Individual Case (CAS) - Discussion: 2011, Publication: 100th ILC session (2011)

Equality of Treatment (Accident Compensation) Convention, 1925 (No. 19) - Malaysia - Peninsular (Ratification: 1957)

A Government representative referred to the background of this case, emphasizing Malaysia’s situation as a trading nation with an open economy facing volatile external market influences. The steady growth of the Malaysian economy had largely been attributed to the Government’s pragmatic leadership and flexible policies and initiatives to diversify and build a more multi-sectored economy. Labour had always been central to the economic transformation of Malaysia over the past five decades. In this framework, the Government had articulated Vision 2020 which envisioned a holistic development status by the year 2020 and had set in motion in 2010 the New Economic Model (NEM) to improve competitiveness in all economic sectors by systematically fostering innovation and promoting higher value-added sources of growth. The NEM was supported by four pillars: Malaysia: People First, Performance Now concept; the Government Transformation Program (GTP); the Economic Transformation Program (ETP); and the Tenth Malaysia Plan (10MP). In line with this policy, the Decent Work Agenda for the country’s workforce relied among other principles on a firm and constant policy of ensuring adequate and equitable social security protection for all workers in the country regardless of their background. In the quest to achieve a balance between socio-economic development and social equity, the Prime Minister’s Department had since 2010 initiated a series of “Lab studies” to review the country’s principal pieces of labour legislation and recommend modern and realistic provisions, in addition to examining new areas of improvement in relation to the management of foreign workers. The findings and outcomes of the studies included, among other areas, the promotion of a sound and quality social security management, and were currently being tabled for consideration and endorsement by the Malaysian stakeholders.

The Government of Malaysia was committed to building consensus for common goals, through regular collaborative engagement with the tripartite social constituents in particular, so as to generate a common perspective on the appropriate system for managing and administering social security for workers in Malaysia. The Government through the National Labour Advisory Council (NLAC) within the purview of the Ministry of Human Resources, and in collaboration with several other consultative forums and stakeholders, undertook to constantly pursue the formulation of the right mechanism and system to administer and remedy this issue.

The Worker members said that this case involved clear and unmistakable discrimination against foreign workers in relation to compensation for industrial accidents. The transfer in 1993 from the Employees’ Social Security (ESS) Scheme to the Workmen’s Compensation Scheme (WCS) resulted in a deterioration of the conditions applicable to foreign workers, as compensation for industrial accidents, which consisted of a flat-rate lump sum, was much less beneficial than the measures envisaged by the 1969 Social Security Act for employed persons, namely the provision of a pension or other periodical payments to victims or their dependants. Moreover, the conditions governing insurance against industrial accidents differed for national and foreign workers. In 1997, this Committee had called on the Government to re-establish equality of treatment and, following a high-level advisory mission, the Government had indicated in 1998 that it envisaged reviewing the situation of foreign workers in relation to the social security scheme. However, nothing had been done. Indeed, in its latest reply in 2010, the Government no longer considered it necessary to modify its law or practice. It referred to administrative and practical problems in the payment of benefits and the monitoring of workers who had returned to their country, as a justification for discrimination.

Recalling the requirements of the Convention (Article 1(1)) regarding equality of treatment between nationals and foreign workers from Members which had ratified the Convention, and concerning mutual assistance between such member States (Article 4), they emphasized that such arrangements were all the more relevant in that most of the foreign workers in Malaysia came from countries which had also ratified the Convention. In the absence of a comparative and actuarial study by the Government of the two schemes for the different types of compensation (temporary and permanent incapacity, invalidity and survivors’ benefits), and as the Government claimed that the lump sum payable to foreign workers was not lower than the pension paid to national workers, the Government should allow foreign and national workers to choose between the two schemes.

The Government clearly had no intention of complying with the Convention and did not envisage granting equal treatment to workers from other member States that had ratified the Convention. Such deliberate violation of the Convention had serious consequences, as there were many foreign workers in Malaysia (1.9 million in 2007), and many industrial accidents occurred among foreign workers (13,000 officially reported in 2006). Moreover, most of the workers were from countries in the region for which practical arrangements would be possible with a minimum of goodwill. The case was illustrative of the discrimination suffered by migrant workers in the region and justified the fact that the Committee of Experts had requested Malaysia to provide explanations to the Conference concerning such a deliberate violation of the Convention.

The Employer members emphasized that the basic principle behind the Convention, adopted as early as 1926, was that migrant workers should receive no less favourable treatment regarding accident compensation than national workers in line with the fundamental principle of equality of treatment between national and non-national workers. In ratifying the Convention in 1957, Malaysia had undertaken to guarantee this principle to migrant workers and their dependants without any condition as to residence (Article 1(2) of the Convention) and to enter into special arrangements with other member States so as to make payments outside Malaysia (Article 2). Moreover, the member States which ratified this Convention undertook to afford each other mutual assistance with a view to facilitating its application (Article 4).

The Employer members noted the history of this case, emphasizing that Malaysia’s adherence to the Convention had been non-contentious until 1996, when the Government asserted that the coverage of certain categories of Malaysian nationals and migrant workers with regard to accident compensation had been transferred already in 1993 from the ESS scheme to the Workmen’s Compensation Act (WCA) due to enforcement and administrative constraints, particularly regarding the remittance of payment of accident compensation benefits to the next of kin or dependants of migrant workers in their home country. In 1996, the Employer members had noted that the WCA provided for a level of benefit lower than the previous one and that as long as Malaysian workers continued to be covered by a scheme offering a noticeably higher level of benefits, there was a clear divergence with the provisions of the Convention. This Committee had expressed the hope that the Government would in the very near future take all necessary measures to reintegrate migrant workers into the same system as nationals. In 1998, the Committee of Experts had noted that the report requested in 1996 had not been received and that in the event of an occupational accident, migrant workers received compensation in the form of a lump sum, whereas nationals had the right to the periodic payment of these benefits. As the Government had not provided a report, the Employer and Worker members considered that this Committee was bound to reiterate its previous conclusions and expressed the hope that the results of the recently conducted ILO advisory mission would help to resolve the problems.

The Committee of Experts then made observations in 1999, 2000, 2001, 2002, 2003 and 2006. In 2008, the Committee of Experts noted that, taking into account the large number of migrant workers concerned and their high accident rate, the situation called for special efforts from the Government to overcome the administrative and practical difficulties that were impeding equal treatment of migrant workers who suffered industrial accidents. In particular, in 2008, the Government was asked to demonstrate the actuarial equivalence of the lump sum paid under the WCS to migrant workers to the amount of the periodical payments granted under the ESS to Malaysian workers. Attention was also drawn to the possibility of overcoming any difficulties in the payment of compensation abroad, through special arrangements between the Members concerned in line with Article 2 of the Convention.

The Employer members emphasized that today was the third examination of this case in this Committee since ratification. They noted with regret that according to the latest report of the Committee of Experts, the Government saw no need to modify its national law and practice to bring it into conformity with the Convention or to resort to the technical assistance which the international community was willing to provide for this purpose. It was therefore not surprising that the Committee of Experts had invited the Government to supply full particulars to the Conference Committee and to report in detail in 2011. The elapse of time between 1996 and 2011 demonstrated that there was a significant barrier preventing the Government from fully complying with the Convention with regard to the amount paid and how it was paid to migrant workers and their dependants.

The Employer members called for a solution to this issue in compliance with the Convention. They asked in particular for information on the following: the reasons for which the actuarial equivalence of the lump sum paid under the WCS to migrant workers to the periodical payments granted under the ESS to Malaysian workers had not been robustly established by the Government since it had been requested three years ago; how compensation was paid and what compensation was paid, in the event of an occupational accident of migrant workers originating from countries which had ratified the Convention, such as, Indonesia, India, Myanmar, Bangladesh, the Philippines (which had ratified in 1994), Thailand, Pakistan and China; the arrangements in place with other member States in order to make payments outside Malaysia, as envisaged in Article 2 of the Convention; the enforcement and administrative constraints regarding in particular the remittance of payment of accident compensation benefits to the next of kin or dependants of migrant workers in their home country. Since the Cartier working group had asserted that Convention No. 19 was likely to receive further ratifications, there was a need to obtain a better understanding of the barriers to implementation.

The Worker member of Malaysia stated that approximately five million foreign workers in Malaysia, either recorded or unrecorded, did not benefit from equal treatment in terms of social security in case of employment-related injuries and/or diseases, as they had been excluded from the ESS scheme and placed under the WCS. The inequalities they suffered related to the fact that under the ESS, a worker benefited from mandatory social security protection regardless of whether the work was registered or unregistered; the coverage was wider, including both accidents and illness or diseases, as well as accidents suffered while commuting to and from work; payments were periodic akin to a pension scheme; there was a lump sum payment; and a higher amount of compensation was awarded. Workers’ compensation under the WCS on the other hand, was confined to a lump sum payment that was far lesser compared to the ESS Scheme. Further, under the WCS, only reported cases led to compensation. If an accident was not reported, the worker was not entitled to any benefits. The High Court had recently ruled that a foreign worker, whose permit had expired after one year of residence, had no legal standing to claim benefits because his status was irregular. Even though it was reassuring to hear that the Government was looking into this matter, the speaker called for specific progress to be made since this issue had been reviewed by the Conference Committee three times.

The Employer member of Malaysia indicated that the WCS was a suitable and practicable approach for managing employment injury and invalidity benefits for foreign workers in Malaysia. Under the ESS, employees were required to contribute for a minimum of 24 months before they or their family could get any benefit under the scheme in case of industrial accidents or occupational diseases. Foreign workers would be required to contribute 0.75 per cent of their wages towards the invalidity and pension insurance scheme and if they were declared to be an invalid before having contributed for 24 months, they would be deprived of any invalidity pension despite having made contributions. Under the WCS once foreign workers were insured, they were covered by the scheme and there was no requirement for 24 months of contributions before the foreign workers could be entitled to the benefits under the scheme. Foreign workers in Malaysia were generally contracted for up to two years at a time and therefore, the ESS scheme was not suitable for them.

The Worker member of Australia shared the concern expressed by the Worker members over the longstanding failure of the Malaysian Government to comply fully with Convention No. 19 and regretted that the Government had not yet addressed the points raised by the Committee of Experts and this Committee, despite numerous examinations over the past years. The speaker noted that Malaysia was a destination for many workers in the region seeking better employment opportunities, and that at present, over two million migrant workers performing a wide range of work, including in industries with a high risk of serious accidents, were registered in the country. In this regard, international labour standards provided ratifying states with guidance as to appropriate laws and policies to be established to ensure respect for the rights of migrant workers. A key principle in these instruments, including in Convention No. 19, was the principle of equality of treatment and non-discrimination of migrant workers. The existence within Malaysia of two distinct laws, regulating compensation in the event of workplace accidents, the application of which depended on the nationality of the worker, and which provided for different levels of payments, failed to comply with the fundamental principle of non-discrimination and equality of treatment. Under the current arrangement, a migrant worker who was injured as a result of an accident at work received a lump sum payment that was significantly lower to the ongoing payments paid to local workers under the ESS scheme. Migrant workers were not entitled to ongoing support and might find themselves not only without a job, but also without adequate income security to support themselves and their family. Furthermore, the speaker noted that the present case embodied a number of key themes being discussed at the 100th International Labour Conference, including the importance of taking a rights-based approach and of ensuring the extension of social security protection to all workers, as well as the right for all workers to be free from discrimination as stated in the Director-General’s Global Report under the follow up to the 1998 ILO Declaration on Fundamental Principles and Rights at Work. The dominance of these themes in this year’s Conference reinforced the centrality and importance of ensuring decent work for all workers. While recognizing that the management of workers’ compensation for migrant workers might pose administrative and practical challenges, the speaker emphasized that sensible arrangements in line with the Convention were achievable and reminded the Government of its obligations. In this regard, technical assistance was available. She concluded by urging the Government to take immediate steps to ensure equal protection for migrant workers under national laws with respect to workers’ compensation, in full compliance with the Convention.

The Government member of Singapore welcomed the positive steps taken by the Government of Malaysia in order to review the country’s principal pieces of labour legislation and recommend modern and realistic provisions through a series of studies under the auspices of the Prime Minister’s department. He also noted that the findings and outcomes of the studies contained proposals for improvement in relation to the management of foreign workers in Malaysia, including their social protection. As the outcome of the studies was being tabled for consensus and endorsement by the stakeholders of Malaysia, the speaker welcomed these consultations and urged the Committee to allow the Malaysian Government more time for the review process to be completed. His Government looked forward to a successful review so as to help the Government of Malaysia identify areas for improvement and the gaps in legislation in its effort to formulate the right solution and tackle the challenges in administering social security protection for all the workers in Malaysia.

The Worker member of Indonesia recalled that most foreign workers in Malaysia were Indonesian nationals, currently estimated at approximately 2.5 million, both documented and undocumented. Many of them were working in construction, the manufacturing industry and plantations, thus facing high risks of work accidents. It was indeed important that they should be respected and treated equally as they were making a significant contribution to the country’s development. The speaker supported the recommendation of the Committee of Experts which called for equal treatment of both local and foreign workers. The latter should be covered by the ESS scheme while the WCS should be discontinued. It was common practice in the Asian context, including in Indonesia, to treat foreign workers equally. Under the Indonesian social security law, all workers had access to social security benefits including foreign workers, in case of injury, even though the economic development of Indonesia was lower than that of Malaysia. For many years after the introduction of WCS, hundreds of thousands of Indonesian workers had been doubly penalized in case of accident by not only losing their jobs and being sent back home, but also by not having any social security protection and facing difficulties in finding a new job in their own country. Extending protection to foreign workers through equal treatment would not involve additional expenditures for the public budget because the social security contributions would be paid by the workers and employers concerned. The speaker concluded by indicating that in July 2009, his trade union Konfederasi Serikat Buruh Sejahtera Indonesia (KSBSI) had signed a Memorandum of Understanding with the Malaysia Trade Union Congress (MTUC) under which these two International Trade Union Confederation (ITUC) affiliates agreed to work together to strengthen the protection of Indonesian migrant workers in Malaysia including through industrial accident protection. Their action included producing a so-called migrant workers’ passport with information on the rights of foreign workers. The speaker expressed the hope that both unions would be involved in the future in discussions on the improvement of industrial accident compensation legislation in Malaysia.

The Government representative expressed his Government’s respect and appreciation for the views and comments submitted by various member States and the social partners in relation to the application of the Convention in Malaysia. He reinstated Malaysia’s commitment to heighten its collaboration and engagement with the social partners to address and tackle priority labour issues of common concern, pursuant to the country’s Decent Work Agenda. Malaysia treasured and valued genuine and constructive tripartism and addressed matters through social dialogue. In the past months, the Government, under the auspices of the Prime Minister and with the engagement of several ministries and departments had discussed new ways of dealing with labour issues arising out of challenging labour market. The Government’s journey towards making a difference required indulgence, understanding and support. In today’s economic scenario, the Government’s priorities were directed towards securing the welfare and well-being of workers, without distinction as to their background.

The Worker members emphasized that the case involved flagrant discrimination against foreign workers in relation to compensation for industrial accidents, which was in direct contradiction with the principle of equality of treatment set out in the Convention. Moreover, the Government showed no will to remedy situations of discrimination, by continuing to refer to practical problems related to making payments and monitoring, while failing to establish specific arrangements with the countries of origin of the workers concerned, as envisaged by Article 4 of the Convention. The Government therefore needed to reconsider as rapidly as possible the discrimination that had existed since 1993, reintegrate foreign workers into the Employees’ Social Security Scheme and keep the Committee of Experts informed of the measures envisaged in that respect. In conclusion, they called on the Government to request a high-level mission with a view to addressing the administrative issues at the regional level.

The Employer members, referring to the statements of the Government representative, pointed out that the Government had not mentioned Convention No. 19 in its concluding remarks. While taking note of the measures adopted by the Government of Malaysia, no information had been given on the implementation of such measures and how this could affect compliance with the Convention. Recalling that many countries, such as Indonesia, Nepal, Bangladesh, India, Pakistan, Viet Nam, Cambodia, Thailand, and the Philippines had migrant workers in Malaysia, he questioned how compensation for industrial accidents was paid to migrant workers and what enforcement mechanisms were in force. They urged the Government to take action, in consultation with the social partners, to ensure compliance with the Convention and to engage with the Conference Committee and the ILO.

Conclusions

The Committee noted the statement of the Government representative and the discussion that followed. The Committee recalled that, since 1 April 1993, when foreign workers employed in Malaysia for up to five years were transferred from the Employees’ Social Security Scheme (ESS), which provided for periodical payments to victims of industrial accidents, to the Workmen’s Compensation Scheme (WCS), which guaranteed only a lump sum payment of a significantly lower amount, the Malaysian social security system had contained inequalities of treatment which ran counter to the provisions of the Convention.

The Committee noted the information provided by the Government highlighting Malaysia’s situation as a trading nation with an open economy facing volatile external market influences, as well as the Government’s pragmatic leadership, which ensured the steady growth of the Malaysian economy in the past decades. In this framework, the Government had set in motion in 2010 the New Economic Model (NEM) to improve competitiveness in all economic sectors. The Committee also noted that the Prime Minister’s Department had since 2010 initiated a series of Lab studies to review the country’s principal pieces of labour legislation and recommend modern and realistic provisions, in addition to examining new areas of improvement in relation to the management of foreign workers. The findings and outcomes of the Lab studies included, among other areas, the promotion of a sound and quality social security management, and were currently being tabled for consideration and endorsement by the Malaysian stakeholders. The Government through the National Labour Advisory Council (NLAC) within the range of authority of the Ministry of Human Resources, and in collaboration with several other consultative forums and stakeholders, undertook to constantly pursue the formulation of the right mechanism and system to administer and remedy this issue.

The Committee hoped that the Lab studies and the broad tripartite consultations conducted by the Government through the NLAC would provide the right framework for the re-examination of the social security coverage of foreign workers in respect of industrial accidents, and that the Government would be able to report their findings in this area in its next detailed report on the Convention due in 2011. Regretting however that the Government representative had given no full replies to the concrete questions raised by the Committee of Experts, the Committee urged the Government to reconsider its position in its 30 July 2010 report that there was no need to modify national law and practice, and to take immediate steps in order to bring national law and practice into conformity with Article 1 of the Convention. It also urged the Government to include in the next report a full comparative analysis of the benefits provided by the ESS and WCS schemes and to demonstrate the actuarial equivalence of the lump sum paid under the WCS to foreign workers in cases of temporary or permanent incapacity, invalidity or survivors’ rights to the amount of the periodical payments granted under the ESS to Malaysian workers in similar cases.

Furthermore, the Committee observed that by not complying with the principle of equality of treatment between nationals of any other member State which has ratified the Convention and its own nationals, the Government of Malaysia undermined the system of automatic reciprocity in granting equality of treatment to nationals of ratifying States that the Convention established between them. This concerned, in particular, countries which were supplying workforce to Malaysia and were also parties to the Convention: Indonesia, India, Bangladesh, Philippines, Thailand, Pakistan and China. The Committee recalled in this respect that the administrative difficulties of monitoring the payment of compensation abroad could be overcome by way of special arrangements between the Members concerned in line with Article 1(2) of the Convention, and that Article 4 required ratifying Members to afford each other mutual assistance with a view to facilitating the application of the Convention. In this context, the Committee considered that, in order to make full use of Articles 1(2) and 4 of the Convention, the Government should consider inviting a high-level advisory mission of the ILO and avail itself of the technical assistance of the Office.