Employment Insurance System Act, 2017

Employment Insurance System Act, 2017

The Employment Insurance System Act 2017 (‘the EIS Act’) is enacted for the purpose of establishing a social security scheme known as the Employment Insurance System (‘EIS’) in Malaysia. The EIS had since launched into operation on 1 January 2018 pursuant to gazette published by the Minister of Human Resource. EIS is currently administered under the Social Security Organization (“SOCSO”).

Purpose & Overview

The purpose of this enactment is to allow those who are insured under the Act to claim up to six (6) months’ benefits in the event of the insured’s contract of service being terminated or voided. Loss of employment, of course, shall exclude that of voluntary resignation, expiry of employment contract, employment contract terminated by mutual consent, retirement, completion of the work in accordance with the terms of the contract, or termination of contract due to misconduct.

Benefits

The benefits that the insured employees could receive under the EIS include job search allowance, early re-employment allowance, reduce income allowance, training allowance, and also career counseling, just to name a few.

The ‘insurance premium’ to be paid in order to be covered under EIS is in the form of contribution at the prescribed rate partly by employers and partly by employees. Such contribution as it stands now shall be at the rate of 0.2% of employees’ monthly salary to be paid by the employer and another 0.2% of the employees’ monthly salary to be deducted from the employees’ monthly salary. The exact amounts of contribution are as specified in the Second Schedule of the EIS Act.

In brief, it is now the law that all employees between the age of 18 and 60 years old and their employers to make the statutory contribution under EIS, except for those employees who have reached the age of 57 before the coming into operation of the EIS Act. Failing to comply with this will result in the employer being fined a maximum of RM10,000, or up to two years imprisonment, or both.