SOCSO (PERKESO) and EIS: Employer and Employee Contribution Caps

In Malaysia, managing payroll compliance involves navigating a series of statutory deductions. Beyond the Employees Provident Fund (EPF), employers must ensure accurate calculations for the Social Security Organisation (SOCSO / PERKESO) and the Employment Insurance System (EIS / SIP). In late 2024, the Malaysian government implemented a significant update by raising the statutory monthly wage ceiling for SOCSO and EIS contributions. For the Year of Assessment (YA) 2026, payroll administrators, employers, and employees must align their contributions with this RM 6,000 cap.

1. What is SOCSO and EIS?

Before examining the contribution thresholds, it is essential to understand the distinct roles these two social safety nets play in Malaysia:

• SOCSO (Social Security Organisation / PERKESO): Provides medical care, physical rehabilitation, and financial compensation to employees who experience workplace injuries, occupational diseases, or invalidity.
• EIS (Employment Insurance System / SIP): Managed by PERKESO, EIS provides job-loss financial assistance, job search training, and re-employment incentives to workers who have been retrenched or experienced involuntary unemployment.

2. The RM 6,000 Monthly Wage Ceiling

Effective October 1, 2024, the monthly wage ceiling for both SOCSO and EIS contributions was increased from RM 5,000 to RM 6,000.

This means:

• For employees earning RM 6,000 or less per month, contributions are calculated based on their actual monthly wage using the brackets defined by PERKESO.
• For employees earning more than RM 6,000 per month, their contribution amounts are capped, with calculations based on the maximum threshold of RM 6,000.

3. SOCSO Contribution Categories and Caps

SOCSO operates under two primary categories of contributions, depending on the age and registration status of the employee.

A. First Category (Employment Injury and Invalidity Scheme)

This category applies to all employees under the age of 60. The contribution rates are approximately 1.75% for employers and 0.5% for employees (totaling 2.25% of the monthly wage).

Under the RM 6,000 wage ceiling, the maximum contribution caps are:

• Employer Share Cap: RM 104.15 per month.
• Employee Share Cap: RM 29.75 per month.
• Total Maximum Contribution: RM 133.90 per month.

B. Second Category (Employment Injury Scheme Only)

This category applies to employees who are aged 60 and above, or new employees who are 55 and above and have never contributed to SOCSO before. The contribution is paid solely by the employer at 1.25% of the monthly wage, while the employee contributes nothing (0%).

Under the RM 6,000 wage ceiling, the maximum contribution caps are:

• Employer Share Cap: RM 74.40 per month.
• Employee Share Cap: RM 0.00 per month.
• Total Maximum Contribution: RM 74.40 per month.

4. EIS Contribution Rates and Caps

The Employment Insurance System applies to all private-sector employees aged 18 to 60. Unlike SOCSO, the EIS contribution rate is flat and split equally: 0.2% for the employer and 0.2% for the employee (totaling 0.4% of the monthly wage).

Under the RM 6,000 wage ceiling, the maximum contribution caps are:

• Employer Share Cap: RM 11.90 per month.
• Employee Share Cap: RM 11.90 per month.
• Total Maximum Contribution: RM 23.80 per month.

5. Summary Table: Contribution Caps (YA 2026)

For payroll processing of employees earning RM 6,000 or more per month, the statutory deductions must reflect the following caps:

6. What counts as "Wages" for SOCSO and EIS?

Employers must calculate contributions based on "wages," which are defined broadly under the Employees' Social Security Act 1969.

• Included in wages: Basic salary, overtime payments, commissions, paid leave (annual, sick, maternity), and performance bonuses.
• Excluded from wages: Employer's EPF contributions, travel allowances, service charges, retirement gratuities, and annual bonuses that are discretionary and non-contractual (under specific exclusions).

7. Late Payment Penalties and Enforcement

Failure to submit SOCSO and EIS contributions on time (by the 15th of the following month) triggers strict penalties:

• Interest on Late Payment: Calculated at 6% per annum for each day the contribution is late.
• Prosecution: Employers who fail to register their employees or fail to pay contributions can be prosecuted under Section 94 of Act 4 and Section 77 of Act 800. Convicted employers face fines up to RM 10,000, imprisonment for up to 2 years, or both.

By keeping payroll software updated with the RM 6,000 ceiling, Malaysian businesses ensure compliance while safeguarding their employees' social security benefits.