MALAYSIAN INDUSTRIAL

RELATIONS & EMPLOYMENT LAW

Author: Maimunah Aminuddin

Chapter Three
The Social Security
Laws

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Employment Law
Preview
Purpose of social security systems
The Employees Provident Fund social security for
old age
Contributions required by both employer and
employee
The Employees Social Security Act compensation
in event of occupational accident or disease
Contributions required by both employer and
employee
Workmens Compensation Act
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Social security systems
Social security systems are designed to reduce
financial stress in the event of loss or reduction of
income.

Social security may protect income when people are

faced with:
Unemployment
Post-retirement
Accident or serious illness
Child birth
Death of income earner

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Social security for post-retirement
Options to ensure elderly have sufficient
income after retirement:
Voluntary savings & investment
State provided pensions
Employer provided pensions
Joint employer-employee contribution
saving schemes

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The Employees Provident Fund
The EPF is a compulsory savings scheme for
employees so that they will have sufficient
funds in their post-retirement years.

Simpanan Hari Tua Anda

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The Employees Provident Fund,
cont.
Membership
Compulsory for:
All Malaysian employees working in private sector

Voluntary for:
Public sector employees on pension scheme
Foreign employees
Domestic servants
Self-employed persons

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The Employees Provident Fund,
cont.
Contributions

Employer responsible to contribute 12% of

employees wages and deduct 11% from
employees wages and send both
contributions to the EPF every month.

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The Employees Provident Fund,
cont.
Definition of wages under EPF Act:
All remuneration in money, due to an employee
under his contract of service or apprenticeship and
includes any bonus or allowance payable by the
employer to the employee but does not include:
Service charge

Overtime payment

Gratuity or retirement benefit

Retrenchment or termination benefit

Travelling allowance
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The Employees Provident Fund,
cont.
Failure by an employer to remit EPF contributions as
required by the law is a serious offence.

Offenders are prosecuted and may be punished as

follows:
The money owing must be paid;
The employer may be fined or jailed (RM10,000 and/or 6
months);
Assets of employer may be seized; and
Directors of company may be prevented from leaving the
country until payment made.

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Employees Social Security Act
(SOCSO)
Purpose of the Act is to establish an
insurance scheme which ensures employees
involved in a work-related accident, or who
contract a work-related disease receive
compensation.

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Employees Social Security Act
(SOCSO), cont.
Monthly contributions are made to SOCSO
by employers and employees.

Scheme is compulsory for Malaysian

employees in the private sector, earning up
to RM3,000 per month.
Once-in, always in!

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Employees Social Security Act
(SOCSO), cont.
Definition of wages:
All remuneration payable in money by the
employer to the employee, including any
payment in respect of leave, holidays,
overtime and extra work on holidays but does
not include:
a) Travelling allowance

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Employees Social Security Act
(SOCSO), cont.
b) Annual bonus
c) Reimbursement for employment related
expenses
d) Gratuity paid on retirement or end of
contract

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Workmens Compensation Act
Employers who employ foreign workers must

purchase an insurance policy to provide

compensation in case of work-related accident or

work-related disease.

The insurance policy must be paid for by the

employer.

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Review
Purpose of social security systems
The Employees Provident Fund social security for
old age
Contributions required by both employer and
employee
The Employees Social Security Act compensation
in event of occupational accident or disease
Contributions required by both employer and
employee
Workmens Compensation Act
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Employment Law