Employee Insurance in Malaysia

What is Employee Insurance Policy in Malaysia?

In Malaysia, employee insurance policies protect workers and employers from various risks at work, such as injuries, illnesses, and deaths. The primary types of employee insurance include:

• SOCSO (Social Security Organization):

SOCSO (Social Security Organization), also known as PERKESO (Pertubuhan Keselamatan Sosial), is a government agency that was established to provide social security protections to employees. Since June 2016 all Malaysian and permanent resident employees must contribute to SOCSO. As of Jan 2019, foreign workers must contribute as well.

SOCSO has two insurance schemes for its members:

1. Employment Injury Scheme : Provides coverage for workplace accidents.
2. Invalidity Scheme : Provides coverage to employees who suffer from invalidity or death due to any cause and not related to their employment.

Remarks: Monthly salary ceiling has been increased from RM5,000 to RM6,000 monthly effective 1st October 2024 and foreign worker is contributing to Employment Injury and Invalidity Scheme and Employment Injury Scheme (similar to Malaysian employee) effective from 1st July 2024.

New Employer Registrations

Employers are required to submit the following forms for registration with SOCSO within 30 days of incorporation. Failing to register for SOCSO are subjected to the federal punishment that includes a fine of RM10,000 or up to 2 years of imprisonment.

1. Form 1 (Employer’s Registration Form)
2. Other documents as per required by SOCSO Officer ( Forms 9 and Form 49 for limited liability company, etc)

Registration and Deregistration

• For New Hires:
  • Employers who take on a new Malaysian employee is eligible under the Act shall register the employee using the form 2, regardless of whether the employee ever registered and make contributions to SOCSO while working at a previous employer.
  • Employers who take on a new foreign employee is eligible under the Act shall register the employee using Foreign Workers Registration Form.
  • The form should be submitted within 30 days after commencement date.

*Registration can be submitted online via Assist portal.

• For Terminated Employees:

Employer have to indicate in Form 8A and update termination date employee record in Assist Portal.

Computations

Generally, all remuneration payable in money to an employee is wages for purposes of SOCSO contributions

• Salary
• Overtime payments
• Commission and service charge
• Payments for leave; such as annual, sick, maternity, rest day, public holidays and etc.
• Allowances such as incentives, shift, food / meal, cost of living, housing and etc.

The following payments are not considered “wages” and are not included in the calculations for monthly deductions

• Any contribution payable by the employer towards any pension or provident fund
• Any mileages claim
• Any gratuity payable on discharge or retrenchments
• Annual bonus

Is Employment Insurance Required in Malaysia?

Yes, employers in Malaysia are legally required to offer SOCSO coverage. This insurance acts as a safety net for employees who might get sick or hurt while performing their job duties. It guarantees that employees receive the necessary support and compensation during such events.

Employment Insurance System (EIS)

Introduced in 2018, the Employment Insurance System (EIS) is designed as a safety net for workers who have lost their jobs due to retrenchment or other similar circumstances. It provides financial support for those who are between jobs, allowing them some peace of mind while looking for their next source of employment.

EIS covers these situations of loss of employment:

1. Normal retrenchment and redundancy
2. VSS/MSS (Voluntary/Mutual Separation Scheme)
3. Closure of the company due to natural disasters
4. Bankruptcy or closure of the company
5. Constructive dismissal
6. Resignation due to sexual harassment or threats made in the workplace
7. Resignation after being ordered to perform dangerous duties that are not within the job scope

EIS Contribution Rate:

Maximum Contribution:

• Employer: RM 11.90
• Employee: RM 11.90
  • Total = RM 23.80

Who needs to contribute?

All private sector employer are expected to monthly contribution for each employee (Except for civil servants, foreign workers and self-employed). All Malaysian and permanent resident employees aged 18 to 60 years old have to contribute except for employees aged 57 years and above who have never contributed before.

Payment subject and exempt from EIS are same as SOCSO.

Please note that all the information listed below are to be used as a general guideline. For more detailed accounts of Malaysia employment laws and regulations, please visit the official governmental websites.

Updated on: April 2025