Navigating Malaysia’s Employment Insurance System (EIS)

Backed by the Malaysian Employment Act, workers in Malaysia enjoy legal benefits that protect them during employment and unemployment. The Employment Insurance System (EIS) contribution is one of these benefits. 

Like any other employment regulation, it has its requirements and processes that every employer must follow while ensuring their employees do the same. As an employer looking to grow your business legally, you must understand the financial implications of the EIS contribution. Failure to comply could result in a penalty.

Hence, this article aims to answer all your questions concerning the EIS scheme. From knowing how to determine eligible employees to understanding the contribution rate, this piece will help you navigate the EIS for proper implementation.

What is the Employment Insurance System (EIS)?

The Employment Insurance System (EIS) is a Malaysian scheme that provides financial assistance to employees who have lost their jobs. Its main aim is to serve as a makeshift source of income for retrenched employees until they find another job. 

It was established on 1 January 2018 and is managed by the governmental organization Pertubuhan Keselamatan Sosial (PERKESO), also known as the Social Security Organization (SOCSO).

This monetary support is funded by monthly contributions from employers and employees. Benefits include allowances for training and job hunting. The scheme also provides additional support, such as career counseling and job matching, so retrenched employees can find another source of income faster.

The EIS scheme is a crucial part of Malaysia’s social security framework. It provides a cushion for retrenched employees and promotes economic stability and adequate welfare in the workforce.

Who qualifies for EIS contribution?

The Employment Insurance System Act 2017 (Act 800) stipulates the requirements to qualify for an EIS contribution. 

Generally, eligible workers who qualify are:

  • Malaysian citizens, whether permanent or temporary residents.
  • Employees aged 18 – 60
  • Those who work in the private sector on a full or part-time basis
  • Those who contribute towards their EIS monthly
  • Retrenched workers

However, while the EIS contribution covers all working Malaysian citizens, some categories of employees are exempted from this scheme. 

They include:

  • Domestic employees
  • Civil servants
  • Employees in local authorities and statutory bodies 
  • Self-employed employees
  • Employees aged 57 and above who have never contributed to the Employment Insurance System. They’re also not required to contribute.
  • Employees who have reached the compulsory retirement age.
  • Workers whose fixed-term contract has expired without renewal.
  • Employees fired for disciplinary reasons out of misconduct.
  • Workers who resigned voluntarily.

Also, not all job losses are eligible for the EIS contribution. The categories of employment loss that qualifies for the Employment Insurance System in Malaysia are:

  • The usual retrenchment or redundancy
  • Voluntary/Mutual separation scheme (VSS/MSS)
  • Constructive dismissal
  • Company closure due to natural disasters or bankruptcy
  • Resignation due to sexual harassment, threats, or being ordered to carry out harmful duties that aren’t within the job scope

On the other hand, the kinds of employment loss that do not qualify for the Malaysian EIS are:

  • Dismissal due to employee misconduct
  • Voluntary resignation
  • Retirement
  • Unconditional termination or expiry of a fixed-term contract

Who is responsible for EIS contributions?

In Malaysia, all employers and employees must contribute to the EIS scheme, whether full-time, part-time, or contract. However, the employer is responsible for remitting the contribution to PERKOSO.

After registering your business and employees with SOCSO to participate in the EIS, deduct the contribution from your salary and employees’ salaries. Then, pay them all to SOCSO regularly. 

Similarly, employees should contribute a certain percentage of their income to the EIS scheme. They should also give their employers accurate and up-to-date information to ensure their correct results when calculating contributions. 

How to Pay for Employees’ EIS

Submit your company’s EIS contribution to Perkoso via the PERKOSO Assist portal. To do this:

  • Log in to the Assist Portal.
  • Click on My Sites and choose EIS-Contribution to generate an Electronic Challan cum Return (ECR).
  • Select Employer Contribution, and when it drops down, click on Add Contribution (Text file).
  • Click on the Text file, upload your EIS file, then submit it.

Once you’ve uploaded and submitted your file, complete your payment via any of these ways:

  • Internet banking.
  • Financial Process Exchange (FPX)
  • Direct Debit Authorisation (DDA)
  • Submit a money order, cheque, or postal order payable to PERKESO. The order or cheque should have your name, Employer Code, and the month and year of contribution written on the back.
  • Remit via your bank portal or counter with your ACR reference. Maybank, RHB Bank, and Public Bank are banks approved by PERKESO as collection agents.
  • Prihatin mobile app

Be sure to submit your employees’ EIS contributions by the 15th of the following month to avoid penalties. Defaulting employers may be prosecuted and punished with imprisonment for a term that may extend to two years and/or with a fine of not more than RM10,000.

What is the EIS contribution rate?

On 1 September 2022, the EIS contribution rate was capped at an insured salary of RM 5,000 monthly. This is in line with the increase of the Wage Ceiling Limit for Act 4 and Act 800 of the EIS scheme in Malaysia. Per the act, the EIS contribution rate is divided into two:

For employer

Employers should pay a total contribution of 0.4% per month. That is, 0.2% of their salary and their employees’ salary. For instance, when wages exceed RM4,000 but don’t exceed RM4,100, employees and employers will contribute RM8.10 each, making it a total of RM16.20.

For employees

Employees should also contribute 0.2% of their hourly, daily, or monthly wages to the Employment Insurance System. 

However, not all income categories are subject to EIS contribution. According to PERKESO, the employees can contribute from wages, overtime, commissions, service charges, allowances and incentives, and leave emoluments. 

The categories exempted from EIS contribution are travel allowance, Employee Provident Fund (EPF) contributions, expenses claim, gratuity or payment for dismissal, benefit in kind, and bonuses.

Read next: Your Guide to Malaysia Payroll

What are the differences between EIS and EPF?

The Employee Insurance System (EIS) and the Employees Provident Fund (EPF) are different social security schemes in Malaysia, and each serves a separate purpose.

For one, EPF is a mandatory savings scheme that helps employees save for retirement. It offers financial support to workers when they retire or can no longer work due to old age or declining health. It is also widely known as the Kumpulan Wang Simpanan Pekerja (KWSP) and is under the Ministry of Finance.

In addition, the EPF comprises about 9% to 11% of employees and 12% to 13% of employers’ monthly income. Its perks include long-term savings for retirement, potential returns on investments, tax benefits, housing and education withdrawals, and monetary support during emergencies.

On the other hand, EIS is an initiative that offers temporary financial support to laid-off employees until they find a new job. The contribution comprises 0.2% of employees’ and employers’ monthly income. Its benefits include job search allowance, training fees, and re-employment programs.

Also, EPF is withdrawable under certain conditions such as retirement age (usually 55), permanent disability, buying a house or leaving the country whereas EIS isn’t withdrawable. Employees only access the periodic payment during involuntary employment.

How do employees register for EIS and can they opt out?

Malaysian employees don’t need to register for the Employee Insurance System. Instead, the EIS contribution mandates all employers to register eligible employees as Insured Persons (IP) as part of the employers’ obligations under the Social Security Organization (SOCSO). 

But first, you must register your business with SOCSO if you haven’t done so already. Afterward, upon hiring a new employee, enroll their details via the EIS portal with these steps:

  • Click on Add Employee.
  • Complete the Employee Information fields and Employee Application Status with the employee’s details, such as their name, identification number, date of employment, salary details, etc.
  • Click on Save to proceed to the next page.
  • Fill in the necessary details on the page, then save and continue.

Employees cannot opt out of the EIS because participation is compulsory for all eligible private sector workers per the Employment Insurance System Act 2017. This is necessary to support employees financially in the event of unemployment.

How does the EIS contribution benefit employees?


The EIS contribution benefits employees in the following ways:

Temporary income support

The Employment Insurance System offers these temporary income support to retrenched employees:

Job Search Allowance (JSA): This is a replacement income for those who have lost their only job. Eligible recipients will receive the allowance for three to six months, depending on the recipient’s Contributions Qualifying Conditions. For instance, the employee must have paid their EIS contribution for a minimum number of months within a specified period.

Reduced Income Allowance (RIA): This is a financial allowance for people who have multiple jobs but lost at least one, not all. Payment rates and duration are the same as Job Search Allowance (JSA). When an insured person loses all their jobs at once, they’re entitled to both JSA and RIA.

After receiving the first installment of their allowance, employees will have to prove they’re actively searching for jobs before they receive subsequent installments.

Training Allowance (TA): This incentive is paid to training recipients to encourage them to attend training sessions. It’s paid at a daily rate of RM 10-20, depending on the employee’s previous salary. But to receive this support, recipients must prove that they have attended all training sessions.

Training Fee (TF): Training service providers receive this incentive so that successful applicants will receive up to six months of training at a maximum cost of RM 4000.

Early Re-employment Allowance (ERA): This financial support is for recipients who return to work while still receiving JSA. It is worth 25% of the JSA the recipient is entitled to but hasn’t received.

Read next: How to Apply, Claim, and Select Training Programs for HRDF Malaysia

Job search assistance

The Employment Insurance System Office provides two kinds of job search assistance:

Re-employment Placement Program: Insured persons registered with the Re-employment Placement Program receive one-on-one support from a SOCSO Employment Services Officer.

Career Counseling: Here, SOCSO Employment Services Officers offer a counseling service to identify problems, such as performance gaps, that a laid-off employee may face when deciding on a future career. This counseling happens during their unemployment period or after they’re re-employed as part of the EIS active labor market program. 

Furthermore, the scheme requires insured persons to enroll with MyFutureJobs. The platform matches laid-off employees with suitable vacancies. EIS also encourages applicants to attend vocational training to improve their skills and advance in their careers.

How can employees claim EIS benefits?

Employees can apply for EIS benefits through the EIS Portal or at the nearest PERKESO office.  Here’s how it works:

Eligibility verification

To successfully apply for and claim their EIS benefits, the insured person must meet these requirements:

  • Apply within 60 days from the date of loss of employment.
  • Meet PERKOSO’s Contributions Qualifying Conditions (CQC), which involves paying their monthly contributions for a minimum number of months within a specified period.
  • Be unemployed under the categories of unemployment that qualify for EIS.

Documentation required

The documents required include:

  • A copy of your NRIC
  • Payslip for the Last six months.
  • Proof of loss of employment. For example, termination letter
  • A copy of bank account information 

Claim process

Employees should contact the EIS office to claim their benefits in person or submit their application via the SOSCO Assist portal. Once approved, the applicant will receive financial support to cushion the challenging unemployment period.

Simplify EIS Compliance with HRIS

Navigating the ever-evolving regulations when it comes to Malaysia’s Employment Insurance System (EIS) can be challenging, and staying up to date with the latest mandates is crucial for HR teams to remain compliant. That’s why it’s important to have the right tools by your side.

Omni’s all-in-one HR software helps you stay up to date with the latest laws and regulations for Malaysia’s Employment Insurance System while streamlining the end-to-end employee management lifecycle. Our comprehensive payroll solution is tailored to Malaysia’s specific requirements. With features like support for MYR, automated EIS contribution calculations, and instant payroll reports, Omni can help HR teams simplify their payroll processing while ensuring compliance with the Employment Insurance System Act.

Start your 14 days free trial and see how Omni can simplify the intricacies and complexities of Malaysia EIS contribution and minimize the costs associated with common errors.

Get started today!

Get a 14-day free trial and see how Omni can work for your business.