As of October 1, 2024, the Malaysian government has officially implemented a significant update to the salary ceiling for SOCSO (Social Security Organisation) and EIS (Employment Insurance System) contributions. Previously capped at RM5,000 per month, the new salary ceiling has been increased to RM6,000. This change will have substantial implications for both employers and employees across Malaysia, affecting over 1.5 million workers.
Why Was the Salary Ceiling Increased?
The salary ceiling for SOCSO and EIS contributions is periodically reviewed to ensure the system keeps pace with the rising cost of living and wages in Malaysia. This new increase, from RM5,000 to RM6,000, is part of a broader effort to extend enhanced social security coverage to higher-income employees and provide more substantial benefits.
How Will This Change Impact Employers?
Employers are legally required to contribute to SOCSO and EIS on behalf of their employees. With the new ceiling in place, employers must now calculate and contribute based on a salary cap of RM6,000, rather than RM5,000. This means that for employees earning more than RM6,000 per month, the SOCSO and EIS contributions will be calculated up to this new limit.
For employees earning less than RM6,000, the contribution rate remains unchanged, as they were already contributing based on their actual salary. However, employers should be prepared for potential questions from employees, especially those whose contributions may now increase as a result of this update.
Employers will need to update their payroll systems and ensure that the new ceiling is reflected accurately in pay slips and records. Failing to do so could lead to penalties or fines, as all companies are required to adhere to SOCSO and EIS contribution regulations. SOCSO inspectors regularly audit companies, and non-compliance can result in fines or even imprisonment for serious breaches.
Key Benefits for Employees
The increase in the salary ceiling means that employees who earn more than RM5,000 will now see higher contributions going toward their social security benefits. While this might result in slightly higher deductions from their salary, it also means access to enhanced benefits in several key areas:
1. Temporary Disability Benefits: Employees who are temporarily unable to work due to illness or injury will receive higher benefits, which can be crucial in covering living expenses during recovery.
2. Permanent Disability Benefits: If an employee is permanently disabled, they will receive increased compensation due to the higher ceiling, ensuring more comprehensive financial support.
3. Dependents’ Benefit: In the unfortunate event of an employee’s death, dependents will receive higher compensation, offering better security for their family members.
4. Invalidity Pension: Employees who are unable to work due to chronic illness or other long-term health conditions will have access to a higher pension.
5. Jobseeker’s Allowance: Under the EIS, employees who lose their jobs will be entitled to a higher allowance during their job search. This is particularly helpful for higher-earning individuals who need to maintain their standard of living while transitioning between jobs.
6. Early Re-employment Allowance: For those who secure new employment quickly after losing a job, the early re-employment allowance will also be calculated based on the updated ceiling.
Penalties for Non-Compliance
Employers who fail to register employees or do not adjust their payroll systems to account for the new salary ceiling can face steep penalties. According to Malaysian law, employers must comply with SOCSO and EIS regulations, and non-compliance can result in fines, penalties, or even imprisonment. For instance, in a case from earlier this year, a beauty center was fined RM1,000 and the owner faced jail time for failing to register the company with SOCSO .
It’s also essential that employers keep detailed records of SOCSO and EIS contributions, as these may be audited by authorities. Proper documentation and compliance will ensure smooth operations and avoid any legal complications.
Next Steps: Ensuring Compliance
To ensure your company complies with these new regulations, consider taking the following steps:
• Update Payroll Software: Make sure your payroll system reflects the new RM6,000 ceiling and automatically calculates SOCSO and EIS contributions based on this new limit.
• Communicate with Employees: Inform your staff about the changes, especially those earning above RM5,000, as their deductions and benefits will be impacted.
• Consult a Professional: If you’re unsure about the steps you need to take, consulting with a professional who specializes in Malaysian employment law and payroll systems can be invaluable.
At our company secretarial firm, we specialize in ensuring compliance with employment regulations like these. If you need assistance updating your payroll or have questions about SOCSO and EIS contributions, we’re here to help.
Call us today at 016-3240990 or WhatsApp us for more information! We’ll guide you through the necessary updates and ensure that your business remains compliant with the latest regulations.
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