Effective 1 July 2024, all foreign national workers with a valid work pass or permit who are hired by companies registered in Malaysia must contribute to Malaysia’s Social Security Organisation (“SOCSO”) under the Invalidity Scheme.1
The deadline to submit monthly SOCSO contributions by employers is on the 15th day of each following month (e.g., the SOCSO contribution for July 2024 wages is due by 15 August 2024).
The employer shall make sure that the deduction from the foreign national worker and the employer’s share of the contribution are stated in the payslip, which must be given to the foreign national worker.
This change will add to the tax/social security liabilities of all foreign national workers. Where employees are tax equalised, adjustments may be necessary to keep assignees whole.
Late payment of SOCSO contributions may lead to assessment of penalties. Employers are responsible for collection and remittance of SOCSO contributions and should already have provided for the appropriate systems adjustments to meet their compliance obligations. This change will add to the costs and administrative burdens associated with international assignments.
Details of the Change
Prior to 1 July 2024, only the employer was required to contribute to SOCSO under the Employment Injury Scheme for foreign national workers, which provides protection to an employee in case of employment-related injury. Foreign national workers were not required to contribute to SOCSO.
With the coming into force of the Invalidity Scheme coverage for foreign national workers effective 1 July 2024, employers shall make the contribution payment based on the contribution rate for the employer and foreign national worker as follows:
- First Category Contribution (Employment Injury Scheme and Invalidity Scheme)
- For foreign national workers who first enter the SOCSO scheme or contribute for the first time under the age of 55 years old;
- The employee and employer contributions are capped at MYR 24.75 and MYR 86.65 respectively (i.e., capped at the monthly wage of MYR 5,000) per month.
- Second Category Contribution (Employment Injury Scheme)
- Foreign national workers who have reached 55 years old when they first enter the SOCSO scheme or who have reached 60 years of age and are still working.
- Only the employer is required to contribute to SOCSO at the rate capped at MYR 61.90 (for wages exceeding MYR 5,000) per month.
- Foreign national workers are not required to contribute.
KPMG INSIGHTS
Employees who are subject to SOCSO contributions are entitled to claim a tax relief of up to MYR 350 per year for such contributions.
Questions about the impact and the mechanics of this change should be directed to your usual professional tax & social security adviser or a member of the GMS team with KPMG in Malaysia (see the Contacts section).
Contacts
Additional Resources
Footnotes
1 The Employer Circular No.2 Year 2024 can be found on the “SOCSO” website.
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Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Malaysia.
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