Care Without Contracts: Rethinking Childcare Through The Informal Economy

Prepared by Claudia Ng

13 March 2026

Credit photo:NST Online

“Rights. Justice. Action”. In a labour market where caregiving obligations disproportionately fall on women, this call by UN Women on International Women’s Day 2026 means not turning a blind eye to those who are sidelined from formal care systems. With the Budget 2026 announcement extending RM3,000 in childcare tax relief to older children, the question arises: How does this translate for mothers earning below the taxable threshold, particularly those in Malaysia’s informal economy? Strengthening women’s economic participation must begin with the rights of low-income mothers in accessing care, as justice only prevails when no one is left behind, a goal that is only achievable through equitable actions.

Proponents of the Margin

The informal sector is a substantial part of Malaysia’s economy. It operates largely outside of corporate structures and is typically small-scale and unregulated. According to the International Labour Organisation (ILO), the informal sector can be defined as economic activities, enterprises, and jobs that are not covered by formal arrangements, involving unregistered enterprises and workers lacking formal contracts or employment benefits. 

While there is currently no precise estimate of the sector’s total contribution to GDP, recent data indicate that informal employment accounts for 24.5% of Malaysia's GDP.  On average, 45.6% of informal workers come from B40 households, with a significant proportion occupied by women. This is supported by The World Economic Forum’s Global Gender Gap Report 2023, noting that women are more likely than men to operate micro-businesses within the informal economy. Youth and individuals with lower levels of education are also disproportionately represented in the informal sector. Thus, women and children are the most vulnerable proponents of the informal economy, leaving them exposed to income instability, precarity, and exploitation. The Covid-19 pandemic further amplified the loss of employment opportunities, driving many women into informal activities such as unstable agricultural work, street vending, family business, and other non-permanent roles. 

Informal employment is often difficult to categorise within existing legal frameworks because they are designed around formal employment relationships. This leaves many informal workers operating without social protection or enforceable employment rights, despite long-standing recognition of their economic contributions. 

Career Penalty to Informal Precarity Pipeline

Findings from SERI’s report on Gender Discrimination across Different Industries and Work Settings identify a clear link between unequal distribution of care and the career penalty borne by working mothers. Due to the entrenched gender norms that render women as primary caregivers, women carry a disproportionate share of unpaid care work. For working mothers in particular, responsibilities related to care, marriage, and motherhood hinder their career progression. Meanwhile, gender-insensitive leadership and workplaces that fail to accommodate care needs leave caregiving women further disadvantaged in work ecosystems. 

The outcome of these structural inequities and the rigidity of formal employment is that women are forced into informal employment, as it provides the flexibility to balance work and domestic responsibilities. This is highlighted by the Khazanah Research Institute’s 2023 study, which found that 62.1% of women cited housework as the main reason for not seeking formal employment, opting for informal employment instead. This pattern extends beyond low-income women. Highly educated women also increasingly partake in gig and digital economy roles in creative, food, and fashion-related fields, drawn by the flexibility these arrangements offer.

However, single mothers are particularly represented in the informal sector and are the most burdened by this arrangement. The flexibility associated with informal employment comes at the cost of formal contracts, employment-linked benefits and contributory social protection. This is unfavourable, especially for low-income single mothers as they enter informal employment to navigate limited employment choices. Despite the flexibility, the same unequal care burden persists, compounded by income instability and limited access to formal care systems. 

In addition, mothers in the informal sector are frequently sidelined from policy measures designed around formal employment and taxable income. Financial support schemes such as tax-based childcare relief are less accessible to parents with precarious earnings or those below the taxable income threshold. Overall, balancing paid informal work demands and caregiving responsibilities prevents them from securing stable formal employment, inhibiting long-term economic mobility and inadvertently trapping them in cycles of poverty. 

Tax Relief in Theory: Relief for Whom?

Under Budget 2026, the MADANI government announced that the RM3,000 tax relief for childcare and preschool expenses for children aged up to six will be extended to registered day care or transit centres for children aged up to 12. However, this tax relief is inaccessible to households whose earnings fall below the taxable income threshold, including B40 households earning less than RM3,111 per month. 

This tax relief also excludes many women in the informal sector, as their irregular income streams coupled with operating in cash-based settings with minimal documentation, make them ineligible to register with the Inland Revenue Board (LHDN). In addition, perceived administrative burdens and compliance costs associated with tax filing further impede participation in the formal tax system.

Ultimately, the limitation of the tax relief is that childcare expenses must still be paid upfront, making it financially unfeasible for some households to fork out thousands of ringgit per month, even for parents who qualify for rebates. For low-income earners, the core barrier is not post-reimbursement but immediate liquidity. As such, tax relief offers little value, especially when there is no tax liability to deduct from. Therefore, the reliance on tax-based incentives reinforces a ‘formal-sector bias’ in Malaysian social policy and excludes the demographic that requires the most assistance. Rather than a reimbursement-based model that fails to lower the immediate, prohibitive cost of childcare, a universal support mechanism for caregivers would be more effective and equitable. 

Reframing Childcare Support

An equitable solution would be prioritising direct, upfront supply-side childcare subsidies for low-income and informal workers. Targeted cash transfers, childcare vouchers, and mandated childcare centres in public housing or PPRs (Program Perumahan Rakyat) would be more effective in addressing liquidity and accessibility issues than tax rebates. 

By making childcare more attainable for women across income groups, parents can reallocate time from unpaid caregiving to paid work, strengthening income security and economic mobility. This approach also aligns with expressed demand from mothers themselves who want to train as childcare providers if made accessible within the communities. This has a dual impact: it creates employment opportunities while increasing the number of certified carers in low-income communities. 

Furthermore, streamlining the childcare registration regulatory framework is essential to increasing access. Multi-layered compliance requirements across different ministries and local authorities increase costs and prolong the approval timeline. This discourages suppliers from entering the market, thereby driving up childcare fees. Moreover, many government subsidies and tax relief mechanisms target only registered childcare centres, thus requiring these alternative childcare centres to be legally compliant. 

As highlighted in SERI’s study on the Feasibility of Mandating Workplace Childcare in collaboration with UNFPA, regulatory fragmentation affects affordability and availability. The Selangor government’s introduction of standardised TASKA guidelines and one-stop centres demonstrates how streamlining administrative processes can encourage more provider entry. However, to deliver meaningful improvement, regulatory harmonisation must be replicated at the national level. This initiative would also shift the policy narrative away from treating formal employment as a prerequisite for childcare support, while easing the compliance burden on SMEs that may struggle to mandate on-site childcare provision. If justice in economic participation means leaving no one behind, then care must be the foundation of participation regardless of status, background, or circumstances. 

References :

[1]  International Labour Organization. (n.d.). Informal economy. hof the sector’s total contribution to GDP, recent data indicatettps://www.ilo.org/projects-and-partnerships/projects/partnership-improving-prospects-forcibly-displaced-persons-and-host/themes/informal-economy

[2] Malaysia’s Informal Economy | Shadow Economy | 2000-2026 Data. (2026). World Economics. https://www.worldeconomics.com/Informal-Economy/Malaysia.aspx

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[4] Noor, N. H. M., Al Koliby, I. S., Al-Swidi, A. K., & Al-Hakimi, M. A. (2025). Women entrepreneurs and sustainable development: Promoting business performance from the low-income groups. Sustainable Futures, 9, 100675. https://doi.org/10.1016/j.sftr.2025.100675

[5] Abdur Rahman, A., Jasmin, A. F., & Ghorpade, Y. (2024, February). Who are the informally employed in Malaysia? (Companion Brief 1). World Bank. https://documents1.worldbank.org/curated/en/099022124104067227/pdf/P18109313c28d408918ef910df6cdd46ce4.pdf

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[7] Adam Manaf Mohamed Firouz. (2025). Time to Care: Valuing Women’s Labour and Care Work. Khazanah Research Institute.

[8] Abdur Rahman, A., Jasmin, A. F., & Ghorpade, Y. (2024). What policy reforms should Malaysia undertake to support the informally employed? World Bank. 

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[10] Md Nor, Z. (2022). Precarious Employment amongst Low Income Single Mothers in Malaysia: The Implications on Family Wellbeing. E3S Web of Conferences, 339, 06009. https://doi.org/10.1051/e3sconf/202233906009

[11] Abdul Razak, N., Wan Rashid, W. E., Zulkiflee, H., Syed Marzuki, S. Z., & Panatik, S. A. (2024). Work-life balance among single mother in business: A case study of Malaysia. International Journal of Operations and Quantitative Management, 30(1), 79–88. https://doi.org/10.46970/2024.30.1.05

[12] Ministry of Finance Malaysia. (2025). Tax measures. https://belanjawan.mof.gov.my/pdf/belanjawan2026/ucapan/tax-measures.pdf

[13] Abdur Rahman, A., Jasmin, A. F., & Ghorpade, Y. (2024, February). What are the characteristics of informal employment in Malaysia? (Companion Brief 2). World Bank. https://documents1.worldbank.org/curated/en/099022124104025708/pdf/P1810931e39cc10471b0a511ed680a40226.pdf

[14] Asian Development Bank. (2024, September 10). Bringing the informal and hard-to-tax sectors into the formal tax system. Development Asia. https://development.asia/insight/bringing-informal-and-hard-tax-sectors-formal-tax-system

[15] Jun, S. W. (2025, December). “Tax relief? There is such a thing?”: B40 mums say childcare aid misses the mark. Malay Mail ; Malay Mail. https://www.malaymail.com/news/malaysia/2025/12/02/tax-relief-there-is-such-a-thing-b40-mums-say-childcare-aid-misses-the-mark/200048#google_vignette

[16] ibid.