SOCSO and EIS Contribution Guide for Employers

In this comprehensive guide, we will uncover the purpose, rates, steps and the responsibilities of SOCSO and EIS contribution for employers. Navigating the intricate world of employment contributions and social security systems is a fundamental aspect of running a business in Malaysia. Ensuring compliance with the regulations surrounding Social Security Organization (SOCSO) and Employment Insurance System (EIS) contributions is crucial for both employers and employees.

In this comprehensive guide, we will delve into the intricacies of SOCSO and EIS contributions, offering a clear understanding of their purpose, rates, and the responsibilities of employers and employees. We will also explore the steps involved in the calculation and remittance of these contributions, simplifying the process for businesses and individuals alike. With these complexities in mind, follow RS 36 Solutions to delve into the intricacies of Malaysia’s payroll landscape to help you navigate this financial terrain effectively.

Understanding SOCSO & EIS Contribution for Employers

Employers in Malaysia have the responsibility of contributing to their employees’ SOCSO and EIS accounts. These contributions are akin to the deductions you might recall from your time as an employee when you saw a portion of your gross salary withheld on your payslip.

As a business owner, adhering to Malaysian legislation, including SOCSO and EIS, entails making monthly payments to the Employee Provident Fund (KWSP in Malay) and the Social Security Organization (PERKESO in Malay) for the benefit of your workforce.

It’s important to note that, just like EPF contributions and Monthly Tax Deductions (MTD), employers are obliged to not only facilitate deductions for SOCSO and EIS contributions on behalf of their employees but also contribute a portion from their own funds into their employees’ accounts.

It’s worth mentioning that while SOCSO and EIS are distinct contributions, they both go to the same organization, PERKESO. However, in contrast to EPF, there isn’t a fixed rate for SOCSO deductions. Instead, employers must consult a table published by PERKESO to determine the applicable rates ( you can find this table at https://www.perkeso.gov.my/en/rate-of-contribution.html ).

For EIS, the contribution rate is set at 0.2% of employees’ wages, with an equal contribution from both employees and employers.

Employer’s Responsibility for SOCSO and EIS Contribution

As your business expands, handling payrolls and managing contributions for SOCSO and EIS on behalf of your employees can become a complex task. To streamline this process, it is advisable to consider enlisting the services of a professional payroll service provider. Such providers can assist with various aspects, including registering your employees with SOCSO, managing salary payments, handling payroll taxes, and ensuring the mandatory contributions to both SOCSO and EIS are appropriately managed.

Social Security Organization (SOCSO) Contribution

The Social Security Organization (SOCSO), also known as “Pertubuhan Keselamatan Sosial – PERKESO,” is a government agency established in 1971 under the Ministry of Human Resource (MHR) in Malaysia.

Under the Employees’ Social Security Act 1969, two primary schemes are governed by SOCSO: the Employment Injury Scheme, which safeguards employees against occupational accidents or diseases, and the Invalidity Scheme, which provides insurance for employees unable to work due to incurable conditions or in cases of death.

It’s mandatory for all Malaysian and permanent resident employees to register with SOCSO, with the exception of Federal and State Government permanent employees, domestic servants, and the self-employed. Foreign workers have been protected under SOCSO since January 2019 (you can refer to https://www.perkeso.gov.my/en/our-services/protection/foreign-worker.html ).

Note: Private companies registered in Malaysia are required to register and contribute to SOCSO monthly, as mandated by the Employee’s Social Security Act 1969.

Function of SOCSO in Malaysia

SOCSO’s primary function in Malaysia is to provide social security protection to employees and their dependents through the Employment Injury Scheme and the Invalidity Scheme. This protection includes financial assistance and benefits for employees who are unable to work due to workplace injuries, emergencies, occupational illnesses, or death.

Why is SOCSO Contribution Important in Malaysia?

The importance of SOCSO contributions lies in providing protection to employees in Malaysia. In the event of work-related injuries, SOCSO compensates employees for medical treatments and follow-up care, ensuring they are fully covered.

Employer’s Responsibility on SOCSO Contribution

Employer's Responsibilities for SOCSO Contributions

Responsibility	Details
1. Register as an Employer	Must register within 30 days of hiring the first employee, a mandatory requirement for all SSM registered companies, enterprises, or partnerships.
2. Register Employees with SOCSO	Register employees as SOCSO members (if first-time workers) and keep their information up to date.
3. Report Work-Related Accidents	Report accidents involving employees within 48 hours.
4. Maintain Monthly Records	Maintain a monthly record of employees' information and ensure it is up to date.
5. Collect and Submit Contributions	Collect both employees' and employers' shares of SOCSO contributions and submit them to SOCSO monthly.

Employer’s and Employee’s Contribution Rate for SOCSO

SOCSO Contribution Categories

Category	Employer's Contribution Rate	Employee's Contribution Rate	Total Contribution	Applicability
First Category: Employment Injury and Invalidity Scheme	1.75%	0.5%	2.25%	Employees below 60 years, except those who attain 55 with no prior contributions before reaching 55.
Second Category: Employment Injury Scheme	1.25%	N/A	1.25%	Employees aged 60 and above or hired after 55

Note: The rates are based on the contribution schedule under the Employees’ Social Security Act, 1969.

Monetary Payments Subject to SOCSO Contribution

Payments subject to SOCSO contributions include:

Salaries
Overtime payments
Commissions
Wages for maternity leave, study leave, and half-day leave
Other contractual payments

Monetary Payments Not Subject to SOCSO Contribution

Payments not subject to SOCSO contributions include:

Contributions to pension or provident funds made by the employer
Gratuity (payment to an employee at the end of their service period or upon voluntary resignation)
Sums paid to cover expenses incurred by the employee in the course of their duties
Bonuses
Travel allowances
Gifts, including cash payments for holidays like Hari Raya and Christmas

How Employers Can Register Their SOCSO Account

To register a SOCSO account, employers can follow these steps:

Register on the ASSIST portal by sending a completed form to idportal@perkeso.gov.my.
Complete registration forms 1 and 2.
Provide certified copies of directors’ NRIC or Passport, employees’ NRIC or Passport, and Work Pass.
Share the company’s business profile and relevant forms, which will be provided by the Company Secretary.

Once registered, both employers and employees can check their contributions online using their Identity Card Numbers (NRIC).

When Should SOCSO Contributions Be Paid?

Similar to EPF, SOCSO contributions in Malaysia are deducted from both the employee’s and employer’s funds and must be paid by the 15th of each month. A late payment interest rate of 6% per year is imposed for each day the contribution remains unpaid. The monthly contribution should be paid by the 15th of the month following the month for which the salary was issued.

How to Make SOCSO Payments

Employers can make SOCSO contributions through various channels, including:

PERKESO ASSIST portal
Internet banking
Cheque, money order, or postal order
Bank counters
Bank agents of Maybank, RHB Bank, and Public Bank
SOCSO counters located nationwide

Employment Insurance System (EIS) Contribution

The Employment Insurance System (EIS) is a relatively recent addition compared to established schemes like EPF and SOCSO. Implemented by PERKESO in January 2018, EIS contributions are deducted monthly from both an employee’s salary and employer’s funds. Administered by SOCSO, this insurance is governed by the Employment Insurance System Act 2017 and provides a safety net for employees between the ages of 18 and 60 who face job loss, with exceptions for voluntary resignation, contract expiry, unconditional contract termination, project completion, retirement, and dismissal due to misconduct.

Goal of EIS in Malaysia

The primary goal of the EIS scheme in Malaysia is to provide support to employees who have lost their jobs until they can secure new employment. Contributions are collected to establish a fund aimed at offering financial assistance to retrenched employees.

Why is EIS Contribution Important in Malaysia?

EIS serves as a dedicated system to assist retrenched employees as they transition to new opportunities. It offers temporary financial support for a period of up to six (6) months to those who are unemployed.

Employer’s and Employee’s Contribution Rate for EIS

For employees aged 18 to 60:

Employer’s and employee’s EIS contribution rate is 0.2%.

Please note that these contribution rates do not apply to new employees aged 57 and above with no prior contributions. Contribution amounts should be calculated based on the rates specified in the Second Schedule of the Employment Insurance System Act 2017. Contributions are capped at a monthly salary of RM4,000.

Employer’s Responsibility on EIS Monthly Contribution

Given that EIS falls under the purview of SOCSO, employers do not need to register separately. If the employer has already registered their SOCSO profile, the EIS profile is automatically created. Employers need to register their employees as SOCSO members only, and this automatically includes them in the EIS program.

When Should EIS Contribution Be Paid?

EIS contributions, both the employee’s and employer’s share, are paid in conjunction with SOCSO contributions.

How Can Employers Make Their EIS Contribution Payments?

EIS contributions can be made through the same channels as SOCSO contributions. As your company expands, managing payrolls and payments for EPF, SOCSO, and EIS for your employees can become cumbersome. Therefore, it is advisable to consider engaging a payroll service provider to oversee your employees’ EPF and SOCSO registration, salary payments, payroll taxes, and statutory contributions for EPF, SOCSO, and EIS.

EIS contributions are deducted on the 15th of each month, and there are several channels through which employers can make their payments:

PERKESO ASSIST portal
Internet banking
Cheque, money order, or postal order
Bank counters
Bank agents of Maybank, RHB Bank, and Public Bank
SOCSO counters located nationwide

SOCSO & EIS Contribution Steps

Step 1: SOCSO & EIS Contributions

The initial step involves determining the wages subject to SOCSO and EIS deductions. Wages for SOCSO and EIS deductions encompass monthly pay but exclude the following:

Bonuses
Reimbursements
Gratuity payments for termination
Contributions made to provident funds or pensions (e.g., EPF)

Once you’ve established the applicable wage amount, refer to the provided table to identify the wage bracket within which it falls. This table will provide you with the relevant amounts for both the employer’s and the employee’s contributions.

Update on Contribution Amount for Act 4 and Act 800: Wage Ceiling Adjustment

As of September 1, 2022, PERKESO has implemented a revised wage ceiling, extending from RM4,000 to RM5,000 per month. Contributions for employees earning above RM4,000 are specified in the Third Schedule of Act 4 and the Second Schedule of Act 800. Employees with salaries surpassing RM5,000 will adhere to the new wage ceiling of RM5,000. Employers are mandated to adjust contribution payments for September 2022 and subsequent months in accordance with this updated wage ceiling. Read more on https://www.perkeso.gov.my/en/rate-of-contribution.html

Step 2: Remittance

Similar to EPF and MTD, employers are required to remit their contributions by the 15th day of the month following the wage period.

This remittance can be accomplished through various channels, including:

SOCSO’s ASSIST Portal (Payment via FPX)
SOCSO counters (accepting payment by cheque, money order, and postal order only)
Bank counters at the following institutions:

1. Maybank Berhad
2. RHB Bank Berhad
3. Public Bank Berhad (starting from 1 March 2018)

Internet Banking

Conclusion:

In conclusion, understanding and adhering to the requirements of SOCSO and EIS contributions are essential components of the employment landscape in Malaysia.

By embracing the knowledge shared in this guide, employers and employees can ensure compliance, safeguard the well-being of the workforce, and contribute to the broader social security framework. With a clearer grasp of the intricacies of these systems, individuals and businesses can navigate the landscape of employment contributions more effectively and contribute to the overall welfare and security of the Malaysian workforce.