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Malaysia’s New Employment Insurance Scheme Now in Effect

By Kira Rubiano

On October 26, 2017, the Malaysian House of Representatives approved the new Employment Insurance Scheme (EIS), which was then approved by the Senate and Parliament. The EIS was first proposed in mid-2016. The bill was implemented on January 1, 2018.

The EIS is a brand new and additional tax contribution for all employees and employers in Malaysia. The contribution rate originally proposed was 0.02% for both the employee and employer portion. However, this has now been amended to be 0.2%. Salary will be capped at RM4,000.00, so the maximum the employee and employer pay is RM7.90 per month, respectively. The contributions will be managed by the Social Security Organization (Socso) of Malaysia.

The goal of EIS is to allow for the creation of an insurance scheme for laid off employees to claim a portion of their insured salary for a period of between three and six months. EIS would cover staff involved in a voluntary or mandatory dismissal, or those made redundant due to business restructuring or closure.

Many believe the implementation of the EIS will increase the productivity of a company through employees who have undergone skills and re-training programs, as well as reduce the pressure on them if there was a need to reduce costs or downsize operations.

Employers should now see a new tax contribution on the payroll register and employee pay slips.

KiraRubianoKira Rubiano is the Senior Manager of Partnerships in Europe and Asia Pac for Celergo Global Payroll. Kira manages 100+ global partnerships, which include all local partners. In addition, she is Celergo’s internal resource for all payroll knowledge in the Europe and Asia Pac regions. Kira has a degree in International Studies, with a concentration in International Law.