Which Payments are Subject to SOCSO/EIS Contribution?

As an employer in Malaysia, you must contribute to SOCSO (Social Security Organization) and EIS (Employment Insurance System) for your employees.

However, not all types of payments are included in the calculation.

Some wages are subject to SOCSO/EIS contributions, while others are exempted.

In this article, we will explain which payments are subject to SOCSO/EIS contributions and which are not, using simple terms for easy understanding.

Payments That Require SOCSO/EIS Contributions

SOCSO and EIS contributions are calculated based on an employee’s wages.

According to Malaysian labor laws, "wages" refer to all payments made by an employer to an employee in exchange for work.

The following payments are subject to SOCSO/EIS contributions:

Basic Salary – The main salary agreed upon between employer and employee.
Overtime Pay – Any extra payment for working beyond normal working hours.
Bonus/Commissions – Payments based on performance, such as sales commissions.
Leave Pay – Payments for annual leave, medical leave, maternity leave, etc.
Service Charges – Additional charges collected from customers and distributed to employees, commonly found in the hospitality industry.

These payments are considered part of an employee’s earnings, so they must be included when calculating monthly SOCSO and EIS contributions.

Example Calculation for SOCSO/EIS Contributions

To help you understand better, here’s a simple calculation example:

Employee Details:

Basic Salary: RM3,000
Overtime Pay: RM500
Commission: RM700
Travel Allowance: RM200 (Exempted)

Total wages subject to SOCSO/EIS: RM3,000 + RM500 + RM700 = RM4,200

Using the SOCSO/EIS contribution table:

Employer SOCSO Contribution (1.75%): RM4,200 × 1.75% = RM73.50
Employee SOCSO Contribution (0.5%): RM4,200 × 0.5% = RM21.00
Employer EIS Contribution (0.2%): RM4,200 × 0.2% = RM8.40
Employee EIS Contribution (0.2%): RM4,200 × 0.2% = RM8.40

Total contributions:

Employer Pays: RM81.90 (SOCSO + EIS)
Employee Pays: RM29.40 (SOCSO + EIS)

This breakdown ensures that you, as an employer, calculate contributions correctly and avoid compliance issues.

Payments Exempted from SOCSO/EIS Contributions

Not all payments given to employees are counted as "wages" under SOCSO/EIS rules.

The following types of payments are not subject to SOCSO/EIS contributions:

Employer Contributions to Pension or Provident Funds – For example, employer contributions to EPF (Employees Provident Fund).
Travel Allowances – Payments for transport or mileage reimbursements.
Gratuity (Retirement Payment) – One-time payments given to employees upon retirement or end of service.
Expense Reimbursements – Any money paid to cover work-related expenses such as meals, accommodation, or transportation costs.
Annual Bonus – Bonuses given to employees yearly as rewards.
Cash Gifts for Festive Celebrations – Payments given for occasions such as Hari Raya, Chinese New Year, or Deepavali.

These payments are considered additional benefits or allowances rather than regular wages. Therefore, they are not used in the calculation for SOCSO/EIS contributions.

Why Is It Important for Employers to Know This?

As an employer, knowing which payments are subject to SOCSO/EIS contributions helps you:

Avoid Legal Issues – Ensuring compliance with Malaysian labor laws.
Manage Payroll Accurately – Prevent overpaying or underpaying contributions.
Enhance Employee Trust – Transparent salary calculations increase employee confidence in your company.

By following these guidelines, you can ensure that your company stays compliant and that employees receive the correct benefits.

Are you hiring?

Consider posting job ads on AJobThing to find the best candidates on Maukerja and Ricebowl. Start hiring today!

Related articles: