EIS To Enhance Employee Protection

Employment Insurance System (EIS) To Enhance Employee Protection

The Malaysia Employment Insurance System (EIS) will be implemented effective 1 January 2018. The Bill has been passed by the Dewan Negara recently. The EIS is intended to act as a safety net for employees in the event of retrenchment or unemployment due to bankruptcy or any other reasons for insolvency of employers.

This system is applicable to the private sector which is estimated to benefit 6.6 million workers. The EIS will be operated and administered by the Social Security Organisation (SOCSO) together with an Employment Insurance Committee that is established to advise SOCSO on all matters related to the system and investments made via funds raised from the EIS.

Based on the EIS Bill 2017, contributions are made by employees and employers in equal proportions based on monthly wages, in accordance with the schedule provided in the Bill. There are four schedules in total which allows the Minister – by the Order published in the Gazette – to determine which rate schedule will be applied, every three years (under the provisions of Section 18 (3) & (4) of the Bill). The average contribution is expected to be around 0.2% contributed by both employees and employers, based on wages and the level of wages.

Under the initial bill, employers and employees will contribute RM0.10  each for those with monthly wages of not more than RM30, and RM19.75 each for employees with monthly wages of more than RM4,000.

Rates for contribution in the revised bill has been slashed by more than half to RM0.05 each for those with monthly wages of up to RM30, and RM7.90 each for employees with monthly salaries exceeding RM4,000.

DEFINITION OF “WAGES”

Based on the Bill, “Wages” refers to all remunerations payable in money by an employer to an employee including any payment in respect of leave, holidays, overtime and extra work on holidays but excludes:

• any contributions payable by the employer to any pension fund, social security fund or provident fund
• any traveling allowances
• any sum paid to the employee to pay for special expenses incurred as a result of his employment
• any gratuity payable on discharge or retirement;
• any annual bonus
• any benefit under any other written law administered by the Organisation, and
• any other remuneration as prescribed.

THE BENEFITS FOR THE EMPLOYEES

The benefits for employees under the EIS cover are as follows:

• Job search allowance

A monthly payment for a period of three to six consecutive months to assist an insured person (employee) who has lost his employment during the period he is seeking for an employment.

• Early re-employment allowance

An incentive paid in lump sum to an insured person for accepting an offer of employment from any employer and commencing the employment within the *waiting period or the period of receiving the job search allowance.

• waiting period means the period of seven days from the date of approval of a claim for benefits.

• Reduced income allowance

Refers to a lump sum payment to assist an insured person who has two or more employment and has lost one or more of his employments.

• Training allowance

Means a monthly payment to an insured person for a period of not more than six months for attending any training in Malaysia, provided by an authorised training provider.

Contribution

The following is the extracted Schedule from the Bill that is the lowest contribution rates and most likely this will be the Gazette contribution rates that will be implemented effective from 1 January 2018:-