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Critical allowances no longer considered critical. Reasons why?

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Long time ago, when factories started operating in Penang’s Bayan Lepas Industrial Zones, they do their hiring all over Malaysia. In order to persuade many of these Malaysians from smaller towns to join them, they provide extra benefits such as allowances and even free accommodation. Else, the hiring will never happen because there are so many uncertainties if these people were to move to Penang from their hometowns.

In my first company, my Japanese managers have something known as inconvenience allowance. They were posted to Malaysia, so they may be away from their home town and their loved ones too. Thus, the allowance is to “soothe their emotional loss”. They may use the allowances to play golf for example. The amount is quite a lot. Let’s just say that’s also because it was calculated in US$ at the time as the company was a Japanese MNC.

In Malaysia, an allowance known as Critical Services Incentive Payment (BIPK) or also known as critical allowance will be stopped for all new staffs employed from January 2020 onwards. For all the employees currently enjoying it, they will continue to enjoy it. More details here:

Article in malaymail.com Under BIPK, civil servants under the management and professional category enjoy an additional five per cent allowance on top of their monthly salaries. Meanwhile, professionals in the medical field are paid a fixed allowance of RM750 on top of their monthly pay. Those in administrative roles in the same field is also eligible for a tenth of their monthly salary except for nurses who gets 15 percent.

This new policy will effect 33 listed professions currently eligible for BIPK. The discontinuation will start from January 1 2020. These professionals include the following: Medical officers and pharmacists, architects, engineers and assistant engineers, legal officers, agricultural and marine engineers, and medical researchers. The reason for this cut is because the JPA said it needs a comprehensive policy review in order to strengthen the public sector allowance distribution system. Please do refer to more details in the Article in malaymail.com

kopiandproperty.com would not want to comment on whether it’s wrong or it’s right. There are reasons from JPA and there are already petitions against it with good reasons too. Hopefully the best solution is found soon. However, what will happen is that consumption / demand due to these critical allowances will reduce yeah.

Assuming RM500 per pax and a total of 10,000 new civil servants under this category meant a monthly allowance of RM5,000,000 to them. Based on a multiplier effect of 4 times, this is RM20,000,000. If all these were spent on food for example, then the restaurants where these allowances were spent will have lower sales figures. Of course, in the context of the whole economy, this may not be huge but it does help. Will continue writing as and when there are further updates.

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Next suggested article: I wonder how, I wonder why. 600,000 Malaysians need a new car in 2019!

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