Employer should know and clearly understand about the Malaysia Statutory contribution. There are laws and rules designed by each Statutory body to protect employees’ benefits. Failure to comply may subject to costly penalties to organization.

As an employer, you are responsible for including the following statutory contribution calculations in your organization payroll and ensure the monthly contributions deducted from your employees’ salary are accurate and remitted to the statutory bodies.

Following are the statutory that need to comply during payroll process:

Employees’ Provident Fund (EPF)

EPF was established in year 1991. A federal statutory body under the purview of the Ministry of Finance. EPF is a retirement savings account funded by contributions from employers and employees. EPF is mandatory for all Malaysian Citizens under employment until the employees attain the age of sixty (60) years and optional voluntary contribution for Malaysian citizen who are self-employed.

Employers may deduct the employee’s share follow the mandatory Contribution Rate from their monthly salary and pay the employees’ and employer’s monthly contribution payment on or before 15th of the following month.

Social Security Organization (SOCSO)

SOCSO was established in year 1971. A statutory body purview under Ministry of Human Resources (formerly known as Ministery of Labour). The function of SOCSO is to provide social security protections to all employees/workers in Malaysia. All employees who are employed under a contract of service or apprenticeship in the private sector and contractual / temporary staff of Federal / State Government as well as Federal / State Statutory Bodies need to be registered and covered by SOCSO.

All employers who employ one or more employees are responsible to register and contribute to Social Security Organisation (SOCSO) based on the Contribution Rate specified under the Employees’ Social Security Act, 1969, administered by SOCSO.

Employment Insurance System (EIS)

EIS was implemented on Year 2017 to support employees who lost their job from voluntary or mandatory retrenchment, or those whose jobs become redundant due to business restructuring, downsizing or closure. All employees under private sector age between 18 years old to 60 years old is mandatory to contribute to EIS. The monthly Contribution Rate had fixed as 0.2% base on the employee’s salary and 0.2% contribution from employer.

EIS is managed by Social Security Organisation (SOCSO) and aims to provide temporary financial assistance for up to six months to the employees who are retrenched by company. Retrenched employees will be given a portion of the insured salary from the 0.4% monthly contribution.

Human Resources Develop Fund (HRDF)

HRDF establish since year 1993. HRDF is governed by the Pembangunan Sumber Manusia Berhad Act 2001 (PSMB Act 2001) and was given the mandate by the Malaysian Government to catalyze the development of current and future workforce. A statutory body that collection of a human resources development levy from employer of the manufacturing and service sectors for the purpose of promoting the training and development of employees. Any employer who is convicted for not registering with PSMB may be fined up to an amount not exceeding RM10,000 or face imprisonment up to a year, or both (Section 13 (2)).

Employer who covered under First Schedule of PSMB Act, 2001 is mandatory to register with PSMB for HRD levy contribution in respect of each of Malaysian employees at the rate of one (1%) of the monthly wages ,

Employer with 5 ≤ 9 Malaysian employees are given an option to register with HRDF and the monthly HRD levy contribution in respect of each employees at the rate of (0.5%).

Disclaimer

Information contained in this site includes information derived from various third parties. Links to other Internet Sites are for information only. The Statutory information may be subject to change under certain circumstances and impact on the accuracy of the Information. Users is responsible to make their own investigations, decisions, enquiries about the information retrieved from other Internet Sites.