We have covered important things in Payroll in Malaysia and our dear Employee Provident Fund (EPF). And now, let's take a look at another statutory requirement - Social Security Organization.
In Malaysia, there are four (4) compulsory deductions and contributions included in payroll processing. They are Monthly Tax Deduction, Employee Provident Fund, Social Security Organization, and Employee Insurance System.
What is Social Security Organization?
Social Security Organization (SOCSO) is also known as Pertubuhan Keselamatan Sosial (PERKESO). Established in 1971, under the Employees' Social Security Act 1969, it aims to provide social security protections to all employees in Malaysia. It is a collection of funds contributed by both employer and employees based on the employee’s monthly salary. The fund is meant for employee coverage in case of health issues due to work or an accident that takes place at work.
PS: Not just at the workplace. (touchwood) If you encounter an accident on the way home from your workplace or contract an occupational disease, you could apply for Employment Injury Insurance from SOCSO as well.
What are the Employer’s Responsibilities?
As an employer, there are a few things that you are responsible for: -
Register as an employer within 30 days upon hiring the first employee.
Register your employees as SOCSO members within the first 30 days of hire.
Collect your employees’ share of SOCSO contribution and submit it to SOCSO along with your employer’s share.
Maintain a monthly record of your employees’ information and keep the information updated.
Your employee’s record should be maintained for 7 years from the last entry date.
Report all work-related accidents that befall your employees within 48 hours of notification.
How do we process it?
Similar to Income Tax and EPF, SOCSO contributions are calculated and retained by employers from an employee's monthly salary. The employers then have to make the payment to PERKESO.
As of 2022, the current contribution rate is as follows:
Note: The monthly contribution is capped at a monthly salary of RM 4,000.
If you have more questions, check out this rate of contribution table provided by PERKESO. But if you want a shortcut, book a chat with us to learn more.
What if I do not comply?
Employers are liable for all their employee's SOCSO deductions and submissions. Most importantly, employers are responsible for keeping PERKESO informed about any employees' movement. If the employers fail to comply, the employers may be prosecuted and shall be punishable with imprisonment for a term which may extend to 2 years, or with a fine not exceeding 10 thousand Ringgit, or with both.
What if my submission is late?
SOCSO contribution submission should be paid by the 15th day of each succeeding month. A late payment interest rate of 6% per annum will be charged for each day of contribution not paid.
What if I miss registering or reporting my employee movements?
Once SOCSO receives information or complaints that a compound of offence has been committed, compound notices will be issued. The compound offer is valid for 14 days. If full payment for the offer amount is made within the 14 days, no further actions will be taken. However, if no payment is made after the 14 days, further actions to prosecute will be initiated without further notice.
And here are some types of offences that can lead to compound and/or prosecution: -
Failure or late in registration of industry.
Failure or late in registration of employees.
Late in informing of accident beyond the allowable time.
Failure to present or maintain employee registration record.
Failure or late in payment of Contribution Late Payment Interest to SOCSO.
Note that this is not an exhaustive list of offenses, but covers the common overlooks provided by PERKESO.