Responsibilities on SOCSO of Employers and Employees in Malaysia

Update Date:2015-9-23 10:10:50 Source:Tannet (Malaysia) Sdn Bhd Views:1376

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What is SOCSO in Malaysia? Malaysia SOCSO (Social Security Organization), also known as PERKESO (Pertubuhan Keselamatan Sosial), was established in 1971 under the Ministry of Human Resources (formerly known as Ministry of Labour) to provide social security protections to all employees/workers in Malaysia. PERKESO is an organization to provide insurance coverage against job-related injuries and disabilities, workplace accidents, occupational diseases and death. SOCSO receives monthly contributions from employers and employees, using this to build up a fund which will pay out social security benefits when such accidents or illnesses occur.

What are Employers / Employees responsibilities?

An employer must register any employees employed under a contract of service or apprenticeship and earning monthly wages of RM3,000 and below. For employees earning RM3,000 and above, registration is optional and must be agreed upon by both employer and employee (except if said employee has registered with SOCSO in their previous employment, under the 'Once In Always In' policy, in which case contribution is mandatory) Employers and registered employees have to contribute a percentage of wages to SOCSO regardless of the employment status whether it is permanent, temporary or casual in nature.

What kind of SOCSO Coverage do Employees get in Malaysia?

Malaysia's SOCSO provides protection to eligible employees through two schemes:

1.       Invalidity Pension Scheme

This scheme provides protection to employees who suffer any invalidity due to causes not connected to their employment, permanent or not or is unlikely to recover, which results in an employee being incapable of earning at least one-third of a employee at normal capacity. The benefits available under this scheme are invalidity pension, daily care allowance, funeral benefits, rehabilitation benefits, education benefits, and invalidity help.

2.       Employment Injury Insurance Scheme

This scheme provides protection to employees who suffer from an an accident or an occupational disease arising out of, and in the course of, his employment. It covers accidents while at work, accidents while travelling, accidents during emergency and diseases caused by nature of work (eg. loss of hearing due to prolonged noise exposure). The organization will provide medical benefits, temporary disablement benefit, permanent disablement benefits, daily care allowance, rehabilitation benefits, family liability benefits, funeral benefits and education benefits.

What Types of Income are Included for SOCSO Deductions in Malaysia?

All remuneration payable in money to an employee is taken into account as wages for the purposes of SOCSO contributions. These include the following payments:

1.       Basic Salary

2.       Overtime payments

3.       Commission

4.       Payments for leave such as annual, sick and maternity leave, rest day, public holidays

5.       Allowances such as performance incentives, good behavior, cost of living (COLA)

6.       Service Charges

Payments not liable for SOCSO deductions:

1.       Payments by employer to any pension or provident fund for employees

2.       Mileage claims

3.       Gratuity payment(s) for dismissal or retrenchment

4.       Annual bonus

Types of Contribution

1.       First Category (Employment Injury Scheme And Invalidity Pension Scheme)

For employees below 55 years of age. The contribution is paid by both the employer and employee for Employment Injury Scheme and Invalidity Pension Scheme.

2.       Second Category (Employment Injury Scheme Only)

For registered employees above 55 years of age and still working, newly registered employees above 50 years of age, and for a previously Insured Person receiving Invalidity Pension who is still working and receiving wages which is less than 1/3 of the average monthly wage before invalidity. Under this category contributions are only paid by the employer for protection under the Employment Injury Scheme.

Rate of Contribution

For the Employment Injury Insurance Scheme and the Invalidity Pension Scheme, the employer pays 1.75% of remuneration up to a maximum of RM51.65 a month, while the employee pays 0.5% of remuneration up to a maximum of RM14.75 a month. This maximum is hit when wages exceeds RM2,900.

For the Invalidity Pension Scheme only, the employer pays 1.25% of remuneration up to a maximum of RM36.90 a month, with no deduction from the employee. For ease of calculation, the exact contribution is slightly different from the intended 2.25% and 1.25% above, whereby contributions are determined in a tabular form depending on the level of wages. A full table can be seen here.

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