From 1 January 2019, the Malaysian government expanded the scope of its Employment Injury Scheme (EIS), which is now mandatory for all foreign workers in the country. Accident compensation and insurance coverage was previously available to foreign workers in Malaysia under the Workmen’s Compensation Act (1952) but after discussions by the Malaysian government in 2018, it was decided that the benefit would be administered by the Social Security Organisation (SOCSO) via the EIS. The expansion of the benefit to foreign workers falls under the mandate of the Equality of Treatment Convention (1925), and the International Labour Organization’s Conference Committee on the Application of Standards, which Malaysia has ratified.
Given the new significance of the EIS, all employers in Malaysia, and especially foreign employers, should take the time to understand the impact of the new rules and how they affect their payroll systems.
What is the EIS?
The Employment Injury Scheme provides protection for employees who are injured or contract a disease as a result of their job. The EIS covers a range of benefits, including both financial assistance and rehabilitation measures. In more detail, those benefits include:
- Medical costs
- Temporary and permanent disability benefits
- Benefits for dependents
- Funeral benefits
- Constant-attendance allowance
- Facilities for physical or vocational rehabilitation
Inclusion of Foreign Employees in the EIS
On 1 January 2019, the EIS was expanded to cover foreign employees in Malaysia, including valid expatriate workers. This means that employers of foreign workers must make the same 1.25% contribution to the EIS that they do for their domestic workers during monthly payroll. This contribution is capped at MYR 49.50, and applies up to a maximum monthly wage of MYR 4,000.
Employers must register their foreign employees with SOCSO before they can begin to payroll the EIS benefit. Registration may take place online using the Automated SOCSO Integrated System Portal (ASSIST) or, alternatively, employers may submit the Foreign Worker Registration Form to a SOCSO office. Once registered, foreign employees receive a 12-digit Foreign Worker Social Security Number, necessary for the submission of their contribution record. Employers who have foreign employees already working in Malaysia under the existing Foreign Workers Compensation Scheme (FWCS) must register those employees for EIS immediately after that coverage expires.
While the EIS now broadly applies to all foreign workers and expatriate workers in Malaysia (although it excludes domestic servants), there are eligibility criteria:
- Foreign employees must hold hold a valid passport, and-
- Hold a Special Pass (for new foreign employees), or-
- A Temporary Employment Visit Pass or a valid employment pass (for existing foreign workers).
Since SOCSO benefits were not applicable to foreign employees prior to 2019, the expansion of the EIS has obviously had an administrative impact on employers and their payroll departments. The contribution cap of MYR 49.50 is expected to limit the impact for employers with employees on international assignments but all employees should review the costs of the legislative changes on their business and ensure their payroll departments are handling the change satisfactorily. Employees found not to be in compliance with the new SOCSO rules face a fine of up to MYR 10,000- and two-years imprisonment.
For more information on Malaysia’s social insurance system, explore activpayroll’s dedicated Global Insight Guide to Malaysia.