Employment Tax
Malaysia | Extension of invalidity scheme coverage to foreign workers
Summary
The Invalidity Scheme by the Social Security Organisation (SOCSO) for protection outside of work is extended to cover foreign workers effective 1 July 2024.
The detail
Based on the circular issued by SOCSO (Employer Circular No. 2 Year 2024), all employers who employ foreign workers who possess a valid pass or permit issued by the Director General of Immigration (including expatriates and foreign domestic workers), are obliged to ensure that their foreign workers are protected under the Invalidity Scheme through the provision under the Employee’s Social Security Act 1969 effective 1 July 2024.
Both employers and employees are each required to make the contribution payment to the Malaysia’s Social Security Organisation (PERKESO) at a contribution rate of 0.5% of each foreign worker’s monthly wage.
The wage ceiling for contribution to the Employment Injury and Invalidity scheme is RM5,000.
The maximum contribution amounts are now capped to the following: –
| Monthly Wages | (First Category) *
Employment Injury & Invalidity | (Second Category) *
Employment Injury only | ||
| Employer’s contribution | Employee’s contribution | Total contributions | Contribution by employer only | |
| When wages exceed RM5,000 | RM86.65 | RM24.75 | RM111.40 | RM61.90 |
*Notes:
Contribution payment is due on the 15th day of each succeeding month. Thus, the contribution payment deadline for contribution month of July 2024 is 15 August 2024.
Employers need to ensure that the amount of contribution for both employer and employee are stated in the payslip and given to the foreign worker.
The extension of the Invalidity Scheme coverage to foreign workers increases staff costs incurred by the employer. Employers to re-calibrate payroll software to capture the changes to ensure compliance starting from July 2024 payroll processing. If the employer decides to bear the employee’s contribution portion, such amount is regarded as a taxable income of the employee.
How we can help
If employer decides to bear the employee’s contribution portion, we can advise on the various employment tax implications and reporting requirements to ensure compliance.
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Hilda Liow
Partner
Lim Phing Phing
Partner
Wee Lay Har
Director
Loh Zi-Lynn
Senior Manager
Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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Further information on Vialto Partners can be found here: www.vialtopartners.com
Vialto Partners (“Vialto”) refers to wholly owned subsidiaries of CD&R Galaxy UK OpCo Limited as well as the other members of the Vialto Partners global network. The information contained in this document is for general guidance on matters of interest only. Vialto is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information is provided “as is”, with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Vialto, its related entities, or the agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.
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