Understanding the SOCSO Contribution Process

Social Security Organization (SOCSO) provides social security protection through social insurance, which includes medical and cash benefits, artificial aid and rehabilitation, and financial guarantees and family protection. Employees below 60 years old who work for a private company in Malaysia are covered by SOCSO.

In accordance with the Employees' Social Security Act 1969 and the Employment Insurance Act 2017 as of 1st September 2022:

• All employees employed under a contract of service or apprenticeship shall be registered and contribute to PERKESO subject to the ceiling limit based on the salary of MYR 5000 a month.

• Consequently, the number of salary groups for the purpose of contribution payment has been increased from forty-five (45) to fifty-five (55) salary groups.

• If an employee earns more than MYR 4000 to MYR 5000 a month, the contribution will be according to the additional contribution rates for September 2022.

• The contribution for September 2022 shall be paid latest by 15th October 2022.Employees whose wages exceed MYR5000 a month are subject to the MYR 5000 salary group contribution rate.

The array SOC AR EEDATA reads the SOCSO category, the employee SOCSO membership number, and the employer SOCSO reference number from the Payee Maintain SOCSO MYS page.

The formula SOC FM CATEGORY determines the SOCSO category (scheme type) by using the duration SOC DR AGE to calculate the payee's age by comparing the birth date and the period end date.

ACT and Regulations

The Employees’ Social Security Act 1969 (Act 4) and the Employees’ Social Security (General) Regulations 1971 apply to all industries having one or more employees. Employers are responsible to register and pay contributions to SOCSO.

Employees’ Social Security Act 1969 (Act 4)

The Social Security Organisation (SOCSO) provides two social security schemes to protect the welfare of employees and their dependents under the Employees’ Social Security Act 1969 (Act 4). The two social security schemes are:

1. Employment Injury Insurance Scheme

   Employment Injury Insurance Scheme ensures protection to employees who suffer from work-related accidents or occupational diseases arising out of and in the course of employment in the industry. The benefits provided under the Employment Injury Insurance Scheme consist of Medical Benefits, Temporary Disablement benefits, Permanent Disablement Benefit, Constant-attendance Allowance, Dependants Benefit, Funeral Benefit, Rehabilitation Benefit, and Education Benefit.

2. Invalidity Scheme

   The Invalidity Scheme provides 24-hour coverage to employees against invalidity or death due to any cause not connected with their employment. However, the employee must fulfill the condition to be eligible for an invalidity pension. Benefits provided under the Invalidity Scheme are Invalidity Pension, Invalidity Grant, Constant-attendance Allowance, Survivors’ Pension, Funeral Benefit, Rehabilitation Benefit, and Education Benefit.

Contributions

Employers shall pay a monthly contribution for each eligible employee according to the rates specified under the Act. These contributions are divided into two categories:

Contribution of First Category

For employees less than 60 years of age, the contribution shall be paid by the employer and employee for protection under Employment Injury Scheme and the Invalidity Scheme.

Note: The Contribution for employees who have yet to reach the age of 60 years shall be under the first category except for employees who have reached the age of 55 years and no contributions have been previously paid shall contribute under the second category.

Contribution of Second Category

Contributions for employees who have reached the age of 60 years are compulsory to contribute under the second category for protection under the Employment Injury Scheme. The employer shall pay the entire amount of contributions under the second category.

Note: Employees who have reached the age of 57 years and no contributions have been previously paid shall contribute under this category.

Contribution Payment Period

Contributions shall be paid not later than the 15th day of each month, for the previous month’s contribution (example: contribution for January 2022 shall be paid not later than 15 February 2022).

The formula SOC FM CONTRIB uses the accumulator SOC AC INCOME MTD to calculate the earnings that apply to SOCSO contributions. Arrears earnings are kept separate from SOCSO earnings. This enables the system to forward retroactive SOCSO contributions. Elements liable to SOCSO must contribute to accumulator SOC AC INCOME SEG.

The accumulator SOC AC INCOME YTD stores the employee's SOCSO income for the year.

SOCSO contributions are deducted as a percentage of each ringgit earned. Therefore, contributions are calculated in each pay period of the month, regardless of the earnings per period.

The contribution calculation always uses the same calculation method for every frequency and every period in the month. In all cases, the system calculates:

• The employer and employee contributions, assessing the contribution schedule table starting from the month-to-date income.

• The difference between the calculated monthly contribution and the month-to-date contributions that were previously deducted.

  If the difference is a negative amount, the amount is refunded.

No special processing requirements exist for termination payments.

This table lists and describes the delivered SOCSO deductions:

Global Payroll for Malaysia uses an array, formulas, variables, and deductions to:

1. Read payee SOCSO data.

   The array SOC AR EEDATA stores the information that is entered on the Payee Maintain SOCSO MYS page. The employee's SOCSO Category is stored as the variable SOC VR CATEGORY.

2. Read SOCSO Contributions.

   SOC BR CTREMPLOYEE lists the employer and employee contribution, based on the income (SOC AC INCOME MTD) of the employee. There are two variables for SOC VR CATEGORY, GE which is the pensioner part of SOCSO, and LT, which is the combined Injury and pension scheme.

3. Check whether to calculate SOCSO.

   The formula SOC FM CALCULATE checks the employee's SOCSO status and category to determine whether to calculate SOCSO.

4. Calculate the monthly SOCSO contribution based on the contribution schedule table.

   The bracket SOC BR CTREMPLOYEE contains the variables and values that are needed to determine the monthly contribution based on payee income.

5. Calculate sliced Income for SOCSO.

   SOC FM SLICEINC is used to slice the income for SOCSO calculation. It the employee has an increase in rate and the element is segmented, it calculates each slice correctly.

6. Split the contribution between employer and employee.

   The formula SOC FM CONTRIB uses variables SOC VR CTREE and SOC VR CTRER to create employee and employer contributions.

7. Create SOCSO deductions.

   The system uses the variables SOC VR CTREE and SOC VR CTRER to supply the SOCSO EE and SOCSO ER deductions.