Socso Enforces New Wage Ceiling Limit for Contributions

The Human Resources Ministry, via Social Security Organisation (Socso), is enforcing a new monthly wage ceiling limit for contribution purposes.

According to Socso Chief Executive Officer Datuk Seri Mohammed Azman Aziz Mohammed, 1.5 million workers, or about 19% of all Socso contributors, are anticipated to be affected by the pay ceiling hike. This number includes both domestic and overseas workers.

The wage ceiling limit for contribution, which began on September 1, was raised from RM4,000 to RM5,000 per month due to the Employees Social Security Act of 1969 (Act 4) and Employment Insurance System Act of 2017 (Act 800) amendments.

He said that raising the wage cap increases Socso's access to social security by increasing the current benefits payment rate to 25.3%.

"The benefits include Job Search Allowance, Reduced Income Allowance, and Early Re-employment Allowance under Act 800 as well as Temporary Disability Benefit, Permanent Disability Benefit, Dependent's Benefit, Survivor's Pension, and Invalidity Pension under Act 4."

The new contribution rate

Employees whose wages surpass RM4,000 per month must pay the contribution amount outlined in the Third Schedule of Act 4 and the Second Schedule of Act 800. The contribution amount is determined by the salary ceiling limit of RM5,000 for employees whose monthly wages are higher than that amount.

According to Mohammed Azman, starting in September of this year and going forward, the employer must make the contribution payment in accordance with the new wage ceiling limit adjustment.

Rate of contribution for Act 4.

For the sake of documentation and Socso inspection, he stated, "Employers are requested to record the contribution deductions in the statement or pay slip of their respective employees."

He further stated that Socso had raised the wage ceiling five times since it was founded in 1971. He said that the actions taken aligned with the organisation's ongoing initiatives to offer contributors and their dependents more thorough social protection.

Rate of contribution for Act 800.

Transition period for employers

The transition period for employers to comply with the new contribution rate is six (6) months, starting from September 1, 2022, to February 28, 2023.

The contribution rate for a salary exceeding RM5,000.00 is RM111.40 for the First Category and RM 61.90 for the Second Category under Act 4. As for Act 800, the rate is RM19.80.

Under the latest amendments, the First Category contribution rate for salaries that exceed RM3,900.00 but do not exceed RM4,000.00 is RM88.90.

For instance, before January 1, 2023, a 30-year-old worker who makes more than RM5,000 will be eligible for permanent disability benefits and have a lump sum payment calculated for them based on the current wage maximum of RM177,252.30.

In contrast, starting on January 1, 2023, the worker will be paid a total of RM222,126.30, based on the calculation of the new wage ceiling. In this sense, the new wage ceiling is higher than the old salary ceiling by 25.3%.

The Employees' Social Security (Amendment) Bill 2022, which Dewan Rakyat approved in July, aimed to increase worker benefits while expanding social security coverage. One of the amendments is raising the contribution ceiling limit from RM4,000 to RM5,000 per month of salary.

For more information, please visit Socso's website.