Employees Provident Fund
The compulsory contributions under the Employees Provident Fund (EPF) Act 1991:
Foreign workers and expatriates
All foreign workers and expatriates and their employers are exempted from compulsory contributions. They can, however, choose to contribute and the applicable rates are as follows:
Age Group 60 – 75 years
Third Schedule (Part C) of the EPF Act 1991] shall apply to the following employees :
(a) Non-Malaysian citizen employees who hold permanent residency status in Malaysia.
(b) Non-Malaysian citizen employees who opted to contribute before August 1, 1998.
Social Security Organisation (SOCSO)
The Social Security Organisation (SOCSO) oversees two social security programs for workers earning monthly wages of RM4,000 or less (Amendments effective from June 1, 2016). Once enrolled, employees maintain coverage regardless of their wages. However, the maximum contribution is calculated based on a monthly wage cap of RM4,000 (Amendments effective from June 1, 2016).
The SOCSO Act oversees two schemes:
Employment Injury Scheme: This scheme offers social insurance protection for workplace accidents, occupational diseases, and commuting accidents to and from work.
Invalidity Pension Scheme: This scheme provides round-the-clock coverage for invalidity resulting from any cause, not exclusively tied to the work environment.
Under these schemes, workers are entitled to various benefits including medical coverage, temporary and permanent disability benefits, constant attendance allowance, dependent’s benefits or survivor’s pensions, funeral assistance, rehabilitation and education benefits, as well as invalidity pensions.
The Employment Injury Scheme is funded solely by employers at a contribution rate of 1.25%, while the Invalidity Scheme is funded equally by employers and employees at a contribution rate of 1%. Contributions are capped at the monthly wage of RM4,000 and are mandated by law.
Registration is mandatory for all eligible Malaysian citizen and permanent resident employees. This includes those employed under a contract of service or apprenticeship in the private sector, as well as contractual or temporary staff of the Federal/State Government and statutory bodies.
The SOCSO Employment Injury Scheme took effect from January 1, 2019. Existing foreign workers in Malaysia covered under the Foreign Workers Compensation Scheme (FWCS) must be registered with SOCSO by their employers within one day after the FWCS expiration, up until the cooling-off period for FWCS ends on December 31, 2019. From January 1, 2020, all employers are required to register with SOCSO, even if their foreign workers are still covered under FWCS. New foreign workers arriving in Malaysia on or after January 1, 2019, must register with SOCSO after validation by the Malaysian Immigration Department at any designated port of entry.
Employees Exempted From the Coverage of the Employees’ Social Security Act, 1969 Are as Follows:
Permanent employees of the Federal and State Government
Domestic workers
Self-employed individuals (excluding taxi drivers, e-hailing service providers such as Grab drivers, and bus drivers who are self-employed)
Spouses of sole proprietors or partners in a business partnership
Self-employed
Self-employed individuals may contribute under the Self-Employed Social Security Scheme (Act 789)
Employment Insurance System (EIS)
The objective is to offer cutting-edge public employment services (PES), labor market information (LMI), and unemployment benefits to Malaysia’s workforce, aiming to advance full employment.
As outlined in Section 18 and Schedule 2 of the Employment Insurance System Act 2017, the contribution rate for the EIS is set at 0.2% for both the employer and the employee, calculated based on the employee’s monthly salary.
EIS Coverage
Monthly contributions are mandatory for all private sector employers for each of their employees, excluding government employees, domestic workers, and the self-employed.
An employee is defined as an individual engaged in employment for wages under a contract of service or apprenticeship with an employer, whether expressed or implied, oral or written.
The Employment Insurance System (EIS) covers all Malaysian citizens and permanent residents employed in the workforce.
All employees aged 18 to 60 are required to contribute, except for those aged 57 and above with no prior contributions before reaching age 57.
Contribution rates are capped based on an insured salary of RM4000.00.
The EIS Act excludes coverage for the self-employed, civil servants, and employees of local authorities and statutory bodies.
The Employment Insurance System Office provides two types of benefits: monetary benefits and job search assistance.
The 5 types of monetary benefits are:
Job Search Allowance (SE)
Reduced Income Allowance (RIA)
Training Fee (TF)
Training Allowance (TA)
Early Re-Employment Allowance (ERA)
The 2 kinds of job search assistance are:
Re-Employment Placement Program
Career Counseling
Human Resources Development Fund (HRDF)
The Human Resource Development Fund (HRDF) operates on the basis of a levy/grant system. Employers who have paid the Human Resources Development levy will qualify for training grants from the HRDF to defray or subsidise training costs for their Malaysian employees.
Companies from Manufacturing and Mining and Quarrying* sectors covered under the Pembangunan Sumber Manusia Berhad Act, 2001 are as follows:
*Starting from June 1, 2014, the Pembangunan Sumber Manusia Berhad Act, 2001 has been expanded to include sub-sectors within the Mining and Quarrying Sector, encompassing businesses engaged in petroleum and gas extraction as well as mineral and stone quarrying activities.
General DOs & DON’Ts for EPF/SOCSO/HRDF contributions and Monthly Tax Deductions (MTD) rules for submissions
Payment must be made by the 15th of the following month, or the immediate preceding business day if it falls on a weekend or public holiday.
It is recommended to allow for a reasonable time frame for cheque/payment clearance. Failure to do so may result in late payment penalties for subsequent payments made after the deadline due to returned payments.
