EPF, SOCSO, and EIS Contribution for Employers in Malaysia
The Malaysian employment landscape is intricately tied to statutory schemes designed to safeguard the welfare of employees and provide financial protection during challenging times. Among these, the Employee Provident Fund (EPF), Social Security Organization (SOCSO), and Employment Insurance System (EIS) play pivotal roles.
The EPF ensures a secure retirement by mandating contributions from eligible employees and their employers, while SOCSO offers a safety net for unforeseen circumstances such as work-related injuries. Introduced in 2018, the EIS focuses on providing temporary financial assistance to those facing job loss or retrenchment.
Understanding the nuances of these systems is vital for both employers and employees, as compliance ensures a robust social security framework. 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.
Employees Provident Fund (Malaysia)
Employer’s Duties Regarding EPF Contribution
- Register as an employer with the EPF within 7 days of hiring the first employee.
- Register your workforce as EPF members and maintain their current information.
- Provide salary statements to your employees.
- Collect your employees’ portion of EPF contribution and submit it to the EPF and the employer’s contribution.
Your employees can voluntarily contribute to the EPF even if it’s not obligatory and can contribute beyond the specified threshold. Moreover, you and your employees can contribute more than the legally mandated rate through Voluntary Contribution.
It is important to note that the contribution amount should be calculated by the contribution rate specified in the Third Schedule of the EPF Act 1991 rather than using a direct percentage calculation, except for salaries exceeding RM20,000.00.
How can an employer register for an EPF account?
Employers can register its EPF account by visiting the nearest EPF branch. They are required to bring along:
- FormKWSP 1 — retrieved via this link
- Certified copy of directors NRIC or Passport
- Company business profile [Will be given by Company Secretary]
- Section 14 — Superform [Will be given by Company Secretary]
- Section 15 — Notice of Registration [Will be given by Company Secretary]
- Section 17 — Certificate of Incorporation [Will be given by Company Secretary]
Once registered, these items will be given to the employers as indication the registration is successful:
- Employer’s reference number
- Notice of employer’s registration
- Employer’s registration certificate [To be displayed at business premise]
How can employers make their EPF contribution payments?
EPF contributions can be submitted through the following avenues:
- e-Caruman platform or mobile application
- Online banking services
- Designated bank agents, including Bank Simpanan Nasional, Maybank, Public Bank, and RHB Bank
- EPF service centers located across the nation.
When is the Deadline for EPF Contribution Payment?
The combined monthly EPF contribution, encompassing the employees’ and employer’s portions, must be settled by the 15th day of each month, covering the salary disbursed in the preceding month. Make timely payments to avoid the imposition of late payment charges or dividends.
Employer’s responsibility on EPF contribution
- Register with the EPF as an employer within 7 days upon hiring the first employee. It is mandatory for all SSM registered Companies or registered businesses such as Enterprises or Partnerships to register EPF as an employer within 7 working days upon hiring the first employee.
- Register your employees as EPF members and keep their information updated.
- Provide salary statements to employees. Provide monthly salary statements or pay slips to each employee indicating the deductions from employers as well as employee’s salary.
- Collect your employees’ share of EPF contribution and submit it to the EPF along with the employer’s share.
Your employees can volunteer to contribute to EPF even if they are not liable or contribute above the threshold stipulated. In addition, both you and your employees can choose to contribute more than the statutory contribution rate under Voluntary Contribution.
Monetary disbursements that fall under EPF contribution include:
- Salaries
- Compensation for untaken annual or medical leave
- Bonuses
- Allowances (with specific exemptions)
- Commissions
- Performance-based rewards
- Back pay or wage arrears
- Wages for maternity, study, or half-day leave
- Other contractual or applicable payments
Below are the EPF contributions that do not cover the following monetary disbursements:
- Service charges, including tips
- Overtime, encompassing payment for work on rest days and public holidays
- Gratuities, given upon service completion or voluntary departure
- Payments in lieu of notice of service termination
- Retirement and cessation benefits
- Termination settlements
- Travel allowances
- Directorial fee
- Tokens, including monetary gifts during festivities like Hari Raya and Christmas
- Non-monetary benefits and perquisites
Social Security Organization (SOCSO)
What employers need to know
- Ensure you register as an employer within 30 days of hiring your first employee.
- Register your employees as SOCSO members and keep their details up to date.
- Promptly report any work-related accidents involving your workers within 48 hours.
- Maintain an up-to-date monthly record of employee information.
- Collect your employees’ share of SOCSO contributions and submit both your share and theirs to SOCSO.
When calculating your contribution to SOCSO, please refer to the Rate of Contribution table on the SOCSO website instead of using a precise percentage calculation. Remember that the monthly contribution is limited to a maximum salary of RM4,000.
Employer’s responsibilities under SOCSO monthly contribution
- It is mandatory for all SSM registered Companies or registered businesses such as Enterprises or Partnerships to register SOCSO as an employer within 30 working days upon hiring the first employee.
- Must register the employees as SOCSO members (if they are first-time workers) and ensure their information is up to date.
- Provide monthly salary statements or pay slips to each employee, indicating the deductions from employers as well as the employee’s salary.
- Collect employees’ and employers’ share of SOCSO contribution and submit to SOCSO monthly.
When to make SOCSO payments?
SOCSO contributions should be paid monthly, and the deadline for payment is typically within the first 15 days of the following month for the previous month’s contributions. Timely payments are essential to avoid incurring penalties or late charges, which can amount to an interest rate of 6% per year for each unpaid contribution day.
How to make SOCSO payments?
Similar to EPF, SOCSO contribution in Malaysia will be deducted from both employee’s and employer’s funds and will be paid every 15th of each month. A late payment interest rate of 6% per year is imposed for each day such a contribution is not paid on time.
There are a few channels SOCSO has disclosed on where employers may auto deduct from.
Employers can make your SOCSO contributions through various channels, including:
- The PERKESO ASSIST portal
- Internet banking
- Payments by cheque, money order, or postal order
- Visiting bank counters
- Utilizing bank agents from Maybank, RHB Bank, and Public Bank
- Directly at SOCSO counters located nationwide.
When it comes to monetary payments, those subject to SOCSO contribution encompass:
- Salaries
- Overtime payments
- Commissions
- Wages for maternity leave, study leave, half-day leave
- Other contractual payments or similar forms of compensation
Monetary payments are exempt from SOCSO contributions:
- Employer contributions to pension or provident funds
- Gratuity, which denotes payments made to employees at the end of their service period or upon voluntary resignation
- Any sum disbursed to cover expenses incurred by employees during their duties
- Bonuses
- Travel allowances
- Gifts, including cash payments for holidays like Hari Raya, Christmas, and other such occasions.
Employment Insurance System (EIS)
Who is Eligible for EIS Benefits?
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Contributions: An employee must have contributed a minimum amount to the EIS fund. Both employees and employers make contributions, and eligibility is based on these contributions.
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Active Employment: Employees must be actively employed when applying for EIS benefits. The system is meant to assist those who lose jobs due to uncontrollable circumstances, like business closure or retrenchment.
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Registration: Employees must register with the EIS within a specific timeframe after being hired to ensure coverage by the system.
Employers’ Responsibilities in EIS
Employers are responsible for contributing to the EIS fund managed by the Social Security Organization (SOCSO). These contributions are crucial to maintaining the system and guaranteeing enough funds for needy employees. Since EIS is under the same roof as SOCSO, employers are not required to register as members separately. Employers must register their employees as SOCSO members just once, and they will automatically become eligible for EIS.
Kindly note that when making contributions to the Employment Insurance System, please calculate the amount based on the contribution rate specified in the Second Schedule of the 2017 Act. It is important to note that the monthly contribution is limited to a maximum salary of RM4,000. Please do not use the exact percentage calculation.
Employer Contribution of EIS in Malaysia
The Employment Insurance System (EIS), governed under the Employment Insurance System Act 2017 and administered by SOCSO, was introduced in Malaysia in 2018 to provide financial protection to employees who face job loss or retrenchment.
It offers temporary financial assistance to eligible employees while they seek reemployment.The EIS aims to reduce the financial burden of unemployment and assist individuals in transitioning to new job opportunities seamlessly.
How Can Employers Make Their EIS Contribution Payments?
The EIS contribution is deducted the same way as SOCSO, on the 15th of each month.
- Calculate the Contribution: Employers determine the EIS contribution for each eligible employee by calculating a fixed percentage of their monthly salary.
- Deduction and Payment: The employer is responsible for accurately deducting the calculated contribution from the employee’s salary.
- Submission: Employers must submit employer and employee contributions to relevant authorities, typically through the same channel as SOCSO.
Channels EIS has disclosed on where employers may auto deduct from:
- PERKESO ASSIST portal
- Internet banking
- Cheque, money order, or postal order
- Bank counters
- Bank agents of Maybank, RHB Bank, and Public Bank
- SOCSO counters nationwide
Conclusion
In conclusion, navigating the Malaysian employment landscape involves a comprehensive understanding of the EPF, SOCSO, and EIS. Employers bear crucial responsibilities in adhering to contribution requirements and ensuring the well-being of their workforce. Likewise, employees benefit from these systems as they contribute to long-term financial security and provide a safety net in times of need.
As the employment landscape evolves, staying informed about the intricacies of these schemes is imperative. Ultimately, the harmonious operation of the EPF, SOCSO, and EIS not only safeguards the rights and interests of both employers and employees but also contributes to the overall resilience and sustainability of Malaysia’s labor market.
Frequently Asked Questions (FAQs)
What is the EPF, and who contributes to it?
The EPF, or Employee Provident Fund, is a retirement savings program in Malaysia, with both employees and employers contributing to it.
Why is EPF contribution important?
EPF contribution is crucial for building a financial safety net for employees, ensuring a secure retirement.
Who is eligible for SOCSO benefits?
All Malaysian and permanent resident employees, except certain categories, are eligible for SOCSO benefits.
What are employers' responsibilities under SOCSO?
Employers must register with SOCSO, maintain up-to-date employee records, and promptly report work-related accidents.
What is the purpose of the Employment Insurance System (EIS)?
The EIS provides temporary financial assistance to employees facing job loss or retrenchment.
How is EIS contribution calculated?
EIS contributions are calculated based on a fixed percentage of employees’ monthly salaries.
Who administers the EIS in Malaysia?
The EIS is administered by SOCSO, the Social Security Organization.
When should employers make EIS payments?
EIS payments are made on the 15th of each month, along with SOCSO contributions.
How can employers make EPF contribution payments?
Employers can make EPF contributions through e-Caruman, online banking, designated banks, or EPF service centers.
What falls under EPF contribution disbursements?
Salaries, bonuses, allowances, and various monetary disbursements are subject to EPF contributions.