EMPLOYER ACTION CODE: ACT

Parliament recently approved the Employment Insurance System (EIS) bill, establishing the country’s first unemployment allowance plan. The system was set to begin operations and the collection of employer and employee contributions on January 1, 2018, with payment of benefits from the fund to begin in January 2019. EIS will be administered by the Social Security Organization (SOCSO).

KEY DETAILS

The main provisions of EIS are:

  • Participation will be mandatory for all workers age 18 to 60 covered by social security.
  • Employers and employees will each contribute 0.2% of pay up to MYR 4,000 per month.
  • Individuals separated from employment on an involuntary basis (including resignation under a formal voluntary separation plan) will be able to claim benefits as early as January 1, 2019.
  • No benefit will be payable to individuals who retire, resign employment voluntarily (i.e., without preconditions), are terminated for gross misconduct or were employed under a fixed-term or fixed-task employment contract.
  • The main benefit from EIS will be a “job search allowance” payable for up to six months at 80% of covered wages the first month, 50% the second, 40% the third and fourth, and 30% the fifth and sixth months.
  • Eligibility for benefits and the duration of the job search allowance will depend on the length of insured employment, with the minimum required periods of insured employment progressively increasing with each claim. For example, to be eligible for six months of the job search allowance, a first-time claimant must have been insured during the preceding 24 months, but a second-time claimant must have been insured for the preceding 36 months.
  • Eligible individuals who obtain new employment within six months will be eligible for a lump sum “re-employment allowance” equal to 25% of the remaining unpaid entitlement.
  • Eligible individuals being retrained will be entitled to a modest daily training allowance equal to 25% of their final daily wage up to MYR 20 per day.
  • EIS will also provide free career counseling and job training services.

Collective redundancy benefits payable under the Employment Act or Labor Ordinances of Sabah and Sarawak will not affect EIS benefits.

For 2018, the Ministry of Human Resources has announced the availability of an interim benefit funded by government revenue for workers who become unemployed during the course of the year and contribute to EIS. The benefit will be payable for up to three months with a maximum benefit of MYR 600 a month.

EMPLOYER IMPLICATIONS

Beginning January 1, 2018, employers are mandated to provide SOCSO with their EIS contributions as well as those withheld from covered employees’ salaries. Noncompliance may be punishable by fines and/or imprisonment.

Employers operating in Malaysia should implement the proper payroll and reporting procedures to comply with the new regulations.