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What employers should know about EPF, SOCSO, and EIS contributions

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An employer in Malaysia does not only pay the employees monthly salary, but also contribute to EPF, SOCSO, and EIS according to the rates set by the laws.

You may have noticed that there are some deductions from your monthly gross salary that are clearly stated on your payslip during your time as an employee before starting a company. Now that you are an employer who has employees or looking to hire, there are some contributions that you have to make towards Employee Provident Fund (or KWSP in Malay) and Social Security Organization (or PERKESO in Malay) for your employees’ benefits as required by the laws in Malaysia, namely EPF, SOCSO, and EIS.

1. Employees Provident Fund (EPF) contribution

Governed under the Employee Provident Fund Act 1991, EPF is a retirement saving scheme for employees who are liable to contribute EPF in Malaysia in which the savings contributed will be managed and invested under Simpanan Konvensional or Simpanan Shariah. The saving is comprised of the employee and employer’s monthly contributions and yearly dividends earned.

Employer’s responsibility

  • Register with the EPF within 7 days upon hiring the first employee
  • Register your employees as the EPF member and keep their information updated
  • Provide salary statement to employees
  • Deduct your employees’ share of EPF contribution from their monthly salary and pay it to the EPF along with your share. Bonus, allowance, commission, incentives, and paid leaves are subject to EPF contribution as well, except for overtime payment, travelling allowance, etc.

Your employees can volunteer to contribute to EPF even if they are not liable. In addition, both you and your employees can choose to contribute more than the statutory contribution rate under Voluntary Contribution.

Employer’s contribution rate of EPF (as of the year 2019)

Employee’s statusEmployer’s EPF contribution rate
Monthly salary rateRM5,000 and belowMore than RM5,000
Malaysian age 60 and above4%
Malaysian below age 6013%12%
Permanent resident below age 6013%12
Permanent resident age 60 and above6.5%6%
Non-MalaysianRM5.00

*The contribution rates stated in this table is not applicable to Non-Malaysians registered as EPF member before 1 August 1998.

However, please bear in mind that the contribution amount should be calculated based on the contribution rate as stated in the Third Schedule of the EPF Act 1991, instead of using the exact percentage calculation except for salaries that are more than RM20,000.00. Besides, the monthly salary for Malaysians who are 60 years old and above as well as for non-Malaysians of all ages does not affect the employer’s EPF contribution rate.

When the contribution should be paid?

The monthly payment on EPF contribution for both yours and employees’ share should be paid by the 15th of the month for the salary issued for the previous month. A late payment charge or a dividend will be imposed if you do not pay the contribution on time.

Where to make the payment?

The EPF contribution can be paid through the following channels:

  • e-Caruman website or mobile application
  • Internet banking
  • Bank agents of Bank Simpanan Nasional, Maybank, Public Bank, and RHB Bank
  • EPF counter nationwide

2. Social Security Organization (SOCSO) contribution

Governed under the Employees’ Social Security Act 1969, there are 2 schemes - Employment Injury Scheme that protects an employee against occupational accident or disease and Invalidity Scheme that insures an employee who is unable to work due to incurable or unlikely to be cured condition or death. It is compulsory for all Malaysian and permanent resident employees to register with SOCSO except for Federal and State Government permanent employees, domestic servants, and those who are self-employed. Foreign workers are protected under SOCSO as well since January 2019.

Employer’s responsibility

  • Register yourself as an employer and your employees as SOCSO members within 30 days on which the Act becomes applicable to your industry
  • Report all work-related accidents that befall their workers within 48 hours
  • Maintain a monthly record of employees’ information and keep the information updated
  • Deduct your employees’ share of SOCSO contribution from their monthly salary and pay it to the SOCSO along with your share. Overtime payment, commission, paid leaves and allowances are subject to SOCSO as well except for annual bonus, mileage claims, etc.

Employer’s contribution rate of SOCSO

Employee’s statusEmployer’s SOCSO contribution rate
Age 60 and above1.25% (Employment Injury Scheme only)
Age below 601.75% (Employment Injury Scheme and Invalidity Scheme)

*The contribution rates stated in this table is not applicable to new employees who are 55 years old and above who have no prior contribution. They are covered under the Employment Injury Scheme only. Employees who are 60 years old and above do not need to contribute to the employee’s share to SOCSO.

However, please bear in mind that the contribution amount should be calculated based on the contribution rate as stated in the Rate of Contribution table on the SOCSO website, instead of using the exact percentage calculation. The monthly contribution is capped at a monthly salary of RM4,000.

When the contribution should be paid?

The monthly payment on SOCSO contribution for both yours and employees’ share should be paid by the 15th of the month for the salary issued for the previous month. A late payment interest rate of 6% per year will be charged for each day of contributions not paid.

Where to make the payment?

The SOCSO contribution can be paid through the following channels:

3. Employment Insurance System (EIS) contribution

Governed under the Employment Insurance System Act 2017 and administered by the SOCSO as well, this insurance is to protect employees aged 18 to 60 who have lost their employment except for voluntary resignation, expiry of the contract, unconditional termination of a contract, completion of a project specified in a contract, retirement, and dismissal due to misconduct.

Employer’s responsibility

You only need to register your employees once as SOCSO members and they are automatically entitled to EIS.

Employer’s contribution rate of EIS

Employee’s statusEmployer’s EIS contribution rate
Age 18 to 600.2%

*The contribution rates stated in this table is not applicable to new employees who are 57 years old and above who have no prior contribution.

However, please bear in mind that the contribution amount should be calculated based on the contribution rate as stated in the Second Schedule of the Employment Insurance System Act 2017, instead of using the exact percentage calculation. The monthly contribution is capped at a monthly salary of RM4,000.

When the contribution should be paid?

The period of the monthly payment on EIS contribution for both yours and employees’ share is the same as SOCSO contribution.

Where to make the payment?

The EIS contribution can be paid through the same channels as the SOCSO contribution.

While you can do the registration and monthly contributions manually yourself for your employees through the official portals of EPF and SOCSO, it could be a hassle that interrupts your focus on your businesses. On Foundingbird, we provide accounting and payroll service that takes care of your employees' salary from salary payment, payroll tax to the mandatory contribution of EPF, SOCSO, and EIS. Talk with us to know more about this service!

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Disclaimer: Information provided in this article is for general reference only. Please seek advice from company secretary, lawyer or other professionals according to your business's needs.