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6 Facts About Employment Insurance System in Malaysia

Author:

Clarisa Wong

Published:

May 24, 2023

Last Update:

December 18, 2024

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Malaysia is quickly becoming a top destination in Asia for remote working, ranking 22nd in a global survey for the top 100 cities in 2024. With a robust internet infrastructure and a relatively affordable cost of living, Malaysia is an attractive hub for both remote workers and businesses looking to expand. For employers eyeing opportunities in this multicultural Southeast Asian country, understanding key compliance factors like payroll and statutory contributions is essential. One such statutory requirement is the Employment Insurance System (EIS).

For companies expanding their global footprint using an Employer of Record (EOR) in Malaysia, staying compliant with local regulations like the EIS is crucial. Here’s everything you need to know about the EIS and how it impacts employers and employees alike.

1. What is EIS Malaysia?

The Employment Insurance System (EIS) Malaysia was introduced in January 2018 and is managed by the government agency PERKESO (Social Security Organisation). The EIS is designed to provide financial assistance to employees who lose their jobs, helping them during their job search by offering temporary financial relief. Both employers and employees are required to make contributions to the system.1

2. EIS Contribution from Employers and Employees

Employers must contribute 0.2% of an employee’s monthly salary, while employees also contribute 0.2%. These contributions form part of the social safety net in Malaysia, ensuring employees are protected in times of unemployment. Employers using an Employer of Record in Malaysia must ensure compliance with these contribution requirements to avoid penalties.2

EIS contribution table can be referred to here.

3. Who is eligible for EIS?

Under EIS, employers must register their employees as Insured Persons (IP). The eligibility criteria for EIS include:3

    • Malaysian citizens or permanent residents aged between 18 to 60 years

    • Full-time or part-time employees

    • Any employee earning a salary, regardless of the amount

However, some categories are exempt from EIS, including:

    • Government employees

    • Domestic workers

    • Self-employed individuals

    • Employees of local authorities or statutory bodies

    • Employees aged 57 and above without prior contributions to EIS

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4. EIS, EPF, and SOCSO: What’s the Difference?

If you’re new to Malaysia or expanding your business through an Employer of Record (EOR), you may encounter other statutory contributions like EPF (Employees Provident Fund) and SOCSO. Here’s how these systems differ:

    • EPF: A retirement savings fund to secure employees’ futures.

    • SOCSO: Covers work-related injuries, accidents, and occupational illnesses.4

    • EIS: Provides unemployment insurance and job search assistance.5

Understanding the distinction between these schemes is vital for companies leveraging Employer of Record services in Malaysia, as compliance with all three is required for most employees.

5. How Can Employers Pay EIS Contributions?

Like other statutory contributions in Malaysia, EIS contributions must be paid by the 15th of each month following the salary period. Payments can be made through various channels, including:6

    • SOCSO’s ASSIST Portal

    • Bank and SOCSO counters

    • Internet banking

For employers expanding into Malaysia through an Employer of Record, managing these payments is simplified as the EOR handles all statutory contributions on behalf of your company, ensuring full compliance with Malaysian labor laws.

6. Benefits Under EIS

The EIS offers a variety of benefits to employees who lose their jobs, including:7

    • Job Search Allowance (JSA): Monthly payments for a minimum of 3 months and a maximum of 6 months to assist employees in their job search.

    • Early Re-employment Allowance (ERA): A 25% lump sum payment if employees find a job before their JSA payments are completed.

    • Reduced Income Allowance (RIA): For employees with multiple jobs who lose one, offering partial financial assistance.

    • Training Fee and Allowance: Covers vocational training costs and incentivizes participation in job-related training.

For companies expanding into Malaysia using an Employer of Record, these benefits provide employees with a layer of financial security, making Malaysia a highly attractive location for business expansion.

Expand Your Business in Malaysia with an Employer of Record

Are you looking for a hassle-free way to enter the Malaysian market? With AYP’s Employer of Record solutions in Malaysia, we handle all HR, payroll, and compliance matters, including statutory contributions like EIS, so you can focus on scaling your business. Book a demo with us here or talk to our HR experts now!