Implementation of Employment Insurance System (EIS) in Malaysia

In recent news, the Parliament of Malaysia has just passed the Employment Insurance System (EIS). As has been noted, Malaysia saw to a loss of more than 38,000 jobs, especially in the retail, manufacturing and quarrying sector in 2016. Being a trading nation, Malaysia is highly susceptible to disruptions in the global economic chain. Therefore, this initiated the development of the EIS 2017 Bill, to serve as a financial buffer against the ill effects of the economic downturn.


The EIS Act went into effect on 1st January 2018, and all companies or enterprises with one or more employees are required to comply. Contributions were initiated since 1 January 2018 and payouts for retrenched workers will begin in 2019. Furthermore, exemptions are only applicable to the self-employed, public servants, domestic helpers and foreign workers. All in all, the EIS serves as a safeguard measure to assist retrenched workers through funding from both employers and employees.

The meaning of Loss of Employment is stipulated under section 30(1) & (2) of the Act. It also extends to retrenched staff who experienced sexual harassment or constructive dismissal at the workplace. This scheme is administered by the country’s Social Security Organisation (Sosco), to provide temporary financial assistance up to six months for each retrenched employee.

Contribution Rate

The EIS is based on a fixed rate basis. The contribution rate for the EIS consists of 0.2% from the employer and 0.2% of the employees’ monthly salary, totaling to 0.4% contribution. Moreover, it is subjected to a monthly contribution cap of RM59.30 for those with earnings RM4,000 and above.

Increased Productivity

The Insurance system consists of a list of activities that complement financial assistance. This includes training programmes, re-skilling, career counseling and job-seeking assistance. They effectively aid the Insured Persons (IP) to return to the workforce in the shortest possible time. Employees at an age range of 40-50 are most likely to benefit from this scheme. In addition, this moderates losses from any business contraction, downsizing or bankruptcy.


Altogether, failure to comply with EIS would result in a hefty fine not exceeding RM10,000 or imprisonment for a term no more than two years, or both, upon conviction.

At Your Service

AYP Malaysia provides comprehensive HR and payroll services that ensure continuous compliance with the new EIS. Contact us for error-free payroll processing for monthly financial contributions!