has been made to make the legislation as flexible and simple as possible. For this purpose, emphasis has been made on enabling powers; but a provision has been introduced requiring the Minister to place before Parliament any regulations made and to allow the possibility for discussion in the House. 22.2.1 It is recognised that certain terms used in the present legislation have become familiar to the staff of the Social Security Organisation and to employers and others. As far as possible present terras have not been changed. However, there would be some psychological advantage if the expression "assumed monthly wage" were changed to "insurable monthly wage". The proposed expression would enable people to understand that such wage, as distinct from the actual wage, is the wage on which the contribution is paid as well as the benefit. The Bill Clause 1 22.3 In preparation for its wider scope in the future, the title of the Act has been changed to "Social Security Act". Clause 2(5) 22.4 covered. The definition of employee denotes insurable employment in the industries Excepted employment is listed in the present First Schedule to the Act. 22.5 It is considered that in terms of insurable employment the definition should be more precise and should include persons rmployod on ships, vnsanlr. and aircraft about whom the definition in tho Act is silent:. * 22.6 It is proposed that the substance of the present definition of employee with the necessary changes should go into the First Schedule as Part I. The present list of excepted employments should constitute Part II of the Schedule. Clause 2(31) 22.7 The definition of wages in section 2(24) of the Act is considered inadequate by the Organisation especially because it does not include overtime. It is also the cause of disagreement over interpretation with employers. 22.8 The definition of earnings in the Workmen's Compensation Ordinance includes all earnings unless specifically excluded. Overtime is not listed with excluded items. The definition in the Act is based on that in section 2 of the Employees' Provident Fund Ordinance which refers to remuneration in money in respect of the normal period of work. 58 22.9 Before including overtime it was considered necessary to establish whether the inclusion of overtime in wages would create substantial fluctuations in earnings and variations in relation to the wage scales. After consultation with ;the actuary, it was found on the basis of statistics of wages in manufacturing industries that overtime was generally equivalent to 4 per cent or less of total earniings. It is therefore considered that it should be included in the definition of wages. Clausle 5(2) 22.10) This clause-enables the Minister to' extend insurability to other gainfully occupied persons. Clausle 10 22.11; This clause enables the Minister to prescribe contribution rates on different bases (viz. wages, income from gainful occupation) and at fixed rates. This may be necessary in the case of certain self-employed persons. Clause 13(2)(c) 22.12! This clause enables provision to be made for the conversion of EPP balances. Clause 13(3) 22.13 This clause is intended to make it possible to make use of other agencies and any private organisation whose officials may be in closer contact with protected persons as in rural areas. Clause 21(5) 22.14 The period of temporary disablement benefit is not limited. When the present employment injury scheme was planned this was emphasised as an advantage over jthe Workmen's Compensation Ordinance. At the time the Ordinance provided that the periodical payment made during the first six months of incapacity was not to bei deducted from the lump-sum payment. With the amendment introduced from 1 January 1977 this period has been extended to 12 months. In practice, the duration of the temporary disablement benefit under the Act depends to a great extenjt on the insurance medical practitioner who recommends that the injured person be examined by a medical board. 22.15( Although in social insurance legislation injury benefit is generally limited to six or twelve months, it is considered that a maximum period should not be introduced now. However, a provision has been made in clause 21(5)(a) to enable the Organisation to require the injured person to be examined by a medical boards Clause 25 22.16: It is observed that the widow is not required to satisfy any conditions as regards age or family responsibility. This is the position under the current provisions. 22.17: The age of dependant children has been raised to 16 years or up to 18 years if they are attending full-time education. Clause 29(2) 22.18 A provision has been introduced so that constant attendance allowance will not be payable when the beneficiary is hospitalised at the expense of the Organisation or the Government. 59 Clause 33 22.19 Permanent disablement assessed at a small percentage is not automatically commuted. The present regulation 84 permits commutation at the request of the beneficiary only if the rate of benefit does not exceed 50 cents a day. 22.20 In other social insurance legislations, disablement assessed at less than 20 per cent or 30 per cent is compensated in a lump sum. In Malaysia, this is one of the causes of low payments. In addition to the public criticisms, an increasing number of small periodical payments are bound to increase the workload and administration cost substantially. Clause 38 22.21 This clause concerns the employers' liability for compensation under the Workmen's Compensation Ordinance and for damages under common law to an injured employee or his dependants. In the present Act there are four sections involved, namely (a) Section 31, which bars an insured person or his dependants from claiming compensation under the Workmen's Compensation Ordinance and damages under any other law if an injury is an employment injury in terms of the Act; (b) Section 42, which bars a person receiving any of the benefits provided under the Act from receiving any similar benefit under "any other written law"; (c) Section 47, which provides that where an employment injury is sustained by an employee by reason of the negligence of the employer to observe safety rules or of any wrongful act of the employer or his agent, the Organisation shall be entitled to be reimbursed by the employer the value of benefits provided under the Act; (d) Subsection (2) of section 96, which appears to give the insured person the right to choose between benefit under the Act and workmen's compensation. 22.22 The employment injuries provisions in the Act and the Workmen's Compensation Ordinance both provide benefit for the same contingency. The former provides compensation for loss of earnings in the form of a periodical payment, while the latter provides such compensation in the form of a lump sum. It is therefore considered that where an employee or his dependants are entitled to benefit under the Act, the employer should not be liable to pay compensation under the Ordinance. 22.23 When a claim for damages is made under common law, the court may award damages not only for loss of earnings but also for suffering, loss of power to enjoy life, etc. It is suggested that the employer or his dependants should not be denied this right when the employer is criminally responsible for an employment accident; but at the same time it is felt that compensation for loss of earnings should not be duplicated. 22.24 There is a school of thought in favour of giving the Social Security Organisation the right to recover the value of benefits provided under the Act from the employer when he is criminally responsible for the accident. This is often considered to be a useful inducement or a deterrent in favour of compliance with safety regulations. In this context, it is for consideration whether it should be mandatory for the Organisation to claim reimbursement, or whether there should be some discretion. 22.25 On the basis of the above considerations, two alternative drafts of clause 38 are being put forward and referred to as "Alternative A" and "Alternative B", respectively. - 60 - "Alternative A" bars an employer or his dependants from claiming compensation under the Workmen's Compensation Ordinance. It allows them full freedom to claim damages under any law, hut if such damages are awarded the court shall be required to order the deduction of the value of benefit under the Act. "Alternative B" exempts the employer from all legal responsibilities under the Workmen's Compensation Ordinance and under any other law; but where the employer is criminally responsible there will be the right to claim damages subject to the deduction of the value of benefit provided under the Act. Both alternatives provide for the right of the Organisation to claim the reimbursement of the value of benefit. In each case there is an alternative in square brackets which, if adopted would make reimbursement automatic without any discretion on the part of the Organisation. Clauses 47 and 48 22.26 In these clauses it has been made clear that in the first instance questions and claims for benefit shall be determined by the Organisation. This is important for the expeditious administration of the system. Clauses 49 to 51 22.27 These clauses provide for the determination of medical aspects of claims. In these cases it has heretofore not been clear who is actually determining claims which also involve other statutory provisions (viz. whether an accident has arisen out of and in the course of employment). Clause 52 22.28 The current name of "Social Security Appellate Board" under section 83, which is referred to as the "Board" must be changed, because under the legislation setting up the Organisation as a statutory body the "Board" will be the Board of Management. It is considered that "Tribunal" is an appropriate name for an appellate body. Part V of the Bill 22.29 Part V of the Bill includes the draft legislation to establish the statutory body. Clause 78 22.30 This clause deals with the constitution of the Social Security Advisory Council, currently the "Social Security Council". It has always been an advisory body in accordance with the functions prescribed in the regulations. The word "advisory" has been inserted mainly because of the proposed establishment of the Board of Management as an executive body. The provisions in regard to the constitution of the Council are in accordance with a policy decision. Section 56(2) of the Act 22.31 This section enables the Organisation to recover from an employer any difference in the rate of benefit payable in respect of contributions due but not paid. The amount to be recovered will be based on the actuarial present value of the pension. Section 105(2)(iv) enables the Minister to impose by regulations interest at a rate not exceeding 6 per cent but not less than $5/- per month for non-payment of contributions. 22.32 The provisions in the two sections constitute a double levy. After consultation with the actuaxy, it is considered that section 56(2) should bo dropped. An actuarial rate of interest will be fixed by regulations, but subject to a minimum levy of $1/- per month per person whose contribution remains unpaid when due. The present provision does not specify that the $5/- will be levied in respect of each employee. - 61 - Clause 98 22.33 This clause which provides for the periodical review of benefits is already included in the proposed statutory body legislation. First Schedule 22.34 The proposed First Schedule will provide for insurable and excepted employments as explained earlier. Paragraph (l) of the present Schedule which restricts insurability to persons earning not more than $500/- per month has been dropped because it is being recommended that the ceiling will be removed. 22.35 Paragraph 12 of the Schedule bars insurability for invalidity of persons over 50 years on the appointed day or employees over 55 years. It appears that such restrictions, mainly of a temporary nature will not be required, provided invalidity and age pensions are harmonised. Second Schedule 22.36 It is proposed that the contents of the Second Schedule which provide for the list of injuries and relative assessment of earning capacity will be transferred to the regulations. Third Schedule 22.37 The Third Schedule provides for three categories of contributions. It is proposed in the Bill that contribution rates be provided for by regulations. There will be only one contribution rate, but separate accounts will be kept for each branch of insurance as will be recommended by the actuary. Fourth Schedule 22.38 The Fourth Schedule provides for the disablement benefit rates and the apportionment of dependants' benefits. The provisions will be reviewed and included in the benefit regulations. Fifth Schedule 22.39 The Fifth Schedule contains the list of occupational diseases. It is proposed that they be called prescribed diseases and be included in the regulations. New Schedules 22.4-0 It is proposed that the Second Schedule in the Bill contain the rules of procedure of the Board of Management. The Third Schedule will provide for the staff rules to be made by the Board of Management. These two Schedules are included in the legislation regarding the statutory body. - 62 - PART VII Social Insurance and the Proposed Motor Vehicle Accident Compensation Scheme 23. The Malaysian Government is taking steps to introduce a scheme to compensate victims of all motor vehicle accidents and their dependants. The scheme is intended to provide for periodical payments to victims and in the event of death to the victim's dependants. It is also intended that the scheme include lump-sum payments in addition to • the periodical payments. 23.1 The scheme will probably be financed from levies on items connected with motor vehicles such as the vehicle licence (road tax) and driving licence. 23.2 The proposed scheme appears to be largely based on the motor vehicle part of the all-embrancing New Zealand Accident Compensation Act, 1972. 23.3 The expert was invited to offer his observations on the position of the Employee's Social Security Act in relation to the Motor Vehicle Accident Scheme. These observations are appended in Appendix V to this report. The memorandum in the appendix includes some details of the proposed benefits. - 63 - APPENDIX I cu -^.CO LAvhCTi (fl tfl -P 0 > -a! VO fl 0 - P ( T i 3 U CSH cd b o J - i - - ' . . . H I VO I K^iCM O o o f-^t-CTi O LALA ^HACVI tAtAOO •^-in O VO t A 0«)0 00 C\J CO 0 > V O OJ tA«* H . (TiNCLAOO r A LAVO VO CO 00 [CM . . . i i-H [ A t A ^ L A C co c n c ^ i n co «* c00 o •o H vo cr\ H ^-CTiCtfc. IACVJ t A I I AJ tA LAD~0 rA-=l--^ O 00 vo ^t-o . . . C \ J H t— O I N 1A1A cr>r-tA co . . . i . HrAOJ ou tAr-CTi . H -=t-tA t A D - O o O O VO H OvJ LA CO tA CO 0 0 LA I H ^ C O H LA tAtA [— C0<MO H I A H tA •*LA CVJ - < - t A -51-LA O O I A H f-tA LA LA H H LAincn LAVO AJ i-H VO • * H LAVO •3-LA o o ft O o o CTi en "C\J =*- tA CO OJ H table LA D-C-H CTvO 00 • C\l t - t A H PM H ed -p ,Q H tfl -P O -P I ,0 w co o •p i a) -p Ctf o •P ,Q w to Hi «! E-l O EH •d •H EH ft o -jJ-VO H I + I LALA O H VO 5 H I + I LALA O H VO •aj > -a! pd -*VO H I + I LALA O H VO 64 APPENDIX I Table 2 Expectation of Life in Certain Countries Age 50 Sex M F M P M P M F 22.90 27.10 19.40 23.40 16.10 19.80 13.80 17.20 Philippines (1946-49) Japan (1972) Iraq Iran People's Republic of China North Viet Nam Saudi Arabia USSR (1971-72) 24.09 24.85 25.15 28.85 20.80 20.68 21.75 24.42 17.72 16.78 18.45 20.17 14.69 13.23 15.22 16.14 - - - - - - - - - _ _ _ _ _ _ _ _ - - - - - - - - Australia (1965-67) Algeria Egypt Tunisia New Zealand (1960-62) Morocco Libya Italy (1970-72) Hungary (1972) Prance (1972) Norway (1971-72) Denmark (1971-72) 22.76 27.83 18.83 23.58 12.16 15.70 Sweden (1973) United States (1972) Peninsular Malaysia^ ' (1972) (2} Other oountriesv ' 60 55 65 Asian countries: Sources: 15.77. 19.50 - - - - - - - - 22.40 26.30 18.60 22.10 15.10 18.00 11.90 14.10 - - - - - - - - 23.71 27.66 19.69 23.35 16.00 19.27 12.78 15.47 - - - - - - - - 24.41 23.25 23.70 25.38 24.90 28.81 27.01 29.60 20.39 19.28 19.90 24.41 22.73 25.30 16.66 13.30 16.15 14.76 17.10 29.87 29.10 25.35 24.90 17.39 17.00 25.73 23.30 30.09 29.00 21.23 20.80 21.52 19.50 20.16 18.61 21.10 21.00 20.70 25.63 24.00 17.50 16.10 21.28 20.80 13.97 13.10 15.59 16.30 12.29 13.10 13.90 13.70 17.13 17.00 (1) Social Statistics Bullet in - Peninsular Malaysia, 1972 (table 14). (2) United Nat ions Demographic Year Book 1974 (table 33) • / 16.85 16.80 - 65 - CO m o -* 786. CM CM • * 608. CD 1 ' rHUO o cficn C\J 286. CO 136. uo co o eden 221. APPENDIX I I 0) CXi en H H H CflC— CD 1 h H O f- flcn Cn U0 ^1- U0 -d- UO *d- ^1H O tn in CO 127. a> co i n 109. CM uo (A in m CO CO CM in H r H H o en en H •rlrt^ •P CO 00 en 00 CM O C- rn tn cn H CM 100 in ^1- H t— CM U0 c- ft co a w a; CM H ' H U0 o uo CM o en CM CM 00 347. e'en -p a o cfl S o B O O U0 U0 100 in U0 538. -p T ) CI a) tt)^v en H 232. en en ^i- 132. O en uo 479. ^—s cDr-i"^. U cfl^ cfl-p .£ o m -P 434. o 440 <H en H o ^—^ o C- in oo JA O co -P en O VD H in CO • * o H -p 752 3 927 o CM in o CM H in 100 I CM 534 H •H H v _ ^ •p ft ra S W <u c— 1 846 t— CTi fi CD^-~ a o S o o o 342 m t> a> -p cfl B 213 rD R "* H cfl -P o •!> -P o in cn ^- H o CM <H o s—s CDH"s& U Cfiw in S"Z ft OT - P c? CD H ,0 H CM H 00 UD CM -p . f t co a • * uo in 3 339 a oo •rHr-lw -5l- 516 cfl P>0 o ccn o 406. q CD CD^-v 1 736 TJ 339 -P 163 EH H 151 HI CD H 1 ^ . f-l C f l w •H -P cfl •p pi o o 197 «M W cu Cfl •P H PH cfl •H CO Cfl" x) u CD CO O O u a)- PH P o •H -P CflH U Cfl -P -rH CO U •A CD SH M •rH Cfl IS <a >i fn o •s H cfl o •rH U 0) H O S A u CD H cfl C O H •H Cfl CO O CO TH CU Cj •ctl -P u CD H cfl O -P H CO •d o 3 > 0 M CO CD O CD • H * •3 U U OT bOO < -d U o CO Z •H - P CO O rH 0 CD •nx O U U O to > s CD CO O fH • H CD r^i fH CD O ^ OT > 3 EH O r>H •H X! EH «• CD O fH 0 O OT - 66 - APPENDIX II Table 2 Employed Persons in First and Second Half of 1975 by Wage Range Wage r a n g e 1 F i r s t half of 1 9 7 5 2 n d half of 1975 50 - 99 454 404 260 701 100 - 149 314 278 202 334 150 - 199 179 274 198 111 200 - 249 115 543 164 987 250 - 299 68 079 79 262 300 - 349 43 607 62 082 350 - 399 28 789 36 108 400 - 599 62 892 (38 614 + 24 278) 74 296 (44 611 + 29 685) 21 454 29 .898 . 11 831 16 106 24 230 30 067 1 324 381 1 152 952 600 - 799 1 800 - 999 1,000 and over Total Annual bonus, overtime and special relief allowance are not included. On the basis of the same data average wage in 1975 were found to be as follows: Source: First half Second half Average wage all members (taking over $1,000 as $1,000) 193 238 Average wage of those below $500 154 183 Average wage of all if over $500 is taken as $500 176 212 EPF data. - 67 - APPENDIX II Table 3 Employment and Salaries in Manufacturing Sector No. of employees in December Year Fulltime Parttime FT+1/2 PT Salaries and wages for year ($•000) Average monthly salary ($) 1963 1 81 Oil 6 439 84 231 153 789 152.15 1964 64 510 3 052 66 036 132 191 166.82 1965 76 002 3 666 77 835 166 705 178.48 1966 2 81 163 4 184 83 255 182 807 182.98 1971 3 87 130 5 159 89 710 201 022 186.73 1968^ 120 807 9 450 125 532 266 957 177.22 1969 116 101 5 551 118 877 260 800 182.82 1970 4 148 305 4 920 150 765 324 144 179.17 1971 4 165 027 4 175 .167 115 362 867 180.95 197 2 4 197 279 4 064 199 311 429 243 179.47 19755 n.a. n.a. 212 2046 584 007 229-34 Sources: Survey of Manufacturing Industries, Peninsular Malaysia, 1972. Monthly Industrial Statistics, Peninsular Malaysia, September 1976. 1963 and 1968 census data; data (annual). other years up to 1972 survey .0 Coverage widened to include textile industry from 1966. 3 Coverage widened to include assembly of automobiles and lorries since 1967. Since 1970, employment cut-off of five or more full-time workers has been used in some industries. 5 1975 monthly survey data. c Full-time + part-time employees. - 68 - APPENDIX II Table 4 Manufacturing Survey 1972 - Wage-Class Distribution of Pull-Time Employees in the Last -Fay -Period of 1972, by Sex Monthly wage range Male Female Total Under $100 31 454 41 022 72 476 $100-199 58 609 19 086 77 695 $200-399 32 095 3 011 35 106 6 756 $400-599 6 339 (3 977 + 2 262) $600-799 1 753 115 1 868 $800-999 906 50 956 $1,000-1,199 642 32 674 $1,200-1,999 993 28 1 021 $2,000+ 725 2 727 133 516 63 763 197 279 126 135 63 381 7 381 382 Average wage of those earning less than $500 173 94 Average wage, if those earning $7,500 are taken as earning $500 191 96 (taking those more than $2,000 as $2,000) 216 98 (taking those more than $2,000 as $2,500) 219 Average wage, if those earning more than $1,000 are taken as $1,000. 206 Total (1) No. under $500 (2) No. over $500 417 (262 + 155) Actual average wage Source: 98 Survey of Manufacturing Industries, Peninsular Malaysia, 1972. - 69 - APPENDIX II Table 5 Manufacturing Industries Average Wages by Category of- Employed Persons - 1972 Category of worker Average No. Cash payments 1972 ($•000) . „,„.,,,„ y „I; a as (1) Management staff (a) professional 2 994 50 985 1 419 (b) non-professional 1 502 14 906 827 (2) Technical and supervisory 0 830 44 294 410 (3) Clerical, etc. 13 442 43 101 267 (4) General workers (i.e. office boys, drivers, etc.) 12 813 25 166 164 (a) skilled 60 871 114 410 157 (b) unskilled 70 250 85 624 102 20 858 46 966 188 191 560 425 452 185 3 416 2 915 71 435 876 168 3 851 3 791 82 (5) Factory workers directly employed - (6) Factory workers employed through contractors TOTAL FULL-TIME (7) Part-time workers (a) factory workers (b) other workers TOTAL PART-TIME GRAND TOTAL 195 411 429 243 2 183 FT + 1/2 PT 193 486 429 243 185 Source; Department of Statistics - Survey of Manufacturing Industries, 1972. i.e. wages + salaries, bonuses + overtime payments paid to employees, gross of employees' EPF contributions. Includes $20,085,000 in overtime payments. Full-time worker = one who works more than six hours a day and more than 20 days a month. Part-time worker = one who works less than six hours a day and less than 20 days a month. - 70 - o vo o VO o CM CM CM H o o oo •* oo CM vt- to cn in in cvo D- r- o in in in H to 00 H in CM H O CM CM CM in o to rVO H O CM 'H- VO t— in O in to CM CM H O O o o to CM VO 552 394 H Pi O •H -P n! H a to en in m o m vo •=*- en H t o CM to vo •>* CM VO to D- <• CM Cvl oo oo ^JCM O O C^ IA CM C— Ifl en to rto H to en in in in to CTv H to in o c— to o Cn vo vo CM in in in to tin CO 00 00 en to 0"\ o en o CO o to CM CO to r00 VO en in in in H to o o C- in in 00 CM co to in C- r- CO VO to in to CM CM o VO to o rvo o c— CM in co 'Hin e'en vo CM en O fVO o en vo o in o CM in to oo 00 O in en to CM oo 880 885 868 102 609 CO H to vo 838 165 572 EH PH in co to in 856 CM 00 en en to vo CM 801 036 442 618 908 EH O EH in in cen to H 845 151- 2 460 551 to cCO vo to r- CM vo PH to cvo en en en a\ to cn CM -* VO VO co CM rvo in in •^~ to vo -=*• en -=dH vo CM vo CM CM O vo CM co in o r~ in H sh H to ot en rM H H VO to 00 CM H H CM VO to o IM i-l •P W -P -P to H to to c5 to H ft cS a w -p CO O «H -P Pi Pi U u o CD Pi O .O ctf H M o o u CD >> a X O H ft S f£\ Pi • to o to to in H -Jvo u CD U CO pi -P < VO -5l- CD O -p Pi (1) r~ CO H u "S CD CD c u 3 o a o > w u s £ > o> H>> H ft •H 1 lit VO to o «H H • pi O £> O P cfl H g,« -p as •rH - P o X to EH o O -u H l-H«H H 0) -P O EH m 1-1 -a CD -p u O 165 in PH 710 I •<*• CM 791 vo r- vo 754 159 -P •H O m H •* H 476 r- 239 349 •<*• 662 800 I ft 491 o 3 EH O EH ft CD PI •H CD O U 3 -P O u O -P O Pi a«H. ffi Jz; e> APPENDIX I I - 71 - APPENDIX III THE SOCIAL SECURITY SCHEME AND THE EMPLOYEES' PROVIDENT E M D (Memorandum by the Social Security Planning and Legislation ExpertJ Background Information 1. At; the ond of February 1977, "li>i*"> .number of employed persons re^ial.eriMl under the Employees' Social Security Act 1969 was over '328,000. The number ol* registered employers was 22,839Considering the physical difficulties which have to be surmounted and the complex nature of social insurance administration, the extension of coverage of the two existing schemes (employment injury and invalidity) has made remarkable progress. 2. The provisions of the EPF Ordinance are applicable to all employed persons all over the country, with the exception of certain classes of employed persons, such as casual workers. The latest known total number of members is 2.8 million. However, as under the Ordinance a person is considered to be a member as long as he has a balance in the Fund, the total number of members includes persons who for several years may not have had a single monthly contribution in their name. 3. Statistics compiled by EPF in respect of 1973, where an inactive member was considered to be one whose account had not been operated on up to 12 months, showed that out of a total of approximately 2.288 million members only 1-317 million, that is 58 per cent were considered active. If the same proportion is applied to the latest known figure of 2.8 million, the number of active members would be in the region of 1.6 million. This figure, when compared to SOCSO's 828,000 points to the prospect that in the not too distance future nearly all workers will be concurrently covered by both EPF and the social security scheme. 4. At the moment contributions are being paid both under the Employees' Social Security Act and the EPF Ordinance in respect of SOCSO's 828,000 insured persons. Employers are paying 7 per cent to the EPF and 1.75 per cent of wages to the social security scheme. Employed persons are paying 6 per cent and 0.5 per cent to EPF and SOCSO, respectively. 5- It is noted that the present social security contribution is relatively very small. However, this situation will change when the proposed social security scheme will be introduced. 6. The proposed social security scheme is to provide benefit in the event of sickness, maternity, invalidity, old age, survivorship and employment injury. The existing employment injury scheme and the invalidity scheme (the invalidity scheme does not at present provide for benefit to survivors) will be incorporated in the proposed social security scheme. For the sake of convenience in this paper this is being referred to as the "new scheme", and the persons so covered "insured persons". 7. Special provisions will also be recommended to extend social security to farmers and fishermen. 8. The ILO actuary who took up his assignment in February 1977 on the social security project will in due course work out the cost of the new scheme for employed persons and the additional contribution required to finance it. 9. It will be up to the Government to determine the limit of total contribution which employers and insured persons, respectively, may reasonably be expected to bear. - 72 - The New Social Security Scheme and EPF 10. The project document requires the social security legislation expert to make recommendations on the co-ordination of the new scheme with the Employees' Provident Fund, and on the method of conversion of EPF balances. However, it appears to the expert from published official statements, that there is little possibility of the transfer of balances of the new scheme except, perhaps, when individual members qualify to withdraw their balance under existing statutory provisions. At that stage it is hardly reasonable to expect any large-scale transfer. 11. In the absence of policy guidelines, the expert assumes that the EPF contribution will continue to operate as in the past with perhaps a lower contribution rate. Under this assumption, the situation generally will be as follows: (a) EPF members insured under the new scheme will receive their EPF balance when they qualify for it, and will be given the option to convert the balance into a life.annuity based on the amount of such lump sum; (b) the same persons will earn entitlement to social security benefits on the basis of their contributions from the date they join the new scheme. 12. In regard to the situation which would apply under this assumption (viz. concurrent contributions to EPF and under the new scheme), the following aspects are put forward for consideration. 13. The level of social security benefits determines the rate of contribution required. As far as possible the rates should not be less favourable than those adopted in social security Conventions, particularly the Minimum Standards Convention (No. 102). The attainment of adequate standards will no doubt depend upon the financial resources (mainly contribution income) which can bo made available. 14. The total cost of the proposed long-term benefit scheme (pension) plus the EPF contribution may be an excessive burden if the new scheme is to provide reasonable levels of benefits. The only means of avoiding this excessive total cost in the short run would be to start the new scheme on a relatively low contribution rate which would defer the excessive cost for a period and magnify it thereafter. This is explained in some detail in the Note by the actuarial expert attached as Appendix A (paragraph 3 ) . 15. One may be tempted to suggest that the liability to contribution to EPF will not apply in respect of persons who will become employed for the first time when the new scheme comes into force. However, if this idea were to be adopted the situation will then be that employers and employees in the same undertaking receiving the same earnings (or in the same grade) will pay a different total contribution namely: (i) v (ii) "X" units of contribution to the new scheme by employers and employees in respect of new employees; and "X" and "Y" units of contribution to the new scheme and to EPF, respectively, in respect of other employees in the same undertaking receiving same earnings. Such arrangement does not seem to be practicable, and would be likely to confuse all parties concerned, including the administration. Furthermore, employers would pay different amounts of contribution in respect of employees in the same wage scale or grade. 16. It is important to explain here that there should be no possibility of an option in regard to new employees as between contribution to EPF or contribution to the new scheme. A social insurance scheme can only operate successfully and achieve its objectives if it is a compulsory scheme. 17. Although the expert is assuming that the contribution to EPF will continue at the present or a reduced rate, he feels that when the relative policy issues are considered it may be useful for the policy planners to know what would be the implications of an alternative approach. - 73 - 18. The main alternative would be that when the new scheme comes into force, employed persons covered by the scheme will no longer be liable to pay contributions to EPF. It is emphasised that in the present circumstances this is being put forward only as a hypothetical possibility, and not as a recommendation. This assumption presents the following two principal alternatives: Alternative (1): Insured persons members of EPF (a) will receive their EPF balance when they qualify for. it and they will be given the option to convert the said balance into a life annuity based on the amount of the EPF lump-sum benefit: (b) will earn entitlement to social security benefits on the basis of their contributions from the date they join the new scheme. This alternative needs no explanation except in regard to the annuity which is explained in paragraph 27 below. Alternative (2): Insured persons members of EPF will have their EPF balance transferred to the new scheme. They will be credited with contribution periods prior to the inception of the scheme in accordance with the amount of their individual EPF balance. 19. This alternative (2) would enable the persons concerned and their survivors to earn social security pensions at a higher rats,, as these benefits Will be related to periods of contribution. The effect of this arrangement is illustrated in very general terms in the examples which follow. 20. The "credited contribution" to which reference is made hereinafter will be contributions credited to the insured person when he is exempted from liability to pay. Such exemption will apply when a person is incapacitated for work for a whole contribution period, viz. one month. Age Pension 21. In the new scheme it will be proposed that normally (see paragraph 22(c) below) an insured person becomes entitled to a minimum rats of age pension on completing a period of 15 years' insurance. This minimum rate may be 40 per cent or a higher rate if the financial resources of the scheme will permit. For every 12 monthly contributions paid or credited thereafter, the insured person will earn an additional 1 per cent over the minimum rate of 40 per cent (or any other minimum rate) up to a maximum of <>0 per cent. 22. It is proposed that the .KFF balance of an insured purson will be converted into contributions under the scheme on the basis of a simple practical formula to be devised. Assuming that the balance of an insured person is converted into 120 monthly contributions (viz. ten years), the resulting pension rates will be as follows: (a) The person who completes just 15 years' insurance will have a pension rate of 50 per cent made up of 40 per cent earned from 15 years' insurance, and 10 per cent yielded by the EPF balance. (b) Another person who completes 20 years' insurance will have a pension rate of 55 per cent (viz. 45 per cent from 20 years' insurance and 10 per cent from the EPF balance). (c) Transitional provisions will be proposed to enable persons who join the new scheme at a high age, which leaves them less than 15 years to pensionable age, to qualify for the minimum pension rate. For instance, it may be made possible for a person who joins the new scheme at an age which is between three and four years before pensionable age to qualify for a minimum pension at 40 per cent if he pays only 36 monthly contributions. An EPF member who qualifies under these transitional provisions may have this rate of 40 per cent increased by another 10 per cent in respect of his EPF balance. - 74 - (d) A person who completes say only five years' insurance because of a long non-insurance period and therefore' does not qualify for special consideration under subparagraph (c) above, may still earn a minimum pension of 40 per cent if he transfers an EPP balance which gives him the equivalent of ten years' insurance. 23. It is explained that the methods of converting EPP balances under this second alternative would not provide strict individual equivalence, as the past accumulation of balances is being pooled, to some extent, as future contributions will be. Special provisions may be devised to provide for cases where large balances would be transferred. Survivors 24. The pension payable to a widow and the children will be a percentage of the pension which the deceased insured person was receiving or would have been entitled to receive at the time of his death. Thus, if the widow's pension will be 60 per cent of the pension and 20 per cent for each child under 16 years, a widow and two children would receive between them the full pension which would . have been payable to the deceased insured person. Therefore, where the i-nsurance period is enhanced by the conversion of the lump sum, the survivors would also benefit. Invalidity Pension 25. An insured person who becomes an invalid after paying three years' insurance contribution would similarly benefit. His survivors would also benefit in'the same way. Short-Term Benefits 26. Persons who transfer their EPP balance may become entitled to sickness and maternity benefit immediately after. Annuity 27. The annuity to which reference is made in the foregoing paragraphs will be an annuity for life. It may also include an annuity for survivors. It will be distinct from the pensions earned from contributions to the new scheme. General Observations The Merits of Social Insurance 28. The system of social insurance under which existing and proposed benefits will be provided has certain outstanding merits which include the following: (a) The system can be effectively used to pool the resources of higher and lower income groups and to share the risks of workers in the different sectors of economic activity .and in different occupations; (b) It can make better provision for social needs on a national basis in the event of the common contingencies of life (sickness, invalidity, old age, etc.) without any loss of human dignity. (c) It permits the periodical revaluation of pensions in relation to any rise in the general level of earnings resulting from increases in the cost of living. (d) It offers the possibility of making special transitional provisions in favour of aged entrants into insurance, as explained above. - 75 - Reserves 29. The new scheme will build up reserves which constitute an important aspect of the financing of pensions schemes. The rate of growth of the reserves will depend upon the financial system adopted as explained in Appendix A (paragraph 4 ) . Conclusion 30. Any policy guidelines which can be given at this stage will enable the experts to make more definite recommendations in regard to the new scheme. 17 May 1977. J. Vella-Bonnici, Social Security Planning and Legislation Expert. - 76 - APPENDIX A SUPPLEMENTARY NOTE BY THE SOCIAL SECURITY ACTUARY 1. Characteristic Feature of a Pension Scheme's Benefit Outgo In the case of a newly introduced pension scheme, the annual expenditure on benefits will begin at a very low level - unless the scheme assumes pension liabilities in respect of those who are already retired, widowed, etc. on the starting date - and will increase continuously for a very long period. This is because not only will there be more and more surviving pensioners, but each new crop of pensioners will be drawing higher rates of pension due to longer insurance periods compared to previous generations of pensioners. This is true even if transitional provisions are incorporated enabling older entrants into the scheme at the outset to draw benefits after shorter contribution periods, although in this case the benefit expenditure may build up at a steeper rate. This feature of a pension scheme leads to the situation that theoretically a variety of methods is available to finance the scheme. The main systems of financing applied in social insurance are described in the following section. 2. Financial Systems 2.1 The Pure Assessment System Under this system, also known as the "pay-as-you-go" system, the contribution rate is assessed for a short period - e.g. one year (annual assessment) - so as to be sufficient to meet the expenditure of the scheme in that period, possibly with a small margin for contingencies. However, if this method of financing is applied to a new pension scheme, the contribution rate will begin at a very low level and will need to be revised upwards very frequently - even annually under the annual assessment system. Further, no sizeable reserve will accumulate under this system, apart from a small contingency reserve whose purpose is to enable the scheme to face the strain of adverse experience or random fluctuations in the experience. 2.2 The General Average Premium System Under this system, a rate of contribution is assessed so as to be sufficient to ensure indefinitely the stability of the contribution rate. This rate is obtained by equating the discounted probable value of contributions of persons insured at the start of the scheme and of future entrants into the scheme, to the discounted probable value of benefits to both initial and future entrants. This system promises the most stable level of the contribution rate, but in practice there may be changes requiring a review of the contribution rate because the actual experience under the operation of the scheme may diverge from the assumptions under which the contribution rate was initially calculated. This system will lead to the accumulation of a substantial reserve fund. However, a relatively very high contribution rate will have to be applied from the very beginning. 2.3 Intermediate Systems Among the variety of available systems intermediate between the two extreme systems described above, particular mention should be made of the scaled-premium system of financing social insurance pension schemes. This system was considered by the Actuarial Subcommittee of the ILO Committee of Social Security Experts (1964) as being most appropriate for financing social security pension schemes in developing countries. - 77 - The scaled-premium system seeks to ensure that within a limited period of say 15, 20 or 25 years called a period of equilibrium, the contribution rate remains constant and the reserve fund never decreases. This means that within each period of equilibrium the contribution Income plus the interest from investments will exceed the expenditure of the scheme. The system is so designed that the contribution rate is revised before the moment is reached when contribution income plus interest on investments will no longer be sufficient to cover the expenditure; the enhanced contribution rate will operate over a new period equilibrium until it is revised in its turn, and so on. The rate of accumulation of reserves under this system will depend upon the length of the period of equilibrium. Thus, short periods of equilibrium would result in a low initial contribution rate needing to be revised rather frequently and also in a low degree of accumulation of funds, thereby approaching the system of annual assessment. On the other hand, long periods of equilibrium would result in a relatively higher initial contribution rate and a higher degree of accumulation of funds, consequently approaching the general average premium system. It may be added that the successive periods of equilibrium need not necessarily be of equal durations, so that a further variety of possibilities exists within this framework. 3. Choice of Financial System The main considerations which arise in connection with the choice of the financial system for a social insurance pension scheme are the following: (i) (ii) (iii) the rate of accumulation of reserve funds which i3 necessary and desirable; the concern to keep contribution rates as stable as possible; the extent to which insured persons and employers may bo expected to contribute, given their economic condition and taking into account any contributions they already pay to existing provident funds or other schemes. The scaled-premium system provides a flexible method of financing social insurance pension schemes which can be adapted to the initial conditions in the country as well as to changing conditions, giving due weight to the factors outlined above. The long-term implications of any given financial system should however be appreciated. If a pension scheme is started with low contribution rates in the initial stages it is inevitable that the ultimate costs in the long run will be higher than what they would have been, if higher contribution rates had been applied in the earlier years. This is because in the latter case higher reserves would have accumulated and the corresponding higher interest income would cease the burden of contributions in the long run. 4. Accumulation of Reserves As explained above, the pattern of accumulation of reserves will depend upon the financial system adopted. The highest accumulation occurs under the general average premium system. The rate of accumulation of reserves under the scaledpremium system depends upon the length of the periods of equilibrium - the longer the periods, the higher the accumulation. Finally, there is practically no accumulation under the pure assessment system. One point should be emphasised here: a fundamental principle underlying the scaled-premium system described above is that the reserves are not to be used to meet the current expenditure-of the scheme. The function of the reserve fund is to produce income by way of interest, which along with current contributions, is used to meet the current expenditure; the balance, if any, is again invested. This principle enables the reserves to be invested in suitable long-term securities, which in the normal course need never be realised. - 78 - 5. Financing of the Pensions Scheme on the Assumption of Transfer oT Employees' Provident Fund BaTances In alternative (2) presented in paragraph 18 of the memorandum by the Social Security Planning and Legislation Expert, it is envisaged that balances of EPF members who are subject to the social insurance pension scheme will be transferred to the scheme, and appropriate periods of pre-scheme contribution will be credited to individual members. Due to the effect of pre-scheme credits, the pension rates will be high right from the start, so that annual benefit expenditure will grow vory steeply. However, the substantial reserve fund which will be available from the start (specifically, the interest income from this fund) would ease the contributory burden at the outset. It is possible to develop a scaled-premium system of financing for the scheme with any desired level of the initial contribution rate, taking due account of the interest income from the initial reserve fund. On the other hand, the precedent set by the EPF by applying a combined employer-employee contribution rate of 10 per cent of wages or salaries from its inception, which was recently raised to 13 per cent, may oblige the pension scheme to continue to apply a contribution rate of this order. If this should be case, it is likely that the reserve fund will continue to accumulate for several years at a rate which may not compare unfavourably with the accumulation which would have resulted had the EPF continued unchanged. Naturally, if the scheme is started on a lower scaled-premium contribution rate, it would need to be revised earlier, and the reserve fund would also accumulate at a lower rate. The point is however stressed that whatever the system of financing applied, provided the principle of not using the reserves to meet current expenditure is followed, existing investments need not be disturbed. 17 May 1977. S.N. Iyer Social Security Actuary. - 79 - APPENDIX IV DRAFT BILL AGREEMENT OF SECTIONS PART I PRELIMINARY ection 1. 2. Short title, extent, commencement and application. Definition. PART II f INSURABILITY AND CONTRIBUTIONS 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. Applicability. Registration of industries. . Persons to be insured. Contributions payable in respect of employees. Employment by more than one employer. Recovery of contribution from immediate employer. Employers to maintain and furnish prescribed information. Rates of contributions. Voluntary insurance. Voluntary annuity scheme. General provisions as to payment and collection of contributions. PART III BENEFITS 14. 15. Description of benefits. Entitlement to and rate of benefit. Sickness Benefit 16. Sickness Benefit. Maternity Benefit 17. Maternity Benefit. - 80 - Invalidity Benefit Invalidity Benefit. Age Benefit Age Benefit. Survivors' Benefit Survivors' Benefit. Benefit for Employment Injuries Benefit for employment injuries. Presumption as to accident arising in the course of employment. Accidents happening while travelling in employer's transport. Accidents happening while meeting emergency. Dependants' benefit. \ Prescribed Diseases and Injuries Prescribed diseases and employment injuries not caused by accident. Conditions for receipt of benefit in respect of prescribed disease or injury. Adjustment for successive employment accidents. Other Benefit Provisions Constant-Attendance Allowance. Medical benefit in respect of employment injury or prescribed disease. Other medical care. Benefits not payable where work is performed. Persons not to commute cash benefits. Benefit and contribution not to be assigned or attached. Overlapping benefits. Deduction from wages. Employer not to dismiss or punish employee during period of temporary disablement. (to be drafted) Facilities for physical or vocational rehabilitation. Organisation's power to cooperate with existing institutions or promote measures for health, welfare, etc. of insured persons. Establishment and maintenance of hospitals, clinics, etc. Time and manner of making claims. Payment of benefit. Matters affecting entitlement to benefit to be reported to Organisation. Repayment of benefit improperly received. Disqualification for benefit. - 81 - ection PART IV DETERMINATION OF CLAIMS AND QUESTION AND AtPElLS 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. Determination of questions as to insurability and contributions. Determination of claims. Determination of invalidity and permanent disablement questions. Appeal from decision of medical board to appellate medical board. Review of decisions by medical boards and appellate medical boards. Constitution of Social Security Tribunal. Appeals, questions and disputes to be determined by the Tribunal. Institution of proceedings, etc. before the Tribunal. Powers of the Tribunal. Right to appear before the Tribunal and to act. Reference to High Court. Appeal to High Court. Stay of payment pending appeal. Review of decisions. PART V ADMINISTRATION, FINANCE AND AUDIT 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. Administration of the Social Security Scheme. Chief Executive Officer. The Social Security Organisation. Appointment of Board of Management. Deputy Chairman to act as Chairman. Sixth Schedule. Cessation of membership of the Board. Disqualification for membership of the Board. Public Authorities Protection Ordinance 1948. Public servants and public officers. Board to give effect to Minister's directions. Delegation of powers of the Board. Administrative control of officers and servants by Director-General Appointment of officers and servants. Setting up Divisions, Regional Offices, etc. Power to dispose of staff questions. Power to make staff rules. Social Security Advisory Council. Cessation of membership of Council. Disqualification for membership of Council. - 82 - Section 81. 82. 83. 84. 85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95.96. Appointment may be revoked. Fees and allowances. Resignation of membership. Functions of the Council. Local Committees. -Social Security Fund. Purpose for which the Fund may be expended. Expenditure and administration. Holding of property etc. Investment of Funds. Raising of loans. Budget estimates. Accounts. Audit. Annual report. Annual report to be laid before the House of Representatives. 97. 98. Actuarial review. Duty of Board to review benefits. PART VI ENFORCEMENT PENALTIES AND LEGAL PROCEEDINGS ENFORCEMENT 99. 100. 101. 102. Appointment of inspectors. Duty to submit to inspection. Recovery of contributions. Offences and penalties. 103. 104. Prosecution. Civil proceedings. PART VII MISCELLANEOUS PROVISIONS 105. 106. 107. 108. 109. 110. Exercise of powers and functions of the Organisation. Exemption from stamp duty. Persons employed aboard ships, vessels or aircraft. Reciprocity agreements. Exemption of industries and persons, etc. Exemption of industries belonging to Government or Local Authority. - 85 - 111. 112. 113. 114. 115. 116. i Contributions etc. due to Organisation to have priority over other debts. Recovery of debt due to Organisation. Power to remove difficulties. Power of the Minister to make regulations. Regulations to be laid before House of Representatives. Repeal. FIRST SCHEDULE. - 84 - DRAFT BILL PART I PRELIMINARY Short title, extent, commencement and application. (1) This Act may be cited as the Social Security Act 1978. (2) Subject to sub-section (3) below, this Act shall apply throughout Malaysia. (3) This Act shall come into force on such date or dates as the Minister may, by Order published in the Gazette, appoint and different dates may be appointed for different provisions or different purposes of the Act and for the same provision for the same purpose in relation to different cases or classes of cases, and for different States or for different parts thereof. (4) Any order made under sub-section (3) above may contain such incidental or supplementary provisions as appear to the Minister to be necessary or expedient for the orderly implementation of the provisions and purposes of the Act. Definition. In this Act unless the context otherwise requires (1) "adopted" means in reference to any child, a child adopted in accordance with the provisions of the Adoptions Ordinance, 1952, or a child who has been registered under the provisions of the Registration of Adoptions Ordinance, 1952; (2) "beneficiary" in relation to any benefit, means the person entitled to that benefit; (3) "benefit" means benefit under this Act; (4) "Board" means the Board of Management established under section 64; (5) "claimant" means a person claiming any benefit under this Act; (6) "contribution" means contribution payable under this Act; (7) "Council" means the Social Security Advisory Council established under section 78; (8) "dependant" means any of the following relatives of a deceased insured person, namely (a) a widow, minor legitimate or adopted son, an unmarried legitimate or adopted daughter or a widowed mother; and (b) if wholly dependent on the earnings of the insured person at the time of his death, a legitimate or adopted son or daughter who is over sixteen years of age and is infirm and is incapable of earning any wages; and (c) if wholly dependent on the earnings of the insured person at the time of his death (i) a parent other than a widowed mother; (ii) a minor illegitimate son, an unmarried illegitimate daughter or a daughter legitimate or adopted or illegitimate if married and a minor or if widowed and a minor; (iii) a minor brother or an unmarried sister or a widowed sister if a minor; (iv) a widowed daughter-in-law; a minor child of a pre-deceased son; (v) (vi) a minor child of a pre-deceased daughter where no parent of the child is alive; or (vii) a paternal grandparent if no parent of the insured person is alive. - 85 - (9) (10) (11) (12) (13) (14) (15) (16) (17) (18) (19) (20) (21) (22) (23) (24) (25) "Director-General" means the Director-General of the Organisation; "duly appointed" means appointed in accordance with the provisions of this Act or with regulations made thereunder; "employee" has the meaning assigned to it in Part I of the First Schedule but does not include a person of the description specified in Part II of the Schedule; "employment injury" means a personal injury to an employee caused by accident arising out of and in the course of an employee's employment and includes a prescribed disease or personal injury due to the nature of that employment and developed after the appointed date in relation to that employee; "Government" means the Government of Malaysia; "immediate employer" in relation to employees employed by or through him, means a person who has undertaken the execution on the premises where the principal employer is carrying on his trade or business, profession, vocation, occupation or calling, or under the supervision of the principal employer or is preliminary to the work carried on in, or incidental to the purpose of, any such trade or business, profession, vocation occupation or calling, and includes a person by whom the services of an employee who has entered into a contract of service with him are temporarily lent or let on hire to the principal employer; "industry" means any business, trade, undertaking, manufacture or calling of employers, and includes any calling, service, employment, handicraft or industrial occupation or avocation of employees; "insured" means insured under this Act; "Minister" means the Minister charged with responsibility for labour; "minor" means a person who is under sixteen years of age; "month" means a month reckoned according to the Gregorian calender; The expressions "occupier" and "factory" shall have respectively the meanings assigned to them in the Factories and Machinery Act, 1967; "Organisation" means the Social Security Organisation; "permanent partial disablement" means such disablement of a permanent nature, as reduces the earning capacity of an employee in every employment which he was able to undertake at the time of the accident resulting in the disablement; "permanent total disablement" means such disablement of a permanent nature, as disables an employee for all work which he was capable of performing at the time of the accident resulting in such disablement; "prescribe" means prescribed by regulations; "principal employer" means the owner of an industrie or the person with whom an employee has entered into a contact of service or apprenticeship and includes (a) the occupier of a factory; (b) the legal representative of a deceased owner or occupier; (c) any government in Malaysia, department of any such government, local authority or statutory body, and, where an employee is employed with any such government, department, authority or body or with any officer on behalf of any such government department, authority or body, the officer under whom such employee is working; - 86 - Provided that no such officer shall be personally liable under this Act for anything in good faith done or omitted to be done by him as an officer of ouch employer; (26) "registered medical practitioner" means a medical practitioner registered under the provisions of the Medical Registration Ordinance, 1952, and unless otherwise specified, medical practitioner shall be construed accordingly; (27) "regulations" means regulations made by the Minister under this Act; "relevant accident" and "relevant injury" mean respectively, in relation to disablement benefit or dependants' benefit, the accident and injury in respect of which any of the said benefits is claimed or payable; (28) (29) (30) "Schedule" means a Schedule to this Act; "temporary disablement" means a condition resulting from an employment injury which requires medical treatment and renders an employee, as a result of such injury, temporarily incapable of doing the work which he was doing prior to or at the time of the injury; (31) "Tribunal" means the Social Security Tribunal appointed under section 52 of this Act; "Wages" means all remuneration payable in money by an employer to an employee including any payment in respect of leave, holidays, overtime and extra work on holidays but does not include - (32) (a) any contribution paid by the principal employer or the immediate employer to any pension fund or provident fund, or under this Act; (b) any travelling allowances or the value of any travelling concession; (c) any sum paid to an employee to defray special expenses incurred as a result of his employment; (d) any gratuity payable on discharge or retirement; (e) annual bonus; (f) any other remuneration as may be prescribed; (33) For the porposes of this Act (a) a person shall be deemed to be over or under a particular age if he has or, as the case may be, has not attained that age; (b) a person shall be deemed to be between two particular ages if he has attained the lower, but not attained the upper of those two ages. PART II INSURABILITY AND CONTRIBUTIONS Applicability. 3. This Act shall apply to all industries other than industries employing less than five employees: Provided that the Minister may, subject to the condition of previous publication in the Gazette, extend the provisions of this Act to industries employing less than five employees. Registfation of Industries. 4. Every industry to which this Act applies shall be registered with the Organisation within such time and in such manner as may be specified in the regulations. - 87 Persons to be insured (1) Subject to the provisions of this Act, all employees over the age of fourteen years in industries to which this Act applies shall be insured in the manner provided by this Act. (2) Regulations may provide (a) for the circumstances in which an employee working outside Malaysia in continuation of his employment in Malaysia shall continue to be insured subject to such conditions as may be prescribed; (b) that specified classes of gainfully occupied persons other than those mentioned in sub-section (1) above shall be insured. Contributions payable in respect of employees. (1). Subject to the provisions of this Act, contribution payable in respect on an employee shall comprise the contribution payable by the employer (hereinafter referred to as the "employer's contribution") and contribution payable by the employee (hereinafter referred to as the "employee's contribution") and shall be paid to the Organisation. (2) Except where regulations otherwise provide, a month shall be the unit in respect of which contributions shall be payable under this Act. (3) Except where regulations otherwise provide, the principal employer shall pay in respect of every employee, whether directly employed by him or through an immediate employer, both the employer's contribution and the employee's contribution for each month in respect of the whole or part of which wages are payable to the employee, and for the purposes of this Act contributions so paid by an employer shall be deemed to be contributions paid by such employee. (4) Notwithstanding anything contained in any other written law but subject to the provisions of this Act and the regulations, the principal employer shall, in the case of an employee directly employed by him, be entitled to recover from the employee the employee's contribution by deduction from his wages and not otherwise. Provided that no such deduction shall be made from any wages other than such as relate to the period or part of the period in respect of which the contribution is payable, or in excess of the sum representing the employee's contribution for the period. (5) Notwithstanding any contract to the contrary, neither the principal employer nor the immediate employer shall be entitled to deduct the employer's contribution from any wage payable to an employee or otherwise to recover it from him. (6) Any sum deducted by the principal employer from wages under this Act shall be deemed to have been entrusted to him by the employee for the purpose of paying the contribution in respect of which it was deducted. Employment by more than one employer. Recovery of contribution from immediate employer. 7. (1) Where an employee is employed successively or concurrently in a month or part of a month by more than one employer, each employer shall be liable to pay contributions with respect to the wages paid by him to that person. (2) The provisions of sub-section (l) may be modified by regulations. (1) A principal employer, who has paid contribution in respect of an employee employed by or through an immediate employer shall be entitled to recover the amount of the contribution so paid (that is to say the employer's contribution as well as the employee's contribution, if any) from the immediate employer, either by deduction from any amount payable to him by the principal employer under any contract, or as a debt payable by the immediate employer. - 88 - (2) In the case referred to in sub-section (1), the immediate employer shall be entitled to recover the employee's contribution from the employee employed by or through him by deduction from wages and not otherwise, subject to the conditions specified in the proviso of sub-section (4) of section S. Employers to maintain and furnish prescribed information 9. (1) Every principal and immediate employer shall submit to the Organisation or to such officer of the Organisation as it may direct such returns in such form and containing such particulars relating to persons employed by him or to any industry in respect of which he is the principal or immediate employer as may be specified in the regulations made in this behalf. (2) Where in respect of any industry the Organisation has reason to believe that a return should have been submitted under sub-section (1) but has not been so submitted, the Organisation may require any person in charge of the industry to furnish such particulars as it may consider necessary for the purpose of enabling the Organisation to decide whether the industry is an industry to which this Act applies. (3) Where the information specified in sub-section (1) and in the regulations are not maintained, furnished or submitted to the Organisation or to any officer of the Organisation duly authorised for the purpose the Organisation may, on the basis of information available to it, by order determine the amount of contributions payable in respect of any employer of that industry. (4) The order made by the Organisation under sub-section (1) shall be sufficient proof of the claim of the Organisation under section 53 or for recovery of the amount determined by such order as a debt due to the Organisation under section 101. Rat-es of contributions. 10. Voluntary insurance. 11. Regulations may provide (a) the conditions under which a person who ceases to be liable to be insured may be insured as a voluntary contributor; (b) the circumstances in which a voluntary contributor may cease to be entitled to be so insured; (c) the rate of contributions payable by a voluntary contributor; (d) the conditions for entitlement to benefit; and (e) the type and rate of benefit. Voluntary annuity scheme 12. Regulations may provide for the establishment of an annuity scheme on a voluntary basis for specified classes of persons and any such regulations may in particular provide (a) for determining the classes of persons who may become members of the scheme; (b) for different types of annuities including annuities payable to survivors; (1) Regulations shall provide from time to time, for rates of contribution payable by employers and such different classes of insured persons as may be prescribed. (2) Regulations may provide for the fixing of contribution rates on the basis of wages, income from any gainful occupation or in any gainful occupation or in any other manner, and such regulations may make different provisions for different classes of insured persons. (c) for fixing from time to time the amount to be paid by a person to become entitled to a specified type of annuity; (d) the period for which different types of annuities may be payable. - 89 - 13. General provisions as to payment and collection of contributions. (1) Subject to the provisions of this Act, regulations may provide for any matter relating or incidental to the insurability of persons under this Act and without prejudice to the generality of the foregoing power such regulations m;iy provide (a) for the registration of employees and other persons liable under this Act; (b) for the payment and collection of contributions including the time within which contributions are to be paid and the procedure to be followed in remitting contributions to the Organisation; (c) for securing that liability to contribution is not avoided or reduced by a person following in the payment of wages or other form of remuneration any practice which is abnormal for the employment in respect of wages or other remuneration is paid; (d) (e) (f) (g) (h) for the maintenance of registers and records and the particulars to be shown in such records; for requiring employers and other persons to supply to the Organisation, in such form and manner as may be prescribed, records of wages and contributions paid, and such information as may be required to determine liability to contributions and entitlement to benefit; the issue, sale, custody, production, inspection and delivery of books or cards used for the purpose of registration, contributions or benefit and for the replacement of any such documents lost, destroyed or defaced; treating, for the purpose of any right to benefit contributions paid after the due dates as paid on such dates as may be prescribed, or as not having been paid; for treating, as paid for the purpose of any right to benefit, contributions payable by an employer on behalf of an insured person but not paid when the failure to pay is shown not to have been with the consent or connivance of or attributable to any negligence on the part of the insured person; (i) for treating contributions of the wrong class or category or at the wrong rate as paid on account of contributions properly payable; the return of contributions paid either in error or in such circumstances that under any provision of this Act or regulations, they fall to be repaid subject to the deduction of any amount of benefit paid as a result of such contributions; requiring persons to apply for registration under this 00 Act. Regulations may provide (a) for exempting insured persons and their employers from liability to pay contributions under such conditions and for such periods as may be prescribed and for crediting contributions to insured persons in respect of such periods; (d) (2) (b) (c) for treating, subject to such conditions as may be prescribed, contributions of a class or category paid by or in respect of an insured person as if they wore contributions of the same or another specified va'.lue in another class or category; for converting into contributions paid under this Act under such conditions and for such benefits as may be prescribed, balances standing to the credit of insured persons under the Employees' Provident Fund Ordinance, 1951. - 90 - (3) Regulations made with the concurrence of a competent authority (being a Federal Government or a State Authority or a statutory body) or any organisation approved by the Minister, may provide in relation to prescribed classes of insured persons, for the collection and payment of contributions and the payment of benefits. PART III BENEFITS Descriptions of benefits. 14. (l) The benefits provided unter this Act shall be the following (a) sichness benefit; (b) maternity benefit; (c) invalidity benefit; (d) retirement benefit; (e) survivors' benefit; (f) benefit in respect of employment injury. (2) Subject to the provisions of this Act, regulations may provide (a) that all or any of the benefits specified in sub-section (1) above shall be provided in respect of one or more classes of insured persons and contributions; (b) Entitle15. ment to, and rate of benefit. (1) (2) for additional benefits. Regulations shall provide (a) for the conditions to be satisfied for entitlement to benefit by insured persons and persons claiming benefit; (b) for the amount of or the rate at which any benefit shall be payable; (c) for the method of calculating the amount or rate of cash benefit payable; (d) for the date from which and the period up to which benefit shall be payable; (e) for the circumstances in which entitlement to benefit shall cease. Regulations may provide (a) for a minimum and maximum rate of benefit and may prescribe different minimum and maximum rates for different benefits and for different classes of insured persons; (b) for the conditions subject to which the payment of benefit shall be made; (c) for the circumstances in which the payment of benefit shall be suspended or discontinued. (3) In relation to persons in receipt of sickness benefit, maternity benefit, invalidity benefit or disablement benefit regulations may (a) prescribe rules of behaviour to be observed by such persons; (b) provide that such persons shall attend for, or submit themselves to any medical or other examination required for the purposes of this Act; (c) prescribe the medical certificates and other evidence to be furnished to the Organisation. - 91 - Sickness Benefit Sickness benefit. 16. (1) Subject to the provisions of this Act a person who satisfies the prescribed conditions shall be entitled to sickness benefit at the rate specified in the regulations in respect of any day of incapacity for work. (2) For the purpose of this section a day shall not be treated as a day of incapacity for work unless the persons concerned shows in accordance with the regulations i) that he is incapable of work on that day by reason of some specific disease or bodily or mental disablement; or ii) that he has been advised by a registered medical practioner or by a prescribed person to abstain from work on that day because he is under observation by reason of his being a carrier, or having been in contact with a case of infectious 'disease; . (3) Subject to sub-section (4) below, an insured person who has attained pensionable age shall not be entitled to sickness benefit. (4) Regulations may provide (a) that an insured person over pensionable age shall be entitled to sickness benefit; (b) (c) for the conditions for entitlement to such benefit; for the rate at which the benefit shall be payable. Maternity Benefit Maternity benefit. 17. (1) A woman shall be entitled to maternity benefit by way of a periodical payment at the rate specified in the regulations if (a) she is pregnant and has reached a stage in her pregnancy which is not more than the prescribed number of weeks before that in which it is to be expected that she will be confined (hereinafter referred to as "the expected week of confinement"); and (b) she satisfies the prescribed conditions. (2) Except where regulations otherwise provide (a) if a woman dies during the period in which she is in receipt of maternity benefit, the benefit shall not be payable from the day subsequent to the day of her death or from any other date as may be prescribed; (b) a woman who has become entitled to maternity benefit shall cease to be entitled to that benefit i) if the pregnancy is terminated otherwise than by confinement; or ii) if at any time before her confinement occurs she fails without good cause to attend for, or to submit herself to, any medical examination which may be required by the Organisation. Invalidity Benefit invalidity benefit. 18. (l) Subject to the provisions of this Act, an insured person shall be entitled to invalidity benefit if (a) he satisfies the prescribed conditions; (b) ho is suffering from invalidity; and (c) he shows to the satisfaction of the Organisation that he has suffered from invalidity for such continous period as may be prescribed. - 92 - (2) An insured person shall be considered as suffering from invalidity, if by reason of a specific disease or bodily or mental disablement of a permanent nature, he is incapable of engaging in any substantially gainful activity. (3) For the purpose of sub-section (2) (a) a disease or disablement shall be deemed to be of a permanent nature if it is either incurable or is not likely to be cured; (b) a person shall be deemed to be incapable of engaging in substantially gainful activity, if in consequence of the specific disease or disablement, he is no longer capable of earning, by work corresponding to his strength and physical ability which, in view of his training and former occupation, might reasonably be assigned to him at the place of his employment or at a similar place in the neighbourhood or in the same district, one-third of the customary earnings of a mentally and physically sound person with similar qualifications and training; (c) in determining whether the claimant is suffering from invalidity, account shall be taken of any permanent improvement in the state of his invalidity which results or is expected to result from such measures of physical or vocational rehabilitation as may be offered to him free of charge by the Organisation. (4) Subject to the provisions of this section and the regulations, invalidity benefit provided under this section shall be (a) an invalidity pension payable throughout the duration of invalidity at the prescribed rate; or (b) an invalidity grant of an amount calculated as prescribed. t (5) Subject to the provisions of this Act, the Organisation may review the payment of an invalidity pension consequent upon the improvement in the state of invalidity or a change in earning capacity of the beneficiary, and as a result of such review the pension may be discontinued or reduced as the case may be. (6) Without prejudice to other provisions in this Act and the regulations relating to disqualification for receiving benefit, the Organisation may suspend invalidity pension (a) for a period not exceeding twelve months if the pensioner has acted fraudulently towards the Organisation in connection with any claim which he has made or any payment which he has received; (b) if and so long as the invalid pensioner i) engages in any employment by virtue of which he is liable to be insured or in any substantially gainful activity without prior notice to the Organisation; ii) fails without good cause to appear, as may be directed by the Organisation, before a medical board, a medical practitioner or any other authority for verification of the existence or the continued existence of his invalidity; iii) refuses or neglects without good cause to comply' with any directive issued to him by or on behalf of the Organisation in regard to any process of physical or vocational rehabilitation or vocational training which he is required to undergo free of charge; or iv) fails without good cause to submit himself to any free medical treatment including fitting of prosthetic appliances offered by the Organisation for his invalidity or fails to carry out any instructions of the medical practitioner in whose care he is placed: Provided that he shall not be required to undergo any operation that is capable of endangering his Life or health. - 93 - Retirement Benefit Retirement benefit. 19. (1) Subject to the provisions of this section, an insured person shall be entitled to retirement benefit if (a) he has attained pensionable age; and (b) satisfies the prescribed conditions. (2) The retirement benefit provided under this section shall be - (a) retirement pension at the prescribed rate; or (b) age grant of a prescribed amount. (3) Subject to the provisions of this section and the regulations, pensionable age in relation to an employee under this Act shall be the age of sixty years. (4) Subject to sub-section (8) below, retirement pension shall not be payable to a person as long as he is or is deemed to be, an employee under this Act. (5) Regulations may provide for a lower pensionable age in respect of categories or classes of insured persons who have completed prescribed periods of insurance or employment in such ardous or unhealthy occupations as may be specified in the regulations. (6) Without prejudice to sub-section (4) above, regulations may provide for different pensionable age in relation to different classes of insured persons. (7) Regulations may provide that retirement pension shall be payable to an employee or classes of employees, who have attained a specified age below pensionable age, and any such regulations shall prescribe the rate of pension and the conditions subject to which the pension shall be payable. (8) Regulations may provide for the circumstances in which a person who is, or is deemed to be an employee under this Act shall be entitled to receive retirement pension. (9) Regulations may provide for the circumstances in which retirement pension shall not be payable to persons other than those specified under sub-section (8) above, who are engaged in a gainful occupation of such kind or to or beyond such extent as may be prescribed. (10) Regulations may provide for (a) the deferment of claim for retirement pension to which an insured person is entitled on attaining pensionable age; increments to be earned to the rate of pensionable 00 the age in respect of contributions paid after that age; (c) the conditions subject to which a claim for retirement pension shall be deferred. Survivors' Benefit Survivors' benefit. 20. (1) Subject to the provisions of this Act, survivors' benefit shall be (a) a periodical payment where the deceased insured person at the time of death (i) was in receipt of an invalidity or retirement pension; or (ii) would have been entitled to receive invalidity pension or retirement pension had he claimed such benefit. (b) a grant (that is to say lump sum payment) where the deceased insured person at the time of his death would have been entitled to invalidity grant or age grant had he claimed such benefit. - 94 - (2) Subject to the provisions of the regulations, the benefit provided under sub-section (l) above shall be payable in relation to the deceased insured person (a) to his widow;' (b) to a legitimate or adopted unmarried son or daughter who at the time of the death of the insured person (i) (ii) is under sixteen years of age; or is between the age of sixteen and eighteen years and shows to the satisfaction of the Organisation that he is attending full-time education; or (iii) is infirm and is wholly dependent on the earnings of the deceased insured person as long as such infirmity lasts or until marriage whichever is earlier. : (3) Regulations may provide for the circumstances in which the widower of a deceased insured person who at the time of such person's death (a) is permanently incapable of work by reason of physical or mental disablement; and (b) is wholly dependent on the earnings of the deceased insured person, shall be entitled to survivors' benefit. (4) Where on the date of the death of the deceased insured person no person specified in sub-sections (2) and (3) above is entitled to survivors' benefit, such benefit shall be payable to other dependants of the insured person as follows (a) (b) to a parent or grandparent; to any other dependant until he attains his sixteenth year of age. Benefit for Employment Injuries Benefit for employment injuries. 21. (1) Subject to the provisions of this Act, where an employee suffers an employment injury (a) temporary disablement benefit shall be payable to the employee if he is as a result of the injury, incapable of work; (b) permanent disablement benefit shall be payable to an employee if he suffers as a result of the injury permanent partial disablement or permanent total disablement: Provided that where permanent disablement total or partial, has been assessed provisionally for a limited period or finally, the benefit provided under this paragraph shall be payable for that limited period or, as the case may be, for life; (c) dependants' benefit shall be payable where an insured person dies as a result of an employment injury; (d) funeral benefit shall be payable where an insured person dies as a result of an employment injury. (2) Except as may be provided in the regulations, benefit provided under this section shall not be available in respect of an employment injury caused by an accident arising out of an in the course of employment outside Malaysia unless such employment is specified in Part I of the First Schedule. (3) Permanent disablement benefit shall not be payable if the degree of disablement assessed in accordance with the provisions of this Act or the regulations is less than one per cent. - 95 - (4) Regulations shall provide for the person or persons to whom funeral benefit shall be payable. (5) Regulations may provide (a) that where a person has received temporary disablement benefit in respect of the same injury for an aggregate period of six months, the Organisation shall require such person to be examined by a medical board who shall determine whether the disablement is permanent and in such case to assess the degree of permanent disablement in accordance with this Act; (b) for the circumstances and conditions under which permanent disablement benefit and dependants' benefit may be commuted into lump sum payments and the method of calculating such commutation; (c) for the circumstances and conditions under which benefit may be provided in respect of an employment injury caused by accident arising out of and in the course of employment outside Malaysia; (d) for such matters as are incidental to the assessment of the degree of disablement. Pre22. sumption as to aocident arising in the course of employment. Accidents 23. happening while travelling in employer' s transport. For the purposes of this Act, an accident arising in the course of an employee's employment shall be presumed, in the absence of evidence to the contrary, also to have arisen out of that employment. (1) An accident happening while an insured person is, with the express or implied permission of his employer, travelling as a passenger by any vehicle to or from his place of work shall, notwithstanding that he is under no obligation to his employer to travel by that vehicle, be deemed to arise out of and in the course of his employment if (a) the accident would have been deemed so to have arisen had he been under such an obligation; and (b) at the time of the accident, the vehicle (i) is being operated by or on behalf of his employer or some other person by whom it is provided in pursuance of arrangements made with his employer; and (ii) (2) Accidents happening while meeting emergency. is not being operated in the ordinary course of a public transport service except when the insured person is himself an employee of the public transport service concerned. In this section "vehicle" includes a vessel and aircraft. 24. An accident happening to an insured person in or about any premises at which he is for the time being employed for the purpose of his employer's trade or business, profession, vocation, occupation or calling, shall be deemed to arise out of and in the course of his employment, if it happens while he is taking steps, on an actual or supposed emergency at those premises, to rescue, succour or protect persons who are, or are thought to be or possibly to be, injured or imperilled, or to avert or minimise serious damage to property. Dependants' 25. Benefit. (1) If an insured person dies as a result of an employment injury sustained as an employee under this Act (whether or not he was in receipt of any periodical payment for temporary disablement in respect of the injury) dependants' benefit at the prescribed rates shall be payable to his dependants as follows: - - 96 - (a) to his widow during life or until remarriage and, if there are two or more widows, the widow's share of dependants' benefit specified in the regulations shall be divided equally between the widows; (b) to each legitimate or adopted son until he attains his sixteenth year of age: Provided that in the case of a legitimate or adopted unmarried son over sixteen years who is infirm and is wholly dependent on the earnings of the insured person at the time of his death, dependants' benefit shall continue to be paid while the infirmity lasts; (c) to each legitimate or adopted unmarried daughter until she attains her sixteenth year of age or until marriage, whichever is earlier: Provided that in the case of a legitimate or adopted unmarried daughter over sixteen years who is infirm and is wholly dependent on the earnings of the insured person at the time of his deaths dependants' benefit shall continue to be paid while the infirmity lasts and she continues to be unmarried: And provided further that where it is shown to the satisfaction of the Organisation that a person specified in paragraph (b) or (c) of this subsection is attending full-time education, benefit shall be payable until such person continues such education or attains the age of eighteen years, whichever is earlier. (2) If an insured person who dies as a result of an employment injury does not leave (a) a widow; (b) legitimate or adopted child, or (c) a widower entitled to dependants' benefit in accordance with any regulations made under sub-section (3) below; Dependants' benefit shall be payable to the other dependants specified in paragraph (c) of sub-section (3) of section 2 of this Act at the rates and for the duration specified in the regulations. (3) Regulations may provide that the widower of a deceased insured person who has died as a result of employment injury sustained as an employee under this Act, shall be entitled to dependants' benefit at such rate and for such period as may be prescribed if at the time of wife's death he (a) is permanently incapable of self-support by reason of physical or mental disablement; and (b) is wholly dependent on her earnings and but for the relevant accident would have been so dependent. (4) Regulations may provide that other specified relations of the deceased insured person shall be entitled to dependants' benefit as may be prescribed. Prescribed Diseases and Injuries Prescribed 26. diseases and employment injuries not caused by accident. (1) Subject to and in accordance with the provisions of this section and of section 27 below a person who is insured under this Act against personal injury caused by accident arising out of and in the course of his employment shall be deemed to be insured also against any personal injury not so caused, being a disease or injury directly attributable to the nature of the employment and developed on or after the appointed day. - 97 - (2) A disease or injury may be prescribed for the purposes of this Act in relation to any insured persons ±2 the Minister is satisfied that (a) it ought to be treated, having regard to its causes and incidence and any other relevant considerations, as a risk of their occupations and not as a risk common to all persons; and (b) it is such that in the absence of special circumstances, the attribution of particular case3 to the nature of the employment can be established or presumed with reasonable certainty. (3) Regulations prescribing any disease or injury for the purposes of this Act may provide that a person who developed the disease or injury on or at any time after a date specified in the regulation (being a date before the regulations came into force but not before the appointed day) shall be treated for the purposes of this Act, subject to any prescribed modifications as if the regulations had been in force when he developed the disease or injury. (4) Provision may be made by regulations for determining (a) the time at which a person is to be treated as having developed any prescribed disease or injury; and (b) the circumstances in which such a disease or injury is, where the person in question has previously suffered from it, to be treated as having recrudesced or as having been contracted or received afresh. (5) Nothing in this section shall affect the right of any person to benefit in respect of a disease which is a personal injury by accident within the meaning of this Act, except that a person shall not be entitled to benefit in respect of a disease as being an injury by accident arising out of and in the course of his employment if at the time of the accident the disease is in relation to him a prescribed disease by virtue of the occupation in which he is engaged in that employment. (6) The provisions of section 22 above shall not apply to the cases to which this section applies. (7) Except where regulations otherwise provide, benefit shall not be provided under this section in respect of a disease which is due to the nature of an employment in which the insured person has been engaged only outside Malaysia. Conditions for receipt of benefit in respect of prescribed disease or injury. 27. (1) Subject to any special provisions in this Act and to the power to make different provisions by regulations, benefit payable under section 26 in respect of a prescribed disease or injury, and the conditions for receipt of benefit, shall be the same as in the case of personal injury by accident arising out and in the course of employment. (2) In relation to prescribed diseases and injuries, regulations may provide (a) for modifying provisions of this Act relating to disablement benefit, and.the administration of such benefit; and (b) for adapting references in this Act to accidents. (3) Without prejudice to the generality of subsection (2) above, regulations thereunder may in particular include provision (a) for presuming any prescribed disease or injury (i) to be due, unless the contrary is proved, to the nature of a person's employment where he was employed in any prescribed occupation at the time when, or within a prescribed period or for a prescribed length of time (whether continuous or not) before, he developed the disease or injury; - 98 - (ii) not to be due to the nature of a person's employment unless he was employed in some prescribed occupation at the time when,, or within a prescribed period or for a prescribed length of time (whether continous or not) before, he developed the disease or injury; (b) for such matters as appear to the Minister to be incidental to or consequential on provisions included in the regulations by virtue of this section. (3) Regulations may make provision for the medical examination of insured persons employed or about to be employed in specified occupations. Adjustment for successive employment accidents. 28. (1) Where a person suffers two or more successive accidents as an employee under this Act he shall not for the same period be entitled to receive disablement benefit in respect of the different accidents at an aggregate daily rate exceeding the rate of disablement benefit to which he would be entitled in respect of disablement which was assessed at one hundred percent. (2) Regulations may provide for adjusting disablement benefit payable in respect of successive accidents or the conditions for the receipt of such benefit in any case where disablement benefit has been commuted into a lump sum. Other Benefit Provisions Constantattendance allowance. 29. (1) An insured person who is entitled to invalidity pension or permanent total disablement benefit shall also be entitled to constant-attendance allowance at the prescribed rate and so long as he is so severely incapacitated as to constantly require the personal attendance of another person: Provided that the existence of the degree of incapacity qualifying an insured person for cori3tant-attoiukuico allowance oha.ll bo verified by a medical board or the appelate medical board or by any other person as may be prescribed. (2) Except as regulations may otherwise provide, constantattendance allowance shall not be payable to an insured person for any period during which he receives treatment as an inpatient free of charge at a hospital or if the cost of such treatment is paid in whole or in part by the Organisation. Medical 30. Benefit in respect of employment injury or prescribed disease. (1) An insured person whose condition requires as a result of employment injury, medical treatment and attendance shall be entitled to receive such treatment and attendance hereinafter referred to as "medical benefit". (2) Such medical benefit may be given either in the form of outpatient treatment and attendance in a hospital or dispensary, clinic or other institution or by visits to the home of the insured person or treatment as inpatient in hospital or other institution. (3) An insured person shall be entitled to receive medical benefit only of such kind and on such scale as may be provided by the Organisation, and the insured person shall not have a right to claim any medical treatment except such as is provided by the dispensary, clinic, hospital or other institution to which he is allotted, or as may be provided by the regulations. (4) Nothing in this section shall entitle an insured person to claim reimbursement from the Organisation of any expense incurred in respect of any medical treatment, except as may be provided by the regulations. Other medical care. (1) Without prejudice to the provisions of section 30 of this Act, regulations may make provision for medical care to prescribed classes of persons. 31. - 99 - (2) Regulations made under sub-section (1) may provide (a) for the type and extent of medical care to be made available; (b) for the conditions for entitlement to medical care; (c) for the period for which medical care shall be available; (d) for the arrangements under which medical care shall be provided. Benefit 32. not payable where work ia performed. (1) No person shall be entitled to sickness benefit, maternity benefit or temporary disablement benefit in respect of any day on which he performs remunerative work. (2) For the purpose of this section "remunerative work" mean3 any work performed as an employed or self-employed person from which wages or profit would normally be derived and includes any work for the purpose of trade, business or profession. Persons not to commute cash benefits. (1) Subject to sub-section (2) below, no person shall be entitled to commute for a lump sum any periodical payment admissible under this Act. (2) Regulations may prescribe the circumstances in which and the extent to which commutation of permanent disablement benefit may be allowed and the method of calculating the commutation value. 33. Benefit and 34. contribution not to be assigned or attached. (1) Subject or charge on, benefit shall benefit shall behalf of the to the provisions of this Act, every assignment of, benefit and every agreement to assign or charge be void; and, on the bankruptcy of.a beneficiary, the not pass to any trustee or other person acting on creditors of the beneficiary. (2) No cash benefit or contribution payable under this Act shall be liable to attachment, sequestration or transfer in respect of any debt or claim whatsoever or in execution of any decree or' order of any court. Overlapping benefits. 35. Deduction 36. from wages, (1) Except where regulations otherwise provide, a person shall not be entitled to the payment of more than one benefit under this Act for the same period; but he shall be entitled to the benefit which was first awarded or if the other benefit is payable at a higher rate, to that other benefit as long as entitlement to such other benefit continues. (2) Sub-section (1) above shall apply to any benefit payable to or in respect of (a) the insured person; or (b) the wife, husband or other dependant of that insured person. (3) Regulations may provide for adjusting benefit payable to persons specified in subsection (2) above and the conditions for its receipt. (1) Subject to the provisions of section 6 and of this Act and of sub-section (2) below, no employer by reason only of his liability for any contributions payable under this Act shall (a) (b) directly or indirectly reduce the wages of any employee; discontinue or reduce benefits to which an employee is entitled under his contract of service which are similar to benefits conferred by this Act; (2) Notwithstanding the provisions of any other written law, regulations may provide that where an employee is entitled to any specified benefit under this Act similar to any benefit payable to him under any other written law or under his contract of service, the employer may discontinue or reduce the benefit payable under such other enactment or contract of service by an amount not exceeding the amount of benefit paid or payable under this Act. - 100 t (3) For the purpose of sub-section (2) above, a person who has not claimed benefit but would have been entitled to the benefit if he had claimed it shall, unless or except so far as regulations provide otherwise, be deemed to be entitled to the benefit for all the purposes of this Act (except so as to confer a right to payment of the benefit). Employer 37. not to dismiss or punish employee during period of temporary disablement. 38. Employer's liability in the case of employment injury. 38. (1) No employer shall, except as provided in the regulations, dismiss, discharge, or reduce or otherwise punish an employee during the period he is in receipt of temporary disablement benefit. (2) No notice of dismissal or discharge or reduction given to an employee during the period specified in sub-section (1) shall be valid or operative. ^ A clause is to be drafted to take the place of the following provisions in the present Act. Alternative "A" (1) A person who suffers an employment injury as an employee under this Act or his dependants shall not be entitled to obtain compensation under the Workmen's Compensation Ordinance. (2) Where an employee or his dependants are awarded damages under any law in respect of an injury which is an imployment injury under this Act, the Court awarding such damages shall order the deduction of equivalent value of cash benefits paid or payable under this Act from the total amount of damages so awarded. (3) Where benefit is paid or payable under this Act in respect of an employment injury for which the employer is criminally responsible or which is due to his wilful action or to an offence committed by him, the Organisation shall have the right to claim from the employer reimbursement of (or "shall be reimbursed by the employer") .the equivalent value of any benefit provided under this Act. (4) In subsections (2) and (3) above, the expression "equivalent value" means in the case of (a) cash benefit paid or payable as a periodical payment, the capital value of such periodical payment assessed in accordance with the regulations made under this Act. (b) cash benefit - paid or payable as a hump sum benefit, the amount of such benefit; (c) benefit in kind, the value of such benefit as determined by the Organisation. Employer's 38. hability in the case of employment injury. Alternative "B" (1) Subject to subsection (2) below, employers covered by this Act shall be exempt from other legal responsibilities for the consequences of employment accidents and occupational diseases arising out of the Workmen's Compensation Ordinance and any other written law. (2) The provisions of subsection (1) above shall not apply to the consequences of employment accidents and occupational diseases for which the employer is criminally responsible or which are due to his wilful action or to an offence committed by him. (3) An insured person who has suffered an employment injury as a result of an accident referred to in subsection (2) above, or his surviving dependants, may claim from the employer all damages due under any law other than the Workmen's Compensation Ordinance, without prejudice to their right under this Act: Provided that the Court awarding damages under such law shall order the deduction of the equivalent value of cash benefits paid or payable under this Act from the total amount of damages so awarded. (4) In the case of an employment accident specified in subsection (2) above the Organisation shall have the right to claim (or "shall be reimbursed by the employer") the equivalent value of any benefit provided under this Act. * * - 101 - (4) In subsections (3) and (4) above, the expression "equivalent value" in the case of (a) cash benefit paid or payable as a periodical payment, the capital value of such periodical payment assessed in accordance with the regulations made under this Act; (b) cash benefit paid or payable as a hump sum benefit, the amount of such benefit; (c) benefit in kind, the value of such benefit as determined by the Organisation. Facilities 39. for physical or vocational rehabilitation. (1) An insured person suffering from or claiming to suffer from invalidity or permanent disablement may be provided by the Organisation, froo of charge :fao.i '1 itiou for physical or vocational rehabili tation. Organisa40. tions' s power to cooperate with existing institutions Or promote measures for health, welfare, etc of insured persons. (1) The Organisation may, in addition to the scheme of benefits specified in this Act, promote measures or cooperate with ex.i u t.i n<; institutions for the improvement of the health, occupational safety and welfare of insured persons and for the rehabilitation and re-employment of insured persons who have been disabled or injured and may incur in respect of such measures expenditure from the funds of the Organisation within such limits as may be determined by the Minister. Establish- 41. ment and maintenance of hospitals, clinics, etc. (1) The Board may establish and maintain such hospitals, clinics, dispensaries and other medical and surgical services as it may think fit for the benefit of insured persons. (2) The Board may enter into agreement with any Government, local authority, private organisation or person, in regard to the provision of medical treatment and attendance for insured persons, in any area and payment of the cost thereof in full or in part. Time and manner of making claims. 42. (2) Facilities under sub-section (1) shall be of such nature and scale and shall be provided to such insured persons and on such conditions as may be specified by the regulations. (3) An insured person suffering from or claiming to suffer from invalidity or permanent disablement may if the regulations so provide and if his condition so requires, be provided and renewed when considered necessary free of charge prosthetic appliances of such nature and scale and on such conditions as may be specified by the regulations. (4) An insured person who undergoes measures of physical or vocational rehabilitation or who is or is to be fitted with prosthetic appliances may, where he is required to go outside his place of residence be paid or reimbursed expenses reasonably incurred or to be incurred by him on travelling or maintenance in connection with such'measures, or the fitting of prosthetic appliances, on such scale and on such conditions as may be prescribed in the regulations. (2) Measures under sub-section (1) may include provision of artificial limbs and appliances, utilisation or creation of opportunities for gainful employment under suitable conditions and participation in the establishment or maintenance of convalescent homes. (1) Subject to the provisions of this Act, it shall be a condition of a person's right to any benefit (a) that he makes a claim therefor to the Organisation or any prescribed authority within the prescribed time in such form, in any manner and at any place as may be required by the Organisation; and (b) that he furnishes particulars and produces such certificates, documents, information and evidence as the Organisation may from time to time require for the purpose of determining entitlement to benefit and for that purpose attends at such office or place as the Organisation may appoint. - 1 0 2- Payment 43. of benefit. (l) , Subject to the provisions of sub-section (2) below, where any person is entitled to benefit (a) he shall receive payment in the manner and at the office of the Organisation or at any other place as the Organisation may from time to time determine or as may be prescribed; (b) the beneficiary or a person authorised to receive payment shall produce any documents and proof of identity and entitlement as the Organisation may require. (2) Regulations may provide (a) in respect of different benefits for the period to be covered by each payment and that such payment shall be made in arrears or in advance; (b) for determining the date of commencement and termination of benefit and the date of commencement of any change in the rate of benefit; (3) An insured person suffering from or claiming to suffer from or claiming to suffer from invalidity or permanent disablement may if the regulations so provide and if his condition so requires, be provided and renewed when considered necessary free of charge prosthetic appliances of such nature and scale and on such conditions as may be specified by the regulations. (4) An insured person who undergoes measures of physical or vocational rehabilitation or who is or is to be fitted with prosthetic appliances may, where he is required to go outside his place of residence be paid or reimbursed expenses reasonably incurred or to be incurred by him on travelling or maintenance in connection with such measures, or the fitting of prosthetic appliances, on such scale and on such conditions as may be prescribed in the regulations. Organisa40. tion' s power to cooperate with existing institutions or promote measures for health, welfare, etc of insured persons. (1) The Organisation may, in addition to the scheme of benefits specified in this Act, promote measures or cooperate with existing institutions for the improvement of the health, occupational safety and welfare of insured persons and for the rehabilitation and reemployment of insured persons who have been disabled or injured and may incur in respect of such measures expenditure from the funds of the Organisation within such limits as may be determined by the Minister. (2) Measures under sub-section (1) may include provision of artificial limbs and appliances, utilisation or creation of opportunities for gainful employment under suitable conditions and participation in the establishment or maintenance of convalescent homes. Establish- 41. ment and maintenance of hospitals, clinics, etc. (1) The Board may establish and maintain such hospitals, clinics, dispensaries and other medical and surgical services as it may think fit for the benefit of insured persons. (2) The Board may enter into agreement with any Government, local authority, private organisation or person, in regard to the provision of medical treatment and attendance for insured persons, in any area and payment of the cost thereof in full or in part. Time and manner of making claims. (l) Subject to the provisions of this Act, it shall be a condition of a person's right to any benefit (a) that he makes a claim therefor to the Organisation or any prescribed authority within the prescribed time in such form, in any manner and at any place as may be required by the Organisation; and (b) that he furnishes particulars and produces such certificates, documents, information and evidence as the Organisation may from time to time require for the purpose of determining entitlement to benefit and for that purpose attends at such office or place as the Organisation may appoint. 42. - 103 - Payment of benefit. 43. Matters 44. affecting to benefit to be Organisation s " a (1) Subject to the provisions of sub-section (2) below, where any person is entitled to benefit (a) he shall receive payment in the manner and at the office the Organisation or at any other place as the Organisation may from time to time determine or as may be prescribed; (b) the beneficiary or a person authorised to receive payment shall produce any documents and proof of identity and entitlement as the Organisation may require. (2) Regulations may provide (a) in respect of different benefits for the period to be be covered by each payment and that such payment shall be made in arrears or in advance: (b) for determining the date of commencement and termination of benefit and the date of commencement of any change in the rate of benefit; (c) for extinguishing the right to payment of any sum by way of benefit if payment is not obtained within a prescribed period from the date on which the right is to be treated under the regulations as having arisen; (d) for enabling a person to be appointed to exercise, on behalf of a claimant or beneficiary who is legally or otherwise unable to act for the time being, any right or power which the claimant or beneficiary may be entitled to exercise under this Act and for authorising a person so appointed to receive and deal with any sum payable by way of benefit, on behalf of the claimant or beneficiary; (e) as to the circumstances in which any benefit which is payable to one person may be paid to another person on behalf of the former; (f) for enabling an insured person or beneficiary to nominate in writing in such form and subject to such condition as may be specified in the regulations any other person or persons to receive any cash benefit to which the insured person or beneficiary himself may be entitled at the time of his death; (g) in connection with a person's death (i) for enabling a claim for benefit to be made or proceeded with in his name; (ii) for authorising payment or distribution of benefit to or amongst persons claiming as his personal representatives, legatees, next-of-kin or creditors (or in cases of illegitimacy of deceased persons, to or amongst others); and (iii) for dispensing with strict proof of title of persons so claiming. (3) Regulations may provide for such other matters as may be necessary for the proper administration of benefit including (a) the adjustment of amounts payable by way of benefit to avoid fractional amounts or to facilitate computation; (b) the obligations of claimants and beneficiaries, persons authorised to claim or receive benefit on behalf of other persons, and employers. (1) A person in receipt of any benefit under this Act shall report to the Organisation as soon as possible every event or fact which affects or is likely to affect the continuance of the right to benefit or the rate thereof. The ^ Provisions of sub-section (1) above shall apply also to person authorised to receive payment of benefit on behalf of some other person. - 104 - Repayment of benefit improperly received. 45. (1) Without prejudice to other provisions in this Act, if any person by reasons of the non-disclosure or misrepresentation by him, or by some other person acting on his behalf, of a material fact (whether such non-disclosure or misrepresentation was or was not fraudulent) has received any benefit to which he was;not entitled he shall be liable to repay to the Organisation the value of the benefit received and in the event of death of the beneficiary his representative shall be liable to repay the value of the benefit from the assets of the deceased, if any, in his hands: Provided that where the beneficiary received the benefit as a result of the non-disclosure or misrepresentation of another person, the Organisation may recover the value of the benefit from such other person. (2) The amount recoverable under this section may be recovered as a debt due to the Organisation. (3) Without prejudice to sub-section (2) above or any other remedy, where any person is liable to repay any sum received by him by way of benefit, that sum may be recovered by way of deduction from any payment or benefit to which thereafter he may become entitled. (4) The value of any benefits received, other than cash payments shall be determined by the Organisation and its decision shall be final. (5) Any sums paid on account of benefit to or on behalf of persons not lawfully entitled thereto, so far as not recovered, shall be treated as expenditure on benefits and charged to the Social Security Fund, hereinafter established. Disquali46. fication for benefit (1) A person shall be disqualified for receiving sickness benefit for a period not exceeding forty-two days if (a) he has become incapable of work through his own misconduct; or (b) after he has been required by the Organisation to busmit himself to a medical or other examination, or to medical treatment, he has without good cause refused or failed to attend for, or to submit himself to, such examination or treatment; or (c) he has behaved in a manner likely to retard his recovery: Provided that no person shall be disqualified for receiving any benefit for refusal to undergo a surgical operation not being one of a minor character. (2) A person in receipt of sickness benefit, maternity benefit or temporary disablement benefit shall be disqualified for receiving such benefit for a period not exceeding forty-two days if he fails without good cause to observe prescribed rules of behaviour: Provided that benefit may be suspended until the beneficiary complies with such rules. (3) Regulations may provide for disqualifying a person, for the receipt of any benefit if he fails to make a claim therefor within the prescribed time; but any such regulations shall provide for extending, subject to any prescribed conditions, the time within which the claim may be made in cases where good cause is shown for the delay: Provided that such regulations shall not provide for the payment of any sum to any person on account of any benefit in respect of any period more than six months before the date on which the claim is made. (4) Except where regulations otherwise provide, but subject to sub-sections (5) and (6) below, a person shall be disqualified for receiving benefit for any period during which - - 105 - (a) he is absent from Malaysia; or (b) is undergoing imprisonment or detention in legal custody. (5) A person who is absent from Malaysia for any period shall not be disqualified for receiving (a) retirement pension; or (b) permanent disablement benefit, if the extent of the disablement has been finally assessed. (6) Regulations may provide that where an insured person is disqualified for receiving a specified benefit under sub-section (4) above, payment of the whole or any part of the benefit may be made in such circumstances and subject to such conditions as may be prescribed for the maintenance of the wife, or a legitimate or adopted son or daughter of the insured person. (7) Regulations may provide for suspending or reducing benefit payable to or in respect of a person during any period in which he (a) is undergoing medical or other treatment as an inpatient in a hospital or other similar institution; or (b) is being maintained in a home for elderly or handicapped persons or at any other place, wholly or mainly at the expense of the Organisation or the Government. PART IV DETERMINATION OF CLAIMS AND QUESTIONS AM) APPEALS Determina- 47. tion of question as to insurability and contributions Determination of claims. 48. If any question arises as to (a) whether any person is or was an employee or is in a class of persons who are liable to be insured under this Act; (b) whether a contribution is or was payable by or in respect of any person under Part II of this Act and the rate of contribution payable; (c) the rate of wages or average daily wages of an employee for the purposes of this Act; (d) who is or was the principal employer of any employee; (e) whether any person is entitled to have a contribution credited to him for any period; that question shall be determined by the Organisation after such inquiry as the Organisation may deem necessary: Provided that if the Organisation deemts fit, it may refer such question to the Tribunal after ,",i.vi.n^ notice to any person appearing to the Organisation to be interested. Subject to the provision in this Part of the Act every claim for benefit shall be considered by the Organisation who may (a) decide the claim in favour of the claimant; or (b) decide the claim adversely to the claimant; or (c) after giving notice in writing to the claimant refer the claim to the Tribunal. - 106 - Determina- 49. tion of Invalidity and permanent disablement questions. (1) Subject to sub-section (3) below, the Organisation shall refer a claim for invalidity or permanent disablement benefit to a medical board appointed by the Minister to determine the medical aspects of the claim, hereinafter referred to as the "invalidity question", and the "permanent disablement question" in the case of a claim for permanent disablement. (2) Subject to sub-section (3) below, any question whether an employment injury is caused by a prescribed disease hereinafter referred to as the "prescribed disease question" shall be referred by the Organisation to a medical board to determine the medical aspects of the claim. (3) (4) Regulations may provide (a) for the aspects to be determined by a medical board in the case of an invalidity question permanent disablement question and prescribed disease question respectively; (b) that in the case of a disablement question (i) the degree of disablement shall be assessed in the form of a percentage as shall be prescribed; (ii) the period taken into account shall be specified; and (iii) where the assessment is limited to a definite date, whether the assessment is provisional or final shall be specified; (c) for subsequent reference to a medical board of an invalidity permanent disablement or prescribed disease question in the case of a provisional assessment. Regulations may provide (a) for the appointment constitution, functions and procedure of medical boards; (b) that where a claim for invalidity benefit or permanent disablement benefit fails on other statutory conditions it shall not be referred to a medical board. Appeal 50. form decision of medical board to appellate medical board. (1) If the claimant or the Organisation is not satisfied with the decision of a medical board such person or the Organisation may appeal in the prescribed manner and within the prescribed time to the appellate medical board appointed by the Minister. (2) Subject to the provisions of section 51 of this Act, any decision of the appellate medical board shall be final. (3) Regulations may provide for the appointment of one or more appellate medical boards as the Minister may deem necessary, and for their procedure. (4) Regulations may provide that where a claimant for invalidity benefit or permanent disablement benefit is called to appear before a medical board or, in the event of .an appeal by the Organisation, before the appellate medical board, in connection with the determination of a relevant question he may be paid travelling and other expenses incurred by him in connection with such appearance in such cases and on such scale and subject to such conditions as may be prescribed. Review of decisions by medical boards and appellate medical boards. (1) Any decision under this Act of a medical board or the appellate medical board may be reviewed at any time by the medical board or the appellate medical board, as the case may be, if it is satisfied by fresh evidence that the decision was given in consequence of the non-disclosure or misrepresentation by the employee or any other person of a material fact (whether the nondisclosure or misrepresentation was or was not fraudulent). 51. - 107 - (2) Any assessment of the extent of the disablement resulting from the relevant employment injury may also be reviewed by a medical board, if it is satisfied that since the making of the assessment there has been a substantial and unforeseen aggravation of the results of the relevant injury: Provided that an assessment shall not be reviewed under this subsection unless such board is of the opinion that, having regard to the period taken into account by the assessment, substantial injustice will be done by not reviewing it. (3) Except with the leave of the appellate medical board, the assessment shall not be reviewed under sub-section {?.) on any application made less than five years, or in the case of a provisional assessment, six months, from the date thereof and on such a review the period to be taken into account by any revised assessment shall not include any period before the date of the application. (4) Subject to the provisions of sub-section (3) above, a medical board may deal with a case of review in any manner in which it could deal with it on an original reference to it, and in particular may make a provisional assessment notwithstanding that the assessment under review was final; and the provisions of section 49 shall apply to an application for review under this section and to a decision of a medical board in connection with such application as they apply to a case for disablement benefit under that section and to a decision of a medical board in connection with such case. Constitution of Social Security Tribunal. 52. (1) The Minister shall, by notification in the Gazette appoint a Social Security Tribunal (hereinafter referred to as the "Tribunal") for such State or States or area or areas as may be specified in the notification. (2) The Tribunal shall consist of a Chairman and two assessors. (3) Any person who is or has been a legal officer, a judicial officer or is a legal practitioner of not less than ten years' standing shall be qualified to be a Chairman of the Tribunal. (4) The assessors shall represent employers and insured persons, respectively, and shall be nominated by the Minister in consultation with such organisations representing employers and insured persons respectively as he may think fit. (5) The Chairman and assessors shall be appointed by the Minister for such period and on such terms and conditions as he may determine. (6) The Minister may in his discretion, appoint a panel of persons to represent employers and a panel to represent insured persons from among whom persons may be drawn to serve as assessors as the Minister may direct, and such panels may be reconstituted by him at intervals as he deems fit. (7) The Minister may, if he considers it expedient so to do, revoke the appointment of the Chairman and of any assessor of the Tribunal or on its panel. (8) A member of the Board shall not be eligible for appointment as a Chairman or assessor of the Tribunal. Appeals, 53. questions and disputes to be determined by the Tribunal. (1) An appeal shall lie to the Tribunal from any decision of the Organisation (a) at the instance of the aggrieved person on any question of law determined under section 47; (b) at the instance of the claimant in the case of a decision under section 48 of this Act. - 108 - (2) Subject to the provisions of this Act, the Tribunal shall determine (a) any question or dispute connected with (i) the recovery of contributions under section 101; (ii) (to) the recovery of contributions by a principal employer from any immediate employer; (iii) claim under section 45 for the recovery of the value of amount or the benefits received by a person when he is not lawfully entitled thereto; and (vi) any claim for the recovery of any benefit admissible under this Act. any other matter which is in dispute between a principal employer and the Organisation, or between a principal employer and an immediate employer, or between a person and the Organisation, or between an employee and a principal or immediate employer, in respect of any contribution or benefit or other dues payable or recoverable under this Act, or any other matter required to be or which may be decided by the Tribunal under this Act. (3) If in any proceedings before the Tribunal an invalidity or disablement question arises and the decision of a medical board or appellate medical board has not been obtained on the same and the decision of such question is necessary for the determination of the claim or question before the Tribunal, the Tribunal shall direct the Organisation to have the question decided in accordance with this Act and shall thereafter proceed with the determination of the claim or question before it in accordance with the decision of the medical board or the appellate medical board, as the case may be. (4) No Civil Court shall have jurisdiction to decide or deal with any question or dispute mentioned in sub-sections (1) and (2) above or to adjudicate on any liability which by or under this Act is to be decided by the Tribunal. (5) No Civil Court shall have jurisdiction to decide or deal with any question or dispute which by or under this Act is to be decided by a medical board or by an appellate medical board. (6) Regulations may provide for (a) the period within which notice of appeal is to be given or application made under this section; (b) the procedure of the Tribunal and the execution of its decisions; (c) the fee payable in respect of an application: provided that no fee shall be payable in respect of an appeal under section 47 or 40, or an application made by the Organisation. Institution 54. or proceedings, etc. before the Tribunal. (1) Subject to the provisions of this Act and the regulations, all proceedings under section 53 shall be instituted before the Tribunal appointed for the area in which the insured person was working at the time the question or dispute arose. (2) The Minister may transfer any matter pending before any Tribunal in a State or area to any such Tribunal in another State or area. (3) The Tribunal to which any matter is transferred under subsection (2) shall continue the proceedings as if they had been originally instituted before it. - 109 - Powers of the Tribunal. 55. (1) The Tribunal shall have all the powers of a President of a Sessions Court in respect of West Malaysia or a Magistrate of the First Class in respect of East Malaysia, for the purpose of summoning and enforcing the attendance of witnesses, compelling the discovery and production of documents and material objects, administering oath and recording evidence. (2) The Tribunal shall follow such procedure as may be prescribed. (3) All costs incidental to any proceedings before a Tribunal shall, subject to such regulations as may be made in this behalf, be in the discretion of the Tribunal. (4) A decision of the Tribunal shall be enforceable as if it were a judgement of a Sessions Court in respect of West Malaysia or a Court of a Magistrate of the First Class in respect of East Malaysia, notwithstanding that the same may be in respect of amount in excess of the ordinary jurisdiction of the said Court. Right to appear before the Tribunal and to act. 56. (1) The Director-General, an officer of the Organisation delegated by him or any prescribed person - Reference to High Court. 57. A Tribunal may submit any question of law for the decision of the High Court and if it does so shall decide the question pending before it in accordance with such decision. 58. Appeal to High Court. (1) Subject to sub-section (2) below, no appeal shall lie from a decision of a Tribunal set up under this Act. (2) An appeal shall lie to the High Court from a decision of a Tribunal if it involves a substantial question of law. (3) The period of limitation for an appeal under this section shall be sixty days from the date the decision is made. (a) shall be enabled to make any application or do any act which is required to be done; (b) shall be entitled to appear before the Tribunal and be heard. (2) Any application, appearance or act required to be made or done by any person to or before a Tribunal (other than appearance of a person required for the purpose of his examination as a witness) may be made or done by a legal practitioner or by an officer of a registered trade union authorised in writing by such person, or with the permission of the Tribunal, by any other person so authorised. Slay of payment pending appeal. V). Whort; (.he Organisation hus pri'Scn tod. an appeal, a^ai us I. a decision of the Tribunal, that Tribunal may, and if so directed by the High Court shall, pending the decision of the appeal, withhold the payment of any sum directed to be paid by the decision appealed against. Review of decisions. 60. (1) The Organisation, having given a decision on any claim or question may review that decision at any time if it is satisfied (a) that the decision was given in ignorance of or was based on a mistake as to some material fact; or (b) that there has been a relevant change of circumstances since the decision was given; or (c) by fresh evidence that the decision was given in consequence of non-disclosure or misrepresentation by the claimant or any other person of a material fact (whether the non-disclosure was or was not fraudulent); or (d) that the decision is no longer in accordance with the provisions of the Act or the regulations as a result of a change in relevant circumstances; or (e) the decision was based on the determination of a question by a medical board or an appellate medical board and such determination is revised under section 51 of this Act. - 110 - (2) Subject to the provisions of this Act and the regulations, the Organisation on such review as aforesaid, may direct that the benefit he continued, discontinued, increased or reduced as appropriate. (3) The Organisation shall not review a decision pending before a Tribunal except with the permission or at the request of such Tribunal. (4) A decision of a Tribunal given on a claim or question may be reviewed by the Tribunal on reference from the Organisation if the Tribunal is satisfied by fresh evidence that any of the circumstances specified in sub-section (l) above exist. (5) Regulations may provide for the procedure to be followed for review of decisions under this section. PART V ADMINISTRATION, FINANCE AND AUDIT Administration of the Social Security Scheme. 61. (1) The Scheme of Social Security embodied under the Act shall be administered by the Social Security Organisation in accordance with the provisions of this Act. (2) The general direction and superintendence of the Organisation shall vest in the Board of Management which shall be established in accordance with the provisions of this Act from such date as the Minister may appoint in this behalf by notification in the Gazette. Chief Executive Officer. 62. (l) The Minister shall appoint a Director-General who shall be the Chief Executive Officer of the Organisation. (2) The Minister may also appoint one or more Deputy DirectorGenerals. (3) The terms and conditions of service of the Director-General and of the Deputy Director-General(s) shall be determined by the Minister in consultation with the Minister of Finance. The Social 63. Security Organisation The Organisation shall be a body corporate with perpetual succession and a common seal and may sue and be sued in its name and, subject to and for the purposes of this Act, may enter into contracts and may acquire, purchase, take, hold and enjoy movable and immovable property of every description, and may convey, assign, surrender, yield up, charge, mortgage, demise, reassign, transfer or otherwise dispose of, or deal with, any movable or immovable property or any interest therein vested in the Organisation upon such terms as it deems fit. Appoint64. ment of Board of Management. (l) There shall be appointed a Board of Management, hereinafter referred to as the Board. (2) The Board shall be composed as follows (a) the Secretary-General, Ministry of Labour and Manpower as Chairman; (b) the Director-General of the Organisation as Deputy Chairman; (c) an officer representing the Ministry of Finance; (d) two persons representing employers to be appointed by the Minister in consultation with such organisations representing employers as may be deemed fit for the purpose by the Minister; (e) two persons representing insured persons to be appointed by the Minister in consultation with such organisations representing insured persons as may be deemed fit for the purpose by the Minister. - Ill - (3) The appointment of members of the Board shall be notified in the Gazette. (4) Members of the Board appointed under sub-sections 1(d) and (e) shall hold office for such term and subject to such conditions as the Minister may specifiy in the instrument appointing them. (5) The Board shall not be prevented from performing all its functions, duties and obligations under this Act by any vacancy in its membership: Provided that the Minister shall take all possible steps so that any vacancy among persons appointed in accordance with sub-sections 1(d) and (e) shall be filled as soon as practicable. (6) The Minister may nominate a Deputy Director-General to perform all the duties and functions of Deputy Chairman of the Board in the absence of the Director-General. (7) The Minister may appoint an officer of the Organisation to perform the duties of Secretary of the Board. The Minister may also appoint an Assistant Secretary. Deputy Chairman to a c t as Chairman. 65. (1) If for any period the Chairman of the Board is temporarily absent from Malaysia or temporarily incapacitated through illness, or for any other sufficient reason is unable to perform his duties the Deputy Chairman shall perform the duties of Chairman during such period. (2) Should the office of Chairman become vacant for any reason, the Deputy Chairman shall perform the duties of the Chairman until such time as the vacancy is filled. Sixth Schedule. 66. The provisions of the Second Schedule to this Act shall apply to the Board. Cessation of membership of the Board. 67; (1) Disqualifi- 68. cation for membership of the Board. A member of the Board shall cease to be a member thereof (a) if he fails to attend three consecutive meetings without leave of the Board; or (b) his appointment is revoked by the Minister. (2) A member of the Board appointed by the Minister under Section 64(2)(d) and (2)(e) may resign his office by notice in writing to the Minister. A person shall be disqualified from being a member of the (1) Board (a) if he is declared to be of unsound mind by a competent court; or 0>) if he is an undischarged bankrupt; or (c) if he has directly or indirectly by himself or by his Partner any interest in a subsi.sting contract with or any work being done for the Organisation except as a medical practitioner or as a shareholder (not being a Director) of a company; or (d) if before or after the commencement of this Act, he has been found guilty by a competent court in Malaysia or outside Malaysia, of an offence involving fraud, dishonesty or moral turpitude; or if a member owes the Organisation past due contributions; or (f) if he subsequently becomes an officer or servant of the Organisation other than the Director-General and the Deputy Director-General(s); or (e) (g) if a member has become a member of a legislature. (2) Any cessation of membership of the Board in accordance with the provisions of this section or of section 67 shall be notified in the Gazette. - 112 - Public 69. Authorities Protection Ordinance 1948. Public 70. servants and public officers. The Public Authorities Protection Ordinance, 1948 shall apply to any action, suit, prosecution or proceedings against the Board, or against any of its members, any officer, servant or agent of the Organisation in respect of any act, neglect or default done or committed by him in such capacity. Board to 71. give effect to Minister's directions. (1) In the exercise of its powers and the performance of its duties and functions under this Act, the Board shall be responsible to the.Minister who may, from time to time, give directions not inconsistent with the provisions of this Act, and the Board shall as soon as possible, give effect to all such directions. All members of the Board and officers and servants of the Organisation while discharging their duties as such members, officers or servants shall be deemed to be public servants within the meaning of the Penal Code, and public officers for the purposes of any written law for the time being in force. (2) The Minister may at any time require the Board to submit to him proposals for the introduction of new social security schemes or the modification or extension of the existing scheme as may be necessary for the fulfilment of the Government's social policy programmes. Delegation of powers of the Board. 72. (1) The Board may, subject to such conditions, limitations or restrictions as it thinks fit, delegate to the Chairman, DirectorGeneral or any other person the power and authority to carry out on its behalf such powers, duties or functions by this Act vested or imposed on the Board as it may determine, except the power to borrow money and raise loans, and the power or funktions so delegated may be exercised or performed by the Chairman, DirectorGeneral or such other person as the case may be, in the. name and on behalf of the Board. (2) Without prejudice to the generality of sub-section (l) above, the Board may delegate to the Chairman, Director-General, any of its members or any person, authority to sanction expenditure from social security funds or any other monies under the control of the Board, up to such limit as.it shall in such case specify. Adminis73. trative control of officers and servants by DirectorGeneral . (1) Subject to the directions of the Chairman of the Board, the Director-General shall have administrative control of the officers and servants of the Organisation. (2) The Director-General shall perform such other or further duties as the Minister or the Board may from time to time determine. Appoint74. ment of officers and servants. (1) Subject to the provisions of section 62, the Board may appoint such other officers and servants cf the Organisation as may be necessary for carrying out the purposes of this Act. (2) No person shall be eligible for employment as officer or servant of the Organisation who has, directly or indirectly, by himself or his partner, any share or interest in any contract or proposed contract with, for or on behalf of the Organisation. (3) Any officer or servant of the Organisation who has or acquires directly or indirectly by himself or his partner any such share or interest shall be liable at the discretion of the Board to summary dismissal without notice. Setting up 75. Divisions, Regional Offices, etc. 76. Power to dispose of staff questions. The Board may set up within the Organisation such Divisions and regional and local offices as it may consider necessary for the efficient functioning of the Organisation. (1) Subject to any other provisions in this Act and in staff rules, the Director-General - - 113 - (a) shall dispose of all questions relating to the service, pay, privileges and allowances of officers and servants of the Organisation; and (b) shall exercise the power of promoting, suspending, dismissing, fining, reducing in rank and granting leave to officers and servants of the Organisation: Provided that in the case of officers and servants whose monthly salary exceeds five hundred dollars, such powers, with the exception of granting or suspending leave, shall not be exercised without the previous approval of the Board. (2) The power of dispensing with the services of any officer or servant of the Organisation for any reason other than the misconduct of such officer or servant shall be exercised by the Board alone. (3) Any officer or servant aggrieved by a decision of the Director-General in the exercise of his powers under this section may appeal to the Board within such period as may be determined in staff rules. Power to 77. make staff rules. (1) With the approval of the Minister, the Board may, from time to time, make staff rules relating to the conditions of service of officers and servants (other than than the Director-General and Deputy Director-General) of the Organisation: Provided that in making such rules, the Board shall have regard to rates of pay and other conditions of service applicable to officers and servants of statutory bodies. (2) Without prejudice to the generality of the provisions of subsection (1) above, such rules may provide for matter:; specified .in the Third Schedule. Social Security Advisory Council. 78. (1) The Minister may appoint a Social Security Advisory Council, hereinafter referred to as the "Council",. consisting of (a) the Secretary-General, Ministry of Labour and Manpower as Chairman; (b) a number of officials and other persons as the Minister may deem necessary, as members; and (c) the Director-General of the Organisation as Secretary, or any other officer of the Organisation authorised by him in this behalf. (2) The members of the Council, other than a member in paragraphs (a) and (c) of sub-section (1) above, shall hold office' for such term and subject to such conditions as the Minister may specify in the instrument appointing them. (3) The appointment of members of the Council shall be notified in the Gazette. Cessation of membership of Council. 79. Disquali80. fication for membership of Council. A member of the Council shall cease to be a member of that body if he fails to attend three consecutive meetings thereof; Provided that the Council may, subject to any regulations made by the Minister in this behalf restore him to membership. A person shall be disqualified from being appointed as or for being a member of the Council (a) if he is declared to be of unsound mind by a competent court; or (b) if he is an undischarged bankrupt; or (c) if he has directly or indirectly by himself or by his partner any interest in a subsisting contract with, or any work being done for, the Organisation except as a medical practitioner or as a shareholder (not being a Director; of a company; or - 114 - (d) if before or after the commencement of this Act, he has been convicted of an offence involving fraud, dishonesty or moral turpitude. 81. Appointment may be revoked. (1) The Minister may at any time revoke the appointment of a member of the Council. (2) All cessations of membership of the Council in accordance with this section or with sections 79 and 80 shall be notified in the Gazette. 82.. Members of the Board and the Council shall receive such fees Fees and and allowances as may from time to time be determined by the allowances. Minister in the instrument appointing them. 83. Resignation of membership. A member of the Council may resign his office by notice in writing to the Minister. Functions of the Council. (1) 84. The functions of the Council shall be (a) generally to advise the Minister on matters relating to social security; and (b) to advise the Minister on any matter referred to it for advice. (2) The Council shall perform such other functions as may be specified by regulations. Regional Social Security Advisory Councils and Local Committees. 85. (1) The Minister may appoint one or more Regional Social Security Advisory Councils, hereinafter referred to as Regional Councils, consisting of (a) such persons including one officer of the Organisation as the Minister may deem necessary; and (b) a secretary nominated by the Director-General. (2) Members of the Regional Councils shall hold office for such term and subject to such conditions as the Minister may specify in the instrument appointing them. (3) The appointment of a Regional Council shall be notified in the Gazette and shall operate in respect of such region or area as shall be specified in the Gazette. (4) A Regional Council shall perform such functions and shall follow such procedure as may be prescribed. (5) The Minister may appoint Local Committees and the provisions of sub-sections (1) to (4) above shall apply mutatis mutandis. (6) The Minister may at any time revoke the appointment of any person appointed on a Regional Council or Local Committee. (7) Members of a Regional Council and Local Committee may receive such fees and allowances as the Minister may from time to time determine. (8) Without prejudice to sub-section (6) above the appointment of a member of a Regional Council or a Local Committee shall cease in such circumstances as may be prescribed. Social Security Fund. 86. For the purposes of this Act, there shall be established, under the control and management of the Organisation, the Social Security Fund hereinafter referred to as the "Fund" into which shall be paid (a) all contributions payable by or in respect of insured persons; (b) all rent, interest, dividend or other income derived from the assets of the Fund; (c) all sums properly accruing to the Fund under this Act, including the re-payment of benefits; - 115 - (d) all sums recovered under this A.ct, ;i.s f.Lnou, loon, penalties or costs and any interest on arrears of contribution; (e) such sums as may be provided by the House of Representatives from time to time to maintain the financial equilibrium of the Fund having regard to the rate of contribution required and benefits provided; (f) such sums by way of grants, donations and gifts from the Federal Government, a State Government, Local Authority, or any individual or body whether incorporated or not, for all or any of the provisions of this Act. (2) The Minister, in consultation with the Minister concerned, may authorise any Government Department or Statutory Body to receive on behalf of the Organisation contributions and other monies payable or accruing to the Fund subject to such conditions as may be prescribed. (3) Regulations may provide that contributions payable under this Act by certain classes of insured persons sha.11 be received on behalf of the Organisation by such other Organisations or persons and subject to such conditions as may be specified in the regulations. Purposes 87. Subject to the provisions of this Act and the regulations, for which the the Fund shall be expended only for the following purposes, Fund may be namely e Pn " (a) payment of benefits and provision of medical treatment and attendance to insured persons or to their dependants, as the case may be; (b) establishment and maintenance of hispitals, clinics, dispensaries and other institutions and the provision of medical and other ancillary services for the benefit of insured persons; (c) payment of contributions to the Government, Local Authority or any private body or individual towards the cost of medical treatment and attendance provided to insured persons and others including the cost of any building and equipment, in accordance with any agreement entered into by the Organisation; (d) defraying the cost of the Board, the Council, the Tribunal, medical boards (including appellate medical boards) Regional Councils and committees set up under this Act and the payment of fees and allowances to members thereof as may be determined by the Minister; (e) payment of sums under any decree, order or award of any court or tribunal against the Organisation or any of its officers or servants for any act done in the execution of his duty or under a compromise or settlement of any suit or other legal proceedings or claim instituted or made against the Organisation; (f) defraying the cost and other charges of instituting or defending any civil or criminal proceedings. ar.Lr.i n/i out of any action taken under this Act; (g) defraying expenditure, within the limits prescribed, on measures for the improvement of the health and welfare of insured persons and for the rehabilitation and reemployment of insured persons who have been disabled or injured; (h) such other purposes as may be authorised by the Minister in consultation with the Minister of Finance. Expenditure 88. Notwithstanding the provisions of the foregoing section, exon administpenditure may be incurred by the Organisation out of the Fund up ration. to such amount as may be authorised by the Minister for any one year for carrying on the administration of the scheme of social security provided under this Act including - - 116 - (a) the payment of salaries, leave and transfer expenses, travelling and compensatory allowances, pensions, contributions to provident or other benefit funds for officers and servants of the Organisation and meeting expenditure in respect of offices and other services set up for the purposes of giving effect to the provision of this Act; (b) the payment of fees and other remuneration to auditors, experts, actuaries, agents, technical advisers, including advocates and solicitors, bankers, stock brokers, surveyors, or other persons employed on a temporary or part-time basis to carry into effect the purposes of this Act; and (c) the purchase or hire of equipment. Holding 89. of property etc. The Organisation may, subject to such conditions as may be determined by the Minister in consultation with the Minister of Finance acquire and hold property both movable and immovable, sell or otherwise transfer any movable or immovable property which has become vested in or has been acquired by it and do all things necessary for the purposes for which the Organisation is established. Investment of Funds. 90, The Board may, subject to such conditions as may be determined by the Minister of Finance (a) invest any monies which are not immediately required for expenses properly defrayable under this Act and may, subject as aforesaid, from time to time, re-invest or realise such investments; (b) deposit other monies in a bank or banks. Raising of loans. 91. The Board may, with the previous sanction of the Minister of Finance and on such terms as may be prescribed by him, raise loans and take measures for discharging such loans. Budget estimates. 92. The Organisation shall in each year frame a budget showing the probable receipts and the expenditure which it proposes to incur during the following year and shall submit a copy of the budget for the approval of the Minister before such date as may be fixed by him in that behalf and such budget shall contain provisions as may be prescribed. Accounts. 93. (1) The Organisation shall maintain proper accounts and records and shall prepare a statement of account in respect of each year or of such other period as the Minister may direct. (2) Regulations may provide that separate accounts shall be maintained in respect of each branch of insurance under this Act as may be specified and in respect of administrative and other expenses which may be incurred in accordance with the provisions of the Act and the regulations. Audi t. 94. (1) The accounts of the Organisation shall be audited annually by the Auditor-General. (2) The Auditor-General or an officer delegated by him shall at all reasonable times have access to the books, accounts and other documents of the Organisation and may, for the purposes of an audit, call for such explanation and information as he may require or examine any principal or other officer of the Organisation. (3) The Board shall forward to the Minister a copy of the auditor's report and any observations together with an audited copy of the accounts of the Organisation. The Minister may direct the Board to send a copy of the auditor's report and of any statement of accounts to any Government Department. - 117 - Annual report. 95. The Board shall submit to the Minister an annual report; of the work and activities of the Organisation. Annual 96. report to be laid before the House of Representatives. The annual report and the audited accounts of the Organisation shall be laid before the House of Representatives. Actuarial review. 97. The Board shall, at intervals of five years, cause an actuarial review to be carried out on the working of the scheme provided under this Act and the report of such review shall be submitted to the Minister. Provided that it shall be open to the Minister or the Board to direct that such actuarial review be made at such other times as may be considered necessary. Duty of Board to review benefits. 98. Without prejudice to the provisions of section 71 of this Act, when substantial changes in the general level of earnings result from substantial changes in the cost of living, the Board shall examine the situation on the basis of an actuarial review under section 97 and shall make recommendations to the Minister to adjust the scheme of social insurance in order to maintain the real value of certain cash benefits. The recommendations of the Board, which shall be accompanied by the actuarial report and shall take account of Government social policy, may include proposals (a) for the revision of current periodical payments in respect of disablement caused by employment injury, oldage, invalidity and death of breadwinner; (b) (c) for the extension of benefit; for the revision of contribution rates and the basis for the calculation of contribution and benefit in relation to earnings from any gainful occupation or in any other manner. PART VI ENFORCEMENT PENALTIES AND LEGAL PROCEEDINGS ENFORCEMENT Appointment 99. of inspectors. (1) For the purpose of this Act the Board may appoint officers of the Organisation as inspectors as it deems fit: Provided that with the approval of the Minister the powers and duties of inspectors may also be ve;;tod by the Board in any other officer other than an officer of the Organisation, already in the service of the Government or a Statutory body. (2) An inspector appointed under this section shall for the purpose of the execution of this Act, have the following powers (a) to enter at all reasonable times any premises liable to inspection under this Act; (b) to make such examination and inquiry as may be necessary (i) for ascertaining whether the provisions of this Act are being, or have been complied with in any such premises; (ii) for investigating the circumstances in which any injury or disease which has given or may give rise to a claim for disablement benefit was or may have been received or con+.racted; or (iii) to ascertain the correctness of any particulars furnished to the Organisation. - 118 - (c) To examine either alone or in the presence of any other person, as he thinks fit, in relation to any matters under this Act on which he may reasonably require information, every person whom he finds in any such premises or whom he has reasonable cause to believe to be or to have been a person liable to pay contributions under this Act, and to require every such person to be so examined; (d) to make copies of, or take extracts from any register, account book or other document maintained in the premises; (e) to exercise such other powers and perform such other duties as may be necessary for carrying this Act into effect, or as may be prescribed. (3) The premises liable to inspection under this Act are any where an inspector has reasonable ground for supposing that any persons are employed but do not include any private dwelling house not used by, or by permission of, the occupier for the purpose of a trade or business. (4) Every inspector shall be furnished with a certificate of his appointment signed by the Director-General, and on applying for admission to any premises for the purpose of this Act, if so required, produce the certificate and his national identity card. (5) In this section and in section 100 below, "premises" includes any place. 100. (1) The following persons are under the duty to assist the Duty to submit to inspector to exercise his powers inspection. (a) the occupier of any premises liable to inspection under this Act; (D) any person who is or has been employing another; (c) the servants or agents of any such person as is specified in paragraphs (a) and (b) above; (d) any person who is or has been liable to pay contributions; but no one shall be required under this section to answer any question, or to give any evidence tending to incriminate himself or, in the case of a person who is married, his spouse. (2) If a person (a) wilfully delays or obstructs an inspector or other officer of the Organisation in the exercise of any power under this Act; or (b) refuses or neglects to answer any question or to furnish any information or to produce any document when required so to do under this Act; he shall be guilty of an offence and shall be liable on conviction to a fine not exceeding two thousand ringgit or to a term of imprisonment not exceeding six months or, to both fine and imprisonment. Where a person is convicted of an offence under sub-section (b) above and the refusal or neglect is continued by him after his conviction, he shall be guilty of a further offence and liable on conviction to a fine not exceeding one hundred ringgit for each day on which it is so continued. It If a person liable to pay any contribution in accordance Recovery 101. (1) with the provisions of this Act and the regulations in respect of contribuof some other person or in his own behalf fails to pay such tions. contribution within the prescribed time, he shall be liable to pay to the Organisation the full amount of contribution due and interest thereon at the rate and subject to such minimum amount of interest as shall be prescribed. - 119 - (2) Any Bum paid by on employer under thiu section shall bo treated as a payment in satisfaction of the unpaid contribution and any part of such sum which represents an employee's share of the contribution shall not be recoverable by the employer from the employee. (3) If an employer being a body corporate fails to pay to the Organisation any sum which he is liable to pay under this section such sum or part thereof as remains unpaid shall be a debt due to the Organisation jointly and severally from any directors or officers of the body corporate who knew or could reasonably be expected to have known of the failure to pay the contribution in question. (4) Without prejudice to any other method of recovery of contribution or other sum payable or recoverable under the provisions of this Act, any debt due to the Organisation may be recoverable as if it is an arrear of land rent or an arrear of a sum payable to a local authority: Provided that this sub-section shall not become operative in a State until adopted by the Legislature of that State. (5) Nothing in this section shall be construed as preventing the Organisation from recovering any sums due to it by means of legal proceedings. * Offences and penalties. 102. (1) If any person (a) fails to pay to the Organisation any contribution and interest thereon which under this Act he is liable to pay; or (b) deducts or attempts to deduct from the wages of an employee the whole or any part of the employer's contribution; or (c) in contravention of section 36 or the regulations reduces the wages or any privileges or benefits admissible to an employee; or (d) in contravention of section 37 or any regulations dismisses, discharges, reduces or otherwise punishes an employee; or (e) fails or refuses to furnish any information (including any statement or return) required under this Act or the regulations or furnishes false information; or (f) is guilty of any contravention of or non-compliance with any of the requirements of this Act or the regulations in respect of which no special penalty is provided, he shall be guilty of an offence and shall be liable on conviction to a fine not exceeding two thousand ringgit or to imprisonment for a term not exceeding six months, or to both fine and imprisonment. (2) The Court before which any person is convicted of an offence under paragraph (a) of subsection (1) above may, without prejudice to any other remedy, order such person to pay to the .Fund the amount of any contribution, together with any interest thereon, certified by the Organisation to be due from such person to the Fund at the date of such conviction, and such amount may be recovered in the same manner as a fine. (3) Where any person i;; charged with .-m offence under pa.rwi^rah (a) of sub-section (1) above and a probation order is made in respect of such offence the provisions of that sub-section shall apply as if the making of the order were a conviction. (4) Any person who for the purpose of obtaining any benefit or increase in such benefit under this Act, whether for himself or some other person, or for any other purpose connected with this Act (a) knowingly makes any false statement or false representation; or - 120 - (t>) produces or furnishes, causes or knowingly allows to be produced or furnished, any document or information which he knows to be false in a material particular, shall be liable on summary conviction to a fine not exceeding two thousand ringgit or imprisonment for a term not exceeding six months or to both fine and imprisonment. (5) Notwithstanding anything contained in any written law, regulations may provide that any person guilty of an offence or contravening any regulation or order made under this. Act for which no special penalty is provided shall on conviction be liable to a fine not exceeding two thousand ringgit and. to a further fine not exceeding ten ringgit a day for every day of default thereafter in respect of the same offence. Prosecution. 103. (1) Subject to the Article 14-5(3) of the Federal Constitution, no prosecution under this Act shall be instituted except by or with the previous sanction of the Director-General or of such other officer of the Organisation as may be authorised in this behalf by the Director-General. (2) Proceedings under sub-section (l) above may be conducted by an officer of the Organisation authorised in that behalf by special or general directions of the Director-General and such officer may not be a barrister or a solicitor. (3) No Court inferior to that of a Sessions Court or a Magistrate of the First Class shall try any offence under this Act. (4) Notwithstanding any provision in any enactment fixing the period within which summary proceedings may be commenced, proceedings for an offence under this Act may be commenced at any time within the period of six months from the date on which evicence sufficient in the opinion of the Director-General to justify a prosecution for the offence comes to his knowledge or within the period of three years after the commission of the offence whichever period last expires and for the purpose of this sub-section a certificate signed by the Director-General as to the date on which such evidence came to his knowledge shall be conclusive evidence thereof. (5) Where an offence under this Act which has been committed by a body corporate is proved to have been committed with the consent or concurrence of or to be attributable to any negligence on the part of any directors, manager, secretary or other officer of the body corporate, they as well as that body shall be deemed to be guilty of that offence and shall be liable to be proceeded against and penalised accordingly. Civil 104. (1) All sums due to the Fund under this Act shall be recoverable proceedings. as debts due to the Organisation and, without prejudice to any other remedy may be recovered summarily as a civil debt. (2) Proceedings for the summary recovery as civil debts of sums due to the Fund may, notwithstanding anything in any enactment to the contrary, be brought at any time within five years from the time when the matter complained of arose. (3) Proceedings under this section for the summary recovery of sums due to the Fund may be instituted by an officer of the Organisation authorised in that behalf by special or general directions of the Director-General, and any such officer may although not a barrister or a solicitor conduct such proceedings. (4) The provisions of sub-sections (1) and (2) of section 102 shall apply mutatis mutandis to proceedings under this section. - 121 - PART VII. MISCELLANEOUS PROVISIONS Exercise 105. of powers and functions of the Organisation. (1) All powers and functions which may he exercised by the Organisation under this Act shall he exerciseably hy the DirectorGeneral or by any officer of the Organisation authorised by him. (2) The Director-General may authorise an officer of the Organisation to exercise powers and functions under sub-section (1) above by special or general directions. (3) The Minister may, in consultation with the Board, authorise in writing or by Order, as he may deem appropriate, any public organisation or private recognised organisation or any officer or servant of such organisation or any person to exercise specified functions for the purpose of this Act on behalf of the Organisation: Provided that where an officer or servant of a organisation is to be so designated the Minister shall, before making the Order, consult the organisation concerned. Exemption 106. from stamp duty. The Organisation shall be exempted from the payment of stamp duty under the Stamp Ordinance, 1949. Persons 107. employed abroad ships, vessels or aircraft. (1) Without prejudice to the generality of any other power to make regulations, the Minister may make regulations modifying in such manner as he thinks proper the provisions of the Act in their application to persons who are or have been or are to be employed on board any ship, vessel or aircraft registered in Malaysia. (2) Regulations made under sub-section (1) above may in particular provide (a) for the registration under this Act of persons who are or have been employed on board ships, vessels, or aircraft; (b) for excepting from insurance under this. Act or from liability to pay contribution any persons employed as aforesaid who neither are domiciled nor have a place of residence in Malaysia; (c) for the taking of evidence (including medical certifikation) for the purpose of any claim for benefit in any place outside Malaysia; (d) for the payment of temporary disablement benefit to or in respect of persons employed aboard ships, vessels or aircraft in respect of accidents happening in the course of, or of prescribed diseases which are due to the nature of, such employment; (e) for treating an accidents arising out of and in the the course of employment aboard any ship, vessel or aircraft accidents happening while the employee is proceeding to or from such employment, or in other prescribed circumstances; ami (f) Reci108. procity agreements for withholding any benefit which may be payable to a mariner for any period while the owner of his ship or vessel is under a statutory obligation to pay him wages. For the purpose of giving effect to any agreement with Government of any country, being an agreement which provides for reciprocity in matters of social security, it shall be lawful for the Minister by Order published in the Gazette, to modify or adapt the provisions of this Act in their application to cases affected by the agreement. - 122 - Exemption 109. of industries and persons, etc. (1) The Minister may, after consultation with the Board, exempt from the application of this Act (a) any industry or class of industries for a period not exceeding one year which may be renewed from time to time for periods not exceeding one year at a time; (b) any person or class of persons employed in any industry or class of industries. (2) Exemptions under sub-section (1) shall be made by notification in the Gazette and shall be subject to such conditions as may be specified in the notification. Exemption 110. of industries belonging to Government or Local Authority. The Minister may, by notification in the Gazette and subject to such conditions as may be specified in the notification, exempt any industry or class of industries belonging to the Federal Government or any State Government or any local authority, from the operation of this Act, if the employees in any such industry or class of industries are otherwise in receipt of benefits substantially similar or superior to the benefits provided under this Act. Contri111. butions etc. due to Organisation to have priority over other debts. Sums due on account of contributions payable under this Act and any other amount payable to the Organisation shall be included among debts accorded priority under any written law in force in the country (being any law relating to personal insolvency, companies' winding-up and the remedies of debenture holders and charges) where such liability accrued before the date of the order of adjudication of the insolvent or the date of the winding up, as the case may be. Recovery 112. of debt due to Organisation. Without prejudice to any other method of recovery of contribution or other sum payable or recoverable under the provisions of this Act, any debt due to the Organisation may be recoverable as if it is an arrear of land rent or an arrear of a sum payable to a Local Authority: Provided that this section shall not become operative in a State until adopted by the Legislature of that State. Power to 113. remove difficulty. (1) If any difficulty arises in giving effect to the provisions of this Act, the Minister may, by Order published in the Gazette, make such provisions or give such directions, not inconsistent with the provisions of this Act, as appear to him to be necessary or expedient for removing the difficulty. (2) Any Order made under this section shall have effect notwithstanding anything inconsistent therewith in any regulations made under this Act. Power of 114. the Minister to make regulations. (1) The Minister may make regulations, not inconsistent with this Act, for the administration of the affairs of the Organisation and for carrying into effect the provisions of this Act. (2) In particular and without prejudice to the generality of the foregoing power, such regulations may provide for all or any of the following matters, namely (a) the levy of interest at a prescribed rate on contributions due but not paid subject to the minimum of one ringgit per month or part thereof in respect of each employee whose contribution is in default beyond the due date and the conditions under which such levy may be waived; (b) the method of determining the actuarial present value of periodical payments; (c) the assessing of the money value of any benefit which is not a cash benefit; (d) the circumstances in which an employee in receipt of disablement benefit may be dismissed, discharged, reduced or otherwise punished; - 123 - (e) (f) the visiting of disabled persons; the appointment of medical practitioners for the purpose of this Act, the duties and functions of such practitioners; (g) the medical and other examination to which an insured person or claimant may be required to submit himself for the purposes of the Act; (h) the duties and powers of Inspectors and other officers and servants of the Organisation; (i) the fee payable in respect of applications made to the Tribunal, the cost incidental to the proceedings before it, the form in which applications should be made and the particulars to be specified in such applications; (j) the establishment institutions, the hospital, clinic, consultation with of hospitals, dispensaries and other allotment of insured persons to any dispensary or other institution in the Ministry of Health; (k) the scale of medical benefit which shall be provided at any hospital, clinic, dispensary or other institution, the keeping of medical records and the furnishing of statistical returns; (1) the registration of industries; (m) matters which must be covered by the periodical valuation of the assets and liabilities of the Organisation; (n) the investment of monies of the Fund and their transfer or realisation, the bank or banks in which such monies may be deposited, the raising and repayment of loans and financial control and proceduresin consultation with the Minister of Finance; and (o) any matter in respect of which regulations are required or permitted to be made by this Act. (3) Any power conferred by this Act to make regulations may be exercised (a) either in relation to all cases to which the power extends or in relation to all such cases subject to specified exceptions or in relation to any specified cases or class of cases; (b) so as to make as respects the cases in relation to which it is exercised (i) the full provision to which the power extends or any less provision; (ii) the same provision for all cases to which the power is exercised, or different provision for different cases, or different provision as respects the same case for differend purposes of this Act; (iii) any such provision either unconditionally or subject to any specified conditions. (4) Without prejudice to any specific provision of this Act, any regulation may contain such incidental or supplementary provisions as appear to the Minister to be expedient for the purposes of the regulations. (5) Regulations shall come into operation .on such day or days ;i.3 the Minister may appoint by order published in the Gazette. - 124 - Regula115. tions to be laid before House of Representatives. (1) All regulations made under this Act shall be published in the Gazette and shall be laid before the House of Representatives as soon as may be after they are made and if within a period of forty days beginning with the day on which any such regulations are so laid the House of Representatives resolves that the regulations or any part thereof be annulled or amended such Regulations or such part thereof shall thereupon cease to have effect or shall be so amended as the case may be, as from such date, but without prejudice to the validity of anything previously done thereunder or to the making of new regulations. (2) In reckoning any period of forty days specified in subsection (1) above, no account shall be taken of any time during which the House of Representatives is dissolved or prorogued or during which the House is adjourned for more than fourteen days. Repeal. 116. The Employees' Social Security Act, 1969, shall be repealed from the date on which this Act shall come into force in accordance with the provisions of section 1 of this Act in relation to employees in respect of whom the Employees' Social Security Act, 1969 applies, and from that date all assets and liabilities of the Invalidity Pension Fund and Employment Injury Fund shall become the assets and liabilities of the Fund. - 125 - FIRST SCHEDULE (Section 2) PART I 1. Subject to Part II of this Schedule, "employee" means any person who is employed for wages under a contract of service or apprenticeship with an employer, whether the contract is expressed or implied or is oral or in writing, on or in connection with the work of an industry to which this Act applies and (a) being a person employed as aforesaid in Malaysia (i) who is directly employed by the principal employer on any work of, or incidental or preliminary to or connected with the work of, the industry, whether such work is done by the employee on the premises of the industry or elsewhere; or (ii) who is employed by or through an immediate employer on the premises of the industry or under the supervision of the principal employer or his agent on work which is ordinarily part of the work of the industry or which is preliminary to the work carried on in or incidental to the purpose of the industry; or (iii) whose services are temporarily lent or let on hire to the principal employer by the person with whom the person whose services are so lent or let on hire has entered into a contract of service; (b) who is domiciled in Malaysia employed as aforesaid outside Malaysia (i) as master or member of the crew of any ship registered in Malaysia or in any other capacity on board any such ship; or (ii) as pilot, commander, navigator or member of the crew of any aircraft registered in Malaysia, or in any other capacity on board any such aircraft: Provided that, in either case, the employment jn that other capacity is for purpose of the ship or aircraft, or the crew, or of any passenger or cargo or mails carried thereby. (2) "Employee" does not include a person of the descriptions specified in Part 11 of this Schedule. (3) The Minister may by order published in the Gazette amend this part, of the schedule to include other persons who are, or are to be deemed to be employees. PART II (1) Any person whose employment is of casual nature and who is employed otherwise than for the purposes of the employer's industry. (2) A domestic servant, that is, a person employed exclusively in the work or in connection with work of a private dwelling house and not of any trade, business or profession carried on by the employer in such dwelling house and includes a cook, house servant (including bedroom and kitchen servants), waiter, butler, child's or baby's nurse, valet, footman, gardener, washerman or washerwoman, watchman, groom and driver or cleaner of any vehicle licensed for private use. - 126 - (3) A tributer, that is, a person who is permitted to win minerals or produce of any kind from or on the land of another and who, in consideration of such permission, gives a proportion of the minerals or produce so won to that other person or pays to him the value of such proportion. (4) The spouse or spouses of the principal employer or the immediate employer. (5) Any member of the Malaysian Armed Forces or of any Local Forces established under any written law or of any Visiting Force lawfully present in Malaysia under any written law relating to Visiting Forces. (6) Any police officer, and any other person engaged to perform police duties in accordance with the provisions of any written law while so performing such duties. (7) Any person detained in any prison, Henry Gurney School, approved school, detention camp, mental hospital, or leper settlement. (8) All nomadic aborigines unless in any particular case the Commissioner for Aboriginal Affairs otherwise recommends. (9) Any person who is employed principally for the purpose of catching fish in maritime waters or employed in any capacity on board any vessel used principally for such purpose. (10) All agricultural workers who are employed for the purpose of cultivating, upkeeping and harvesting paddy. (11) Any class or classes of persons whom the Minister may declare by notification in the Gazette not to be employees for the purposes of this Act. * « - 127 - APPENDIX V MALAYSIA Social Insurance and The Proposed Motor Vehicle Accident Compensation Scheme" 1. The Director-General of the Social Security Organisation has invited me to offer my comments on the proposed Motor Vehicle Accident Compensation Scheme in relation to the social insurance programme. Reference has been made to the New Zealand Accident Scheme and its effect on the Workmen's Compensation Legislation in that country. 2. I have had a quick look at the New Zealand Legislation and at Parts 1 and 11 of the Treasury Memorandum dated 30 th March and 21 April, 1977, respectively. At this stage I cannot undertake more than that. I cannot therefore claim to be an expert in the New Zealand Scheme or Malaysia's proposed Motor Vehicle Accident Scheme (hereinafter referred to as the "Motor Vehicle Accident Scheme"). The observations which follow should be treated in the context of this premise. It is also appreciated that the Treasury Memorandum gives only an outline of the proposed scheme. 3. I have also tried to be as brief as possible, to save time for all. New Zealand Scheme 4. The principal Act is the "Accident Compensation Act, 1972", 5. The following amendments were made Two in 1973 One in 1974 One in 1975. Funds 6. Section 31 of the Act established four Funds, namely (a) An account to be known as the Motor Vehicle Compensation Fund: (b) An account to be known as the Accident Compensation Fund: (c) An account to be known as the Accident Compensation Commission's General Fund: (d) 7. An account to be known as the Active Service Compensation Fund: In my view we are interested in two main schemes namely (a) the Earners' Compensation Scheme; and (b) the Motor Vehicle Accident Compensation Scheme. Earners Scheme 8. The scheme provides cover to all earners, employed or self-employed, who suffer personal injury by accident in New Zealand. This includes all accidents, including accidents at work. - 128 - 9. This scheme therefore supersedes the Workmen's Compensation Scheme. In fact, the "Accident Compensation Amendment Act, 1975 (Section 31) dissolved the Workmen's Compensation Board. The Schedule to the same amending Act repealed specified sections of the Workmen's Compensation Act, 1956, and several subsequent amendments to that Act. Therefore, I think it would be correct to assume that the New Zealand Workmen's Compensation Scheme ceased to operate. In any case, the accident scheme does cover employment accidents. 10. It does not appear that the New Zealand Social Security Act has been affected; but there may be provisions to prevent overlapping of benefits. In general compensation under Earnings Scheme stops at the age of 65, presumably because the beneficiary becomes entitled to an age pension. New Zealand Motor Vehicle Scheme 11. The Motor Vehicle Scheme provides cover (a) to all persons, earners or non-earners; (b) in respect of personal injury by accident in New Zealand if accident is caused by or through or in connection with the use of the vehicle if that vehicle is registered in New Zealand. 12. A Motor Vehicle Accident arising out of and in the course of employment of a person becomes a work accident and falls also under the Earners' Scheme. Malaysia's Scheme 13. In paragraph 5 on page 3 or Part 11 of the Memo it is stated that the scheme is intended to cover only personal injury suffered as a result of a motor vehicle accident. 14. My interpretation of this is that if a person suffers an accident on a vehicle and the accident arises out of and in the course of his employment, the accident would be an employment accident in relation to that person. At the moment such a person is covered both by the Employers' Social Security Act (E.S.S. Act) and by the Workmen's Compensation Ordinance. A clear case would be that of a driver or attendant employed on a truck, a bus driver or conductor etc. Proposed Benefits Compensation for loss of Earnings 15. This is understood to mean temporary incapacity for work and it is referred to as "Earnings Related Compensation" (E.R.C.). 16. The benefit is 60$ of average earnings over last 6 months, subject to (a) Maximum of earnings of $1000 per month tc give maximum benefit of $600; (b) Minimum monthly earnings of $150 to guarantee minimum benefit of $90 per month. 17. Under E.S.S. Act, there is an earnings ceiling of $500. After consultation with the Actuary, I am proposing that this will be removed; but for persons earning over $1000 per month the assumed monthly wage would be $1050, and contributions and benefits will be payable on that basis. 18. The minimum monthly earnings of $150 per month proposed by the Committee is far above the minimum earnings under the E.S.S. Act. The Fourth Schedule to the Act provides that where the wage cannot be determined, the method provided in section 9 of the Workmen's Compensation Ordinance is to be adopted. The minimum earnings under the Ordinance are related to age thus - - 129 - Age over 18 years $105 per month Age between 16 and 17 years $90 per month Age under 16 years #70 per month. 19. After consultation with the Actuary, I am proposing that the wages of a person over 18 years would not be deemed to be less than $125 per month. This would have compared well with Workmen's Compensation Ordinance, but not with the Motor Vehicle.Accident Scheme. A higher minimum wage for the purpose of computing disablement benefit may bring about the situation where benefit is higher than normal pay, especially where casual and part-time workers are involved. There are probably many whole-time employees earning less than $125 per month. This is confirmed in paragraph 8 of Part 11 of the Treasury Memo where it is stated that in the year of assessment 1972, there were only 211,788 resident individual tax payers out of a population of about 10 million, whose income was not less than the lowest tax bracket in Malaysia which begins at $2,500 per annum that is, about $208.per month. Permanent Incapacity 20. It appears from paragraph 11 of Part 11 of the Treasury Memo that Earnings Related Compensation will continue as a periodical payment in the event of permanent incapacity. In fact, it is to go beyond the age of 65, and in paragraph 12 it is indicated that the Earnings Related Compensation will also be revalued to take account of changes in the level of earnings and cost of living. 21. It is recalled that a provision for revaluation of pensions was included in the draft legislation to set up SOCSO as a Statutory Body. 22. If my understanding is correct, the Earnings Related Compensation becomes similar to Permanent Disablement Benefit under the ESS Act; but even so, a straight forward comparison is not possible. There is no provision in the Act to limit the period of Temporary Disablement Benefit to say 6 or 12 months after which the degree of permanent disablement has to be assessed. However, in practice SOCSO may take steps at some stage in the Temporary Disablement period to assess the degree of permanent disablement if this is not recommended by the general practitioner. When this is done, it may only compare with Earnings Related Compensation if the assessment is permanent total disablement. Loss of Bodily Function 23. Paragraph 13 of Part 11 of the Treasury Memorandum indicates that under the Motor Vehicle Accident Scheme there will be a lump sum payment in respect of "permanent loss of bodily function" in addition to loss of earnings". This appears to be payable in addition to Earnings Related Compensation. 24. There is nothing to compare with this benefit under the ESS Act, nor in my proposals. 25. The Motor Vehicle Accident Scheme will also provide for an additional lump sum payment for "non-economic loss". Again there is nothing similar under the ESS Act, nor in my proposals. Dependants Definition 26. It is noted that the definition of "dependants" in section 2(3) of the ESS Act is being adopted. - 130 - Periodical Payments Widow 27. A widow will receive (a) 50 $ of the Earnings Related Compensation if at the time of husband's death she is "totally dependent" on him; or (b) a lesser rate at the discretion of the Board if not totally dependent. This periodical payment as at (2) or (b) is to cease on the widow's remarriage. It is therefore inferred that the pension will be for life. 28. Under the ESS Act, the widow of an insured person who dies as a result of an employment accident receives 60$ even, if not dependent at all on her husband, and without any conditions. 29. In my proposals, if the widow is under 50 years there are conditions based on responsibility for children or permanent incapacity for self-support. The Director-General, SOCSO, is aware of the details of my proposals on this point. 30. Under the proposed Motor Vehicle Accident Scheme a parent will be entitled to receives 50$ of the Earnings Related Compensation if totally dependent on the deceased "at the time of death". It is not clear whether: 31. 32. (a) two surviving parents would each be entitled to 50$; (b) what happens if the deceased is survived by a totally dependent widow and one or two parents. Under the ESS Act (a) a parent or grandparent may only receive threetenths- (30$), but if there are more than one, the rate is shared among them. A grandparent is only entitled if there is no parent. (b) a parent or grandparent is entitled if there is no widow or children of the deceased. It is not clear whether this will be the case under the Motor Vehicle Accident Scheme. In my proposals for survivors' benefit I am suggesting that (a) a parent, including a widowed mother, will be entitled to survivors' benefit at the rate of 40$ (two parents 80$ between them) if wholly dependent on the earnings of the deceased insured person, and (i) is over pensionable age; or (ii) if under that age, is permanently incapable of self-support; 33. Under the ESS Act, parents and grandparents fall under what I call a "secondary group" and will only be entitled to benefit if there are no wife and/or children. 34. In my proposals this condition will also apply. 35. Under the Motor Vehicle Accident Scheme a totally dependent child will receive one-sixth. It is not clear what will happen -• (a) if there are, say, seven children; (b) if there is a widow and four or five children. 36. Under the ESS Act, a child's share is two-fifths which will have to be reduced if there is a widow and more than one child. 37. In my proposals this will be the same. - 131 - Lump Sum Payment to Dependents 38. The Motor Vehicle Accident Scheme will also pay in addition to Earnings Related Compensation a lump sum to (a) a totally dependent widow up to #2,500; (b) up to $1,250 for each totally dependent child; (c) apparently, a totally dependent parent up to $1750. 39. There are no comparative payments under the ESS Act, and I am not proposing such payments. Overlapping with Invalidity Pensions 40. Under the ESS Act a pension is payable to an insured person who becomes an invalid through any cause, if he satisfies the contribution conditions. The rate will vary according to number of contributions. It is being proposed that such pension should be over eighteen years and under pensionable age. 41. Under my proposals survivors' benefit will be payable in the event that. such a person dies. Conclusion 42. The method or methods of financing of the Motor Vehicle Accident Scheme are going to be very different from that of the Social Insurance Scheme. This must be taken into account when any comparison is made between the two systems. There is also going to be some overlapping. For these reasons I am of the opinion that a detailed study is required. 22nd June, 1977. J. Vella-Bonnici, Social Security Planning and Legislation Expert!
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