What do we know about the new contractual scheme for civil servants so far?

KUALA LUMPUR, Sept 18 — From next year, new hires in the civil service may not come under the pension scheme as there are plans to replace the latter with an improved contractual scheme.

The introduction of the new scheme was discussed at a special public service reform committee meeting last October.

There have been a lot of concerns and questions since news of the scheme broke.

Stakeholders want assurance on job security and more information on the new mechanism for civil servant hires, as well as if the new scheme will benefit people while helping the Pakatan Harapan government cut the government’s growing expenditure.

While not many details are known at this point, this is what we know so far:

The new contractual scheme

Director-General of the Public Service Department Datuk Seri Borhan Dolah, before he opted for retirement last Monday, said the new contractual scheme is aimed at providing better pay, welfare and protection for civil servants.

He was reported as saying the civil service will be downsized in phases and based on need. This will reduce the burden of pension pay-outs, a figure that’s close to RM28 billion a year.

Borhan said the contractual scheme will be more dynamic and tailored to Generation Y which is less likely to stay in one job for their entire working life.

This will give them the option to leave the public service after serving for a certain period.

Borhan said the new scheme will be subject to the Public Service Act, which protects the interests of civil servants, permanent or contractual, ensuring they are not dismissed indiscriminately.

It was also revealed the targeted savings under the new scheme are projected to be around RM5 billion a year.

Why the need for a new scheme?

Prime Minister Tun Dr Mahathir Mohamad said that the new mechanism is needed to alleviate the burden on the nation’s coffers, acknowledging that pension payments have become a huge financial burden.

At a recent press conference, Dr Mahathir said pension payments had ballooned partly because of the 25 per cent salary increment for civil servants granted by the previous administration.

He said it was a decision made without taking into account the government’s financial strength.

“Now, we are also paying pensions to the wives and children (of deceased retired civil servants). This all becomes a burden to the country,” he had explained.

Who does it benefit? 

Economist Prof Mohd Nazari Ismail from Universiti Malaya’s Faculty of Business and Accountancy said, “It is high time the government starts reducing its financial obligations, including its debts, otherwise the situation will get worse and worse.

“The contract system is good for the government but not really good for the civil servants because they lose job security. Civil servants will be under lots of stress to perform.”

However, Mohd Nazari acknowledged the situation is unavoidable.

“The same thing (stress) is happening in the private sector. If we want a work situation that is less stressful, then we need to change our value system and also our economic system.

“We should be less materialistic and less dependent on banks. Our economic system will then be less burdened by debt which is squeezing ordinary folks but benefiting the rich.”

A transformed economic system, he said, will result in reduced pressure from the cost of living once banks are curtailed and not allowed to issue loans as easily as before, reversing the effects of inflation.

The concerns

The Congress of the Union of Employees in the Public and Civil Services (Cuepacs) said that if the government plans to abolish the existing pension scheme, it should be open to holding discussions on how new appointments in the public service are made.

Cuepacs president Datuk Azih Muda said, “Cuepacs is shocked by the statement issued by the Public Service director-general (Borhan) that the government plans to stop hiring permanent and pensionable staff by 2020.

“If the proposal is implemented, Cuepacs is of the view that the future of the young people to serve the government in the context of ‘Government The Nation’ is no longer a priority,” Azih told Bernama.

Those appointed under the new scheme will be excluded from benefits such as housing and car loans that are enjoyed by their colleagues under the pension scheme.

However, the exclusion of these benefits might be translated into a higher allowance, with existing civil servants possibly being given the option to switch to the new contractual scheme.

Who will be affected?

The government is studying the possibility of excluding security forces from the proposal.

Chief Secretary to the Government Tan Sri Ismail Bakar was reported as saying that this should be placed under consideration as Royal Malaysian Police and the Armed Forces need continuity in their work.

However, an official decision on the new scheme will only be made next year.

Meanwhile, when asked if the implementation of a new contract system would make the private sector more attractive to professionals, Mohd Nazari said:

“The system is practised everywhere in the world and so the situation is the same everywhere.

“There is no choice but to simply work harder. Even entry level qualifications are getting higher.

“Last time only a Master’s degree was required to be a lecturer. Now even a PhD may not get you a job as a lecturer.”

How successful will this new scheme be in helping the government cut costs?

It is not clear how long it will take for the effects of a majority pension-less civil service to be felt.

Mohd Nazari said it will depend on what happens to government expenditure in other sectors.

“For example, the government is spending money on free breakfast for all students including those who are well off. That will add to government expenditure.

“The rakyat also seems to expect more government assistance or subsidies too.

“Young people expect the government to cancel their PTPTN loans even though those loans are actually financed by money borrowed from banks.

“So if other government expenditure is not reduced, since the government wants to be popular, there will not be much effect,” he said.

“The really poor segments of society are the ones that really deserve the government’s help, regardless of race and religion.

“The past practices of channelling government funds to politically connected groups, even though many were already well off, must end.”

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