Raising The Maximum Contribution Rate Under The Employees’ Social Security Act and Employment Insurance System Act.

by MH Law | Aug 8, 2024 | Legal Update

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Overview

On 25 June 2024, two significant amendments were enacted: the Employees’ Social Security (Amendment) Act 2024 and the Employment Insurance System (Amendment) Act 2024. These adjustments will have a notable impact on the social security landscape for both employers and employees in Malaysia.

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Key Changes

The maximum insurable wage amount for employees has been raised from RM5,000.00 to RM6,000.00 per month under both the Employment Insurance System Act 2017 (“EIS Act”) and the Employees’ Social Security Act 1969 (“SOCSO Act”).

The mandatory contribution rates for employers and employees have been revised. Employer contributions for SOCSO will increase by an amount ranging between RM1.70 and RM17.50 per month, while for EIS, the increase will range between RM0.20 and RM2.00 per month.

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Business Implications

Financial Planning:

Employers need to factor in the increased contribution rates in their financial planning to accommodate the additional costs, which could accumulate, especially for larger businesses.

Compliance Requirements:

It is crucial for employers to update their payroll systems to align with the new insurable limits and contribution rates. Non-compliance may lead to severe penalties outlined under Section 94 of the EIS Act and Section 16 of the SOCSO Act.

Employee Benefits:

Employees earning above RM5,000.00 per month will benefit from improved social security coverage, potentially enhancing employee satisfaction and retention.

These amendments to the Employees’ Social Security and Employment Insurance System Acts necessitate proactive adaptation by employers, particularly those in the startup and SME sectors, to ensure compliance and capitalize on the advantages of enhanced employee coverage.

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