Malaysia Socso

1.0 Introduction

Most of us as employees have contributing to SOCSO which the contribution will be reduced from our salary. However, many of us still lack of knowledge on what SOCSO really is and what it offer to us. This assignment will study on SOCSO and its role in employee's financial planning. We shall start the assignment with some real cases related to SOCSO.

In May 2008, timber grader John suffered bad injury in a road accident in Sabah during his duty. He had collided with a lorry and the injury paralysed his lower body part. Fortunately, his company has contributing to SOCSO and his employer applied on behalf of John for compensation. SOCSO also confirm his compensation as all documents needed by SOCSO are completely prepared. John had covered by several benefits such as Temporary Disablement Benefit, Constant Attendance Allowance as and also things such as wheelchair.

Another case, for non-work related injury, Ahmad PadukaRamli, a bus driver in Miri had suffered severe disablement yet covered by SOCSO under Invalidity Pension Scheme. He got stoke and had been paralysed that he was getting worse and beyond cure. Due to his contribution to SOCSO, his sister application for IPS was confirmed and he was able to receive money and also things like wheelchair, ripple mattress and others.

Source: Pertubuhan Keselamatan Sosial annual report 2011.

Above are the cases that the party that has successfully apply for compensation from SOCSO and the table shows the number of SOCSO benefit recipients. However, the important point is that they are aware of SOCSO. Many employers and even employees do not know the right to register and contribute to SOCSO to get covered by it or avoid it just because of do not want to reduce their salary.

Source: Pertubuhan Keselamatan Sosial annual report 2011.

Above is the table for number of employers and employees that register with SOCSO. Through the Ops Kesan campaign, it gets better in aiming to educate employers and employees about their responsibilities as well as SOCSO's but there are still employers that do not register.

Social security is familiar with the basic human right. Its concept is likely to maintain quality of life of individual and the dependents when get old or face mishap. It acts as a system as well as an instrument to ensure fulfilment of human needs and to make the most of all advantages offered to them.

Employees are always exposed to so much variety of risks that will cause difficulty in their lives. If they get into accidents, not only the employees themselves will suffer in disablement, death, occupational diseases or others but the dependents will also face problems in daily life. Therefore employees should have been protected to reduce their pain and to provide financial helps as well as guarantee to their family.

2.0 Social Security Organization of Malaysia

The Social Security Organization, which called SOCSO, in malay term is "Pertubuhan Keselamatan Sosial", which also called PERKESO. This government department is formed on 1 January 1971 to enforce the Employees' Social Security Act, 1969. Since 1 January 1992, SOCSO has been separated from the government's New Remuneration System. Consequently, SOCSO's new remuneration system was introduced.

2.1 Employer's Liability

The principal and immediate employer who hires one or more employees is required to register and contribute monthly to SOCSO for all employees under the Employees' Social Security Act, 1969. Besides that, the principal employer has the responsibility to ensure all employees employed by the immediate employer have been registered and their contributions have been paid.

2.2 Coverage

The Employees Social Security Act 1969 (ESSA 1969) covers local and permanent resident workers which earning up to RM 3,000 per month. For those above the salary, they are optional to be covered with the mutual consent of the employers. Therefore, both employers and employees are subject to the principle of ‘once in, always in'.

For the contribution, employers is committed to contribute 1.75 percent of a worker's monthly salary (1.25 percent for the Employment Injury Scheme and 0.5 percent for Invalidity Scheme) while the workers contribute 0.5 percent of his/her monthly salary for the Invalidity Scheme.

Categories of employees exempted from SOCSO's coverage:

• Government employees

• Domestic servants

• Self-employed persons

• Members of the armed forces

• Prisoners

• Foreign workers

• Business owner and spouses of sole-proprietorship or partnership

2.3 Contribution

The principal employer must pay monthly contribution for each eligible employee according to the rates specified under the Act which is based on the SOCSO Contribution Schedule.

Both the rates of contribution are based on the total monthly wage paid to the employee. Contributions should be made from the first month the employee is employed.

2.3.1 Types and Categories of Contributions

The SOCSO's contributions are classified into two which are First Category & Second Category.

First Category Second Category

Includes the Employment Injury Insurance Scheme and Invalidity Pension Scheme. Includes the Employment Injury Insurance Scheme only.

Contribution payment is made by both the employer and employee. Contribution is paid by the employer only.

For employee below 60 years of age. For employees above 60 years of age and still working and employees above 55 years of age when first registered and contributed to SOCSO

An employee who is not covered under the Invalidity Pension Scheme is protected under this category.

For an Insured Person receiving Invalidity Pension who is still working and receiving wages which is less than1/3 of the average monthly wage before invalidity

2.4 Social Protection Scheme

There are two types of the scheme which is Employment Injury Insurance Scheme and Invalidity Pension Scheme. The Employment Injury Insurance Scheme is protect the employees who are involved in accidents arising out of and in the course of his/her employment occupational diseases and also commuting accident. Invalidity Pension Scheme provides twenty four (24) hours coverage for workers from invalidity or dies irrespective of the cause of death. The other objective is when an unexpected incident occurs, SOCSO will have to ensure payments are made to workers and dependants.

There are different benefits provided under this two scheme which is as below:

Employment Injury Scheme Invalidity Scheme

Temporary Disablement Benefit

Invalidity Scheme

Permanent Disablement Benefit

Invalidity Pension

• Medical Benefit

Invalidity Grant

• Dependant's Benefit

Constant Attendance Allowance

• Employment Injury Scheme

Survivor's Pension

Rehabilitation Benefit

Funeral Benefit

Education Benefit

3.0 SOCSO Protection Scheme

The protection schemes which will be further explained in the following section are playing important role in financial planning. With explanation of the different benefits in both schemes, people will know some important things in developing and revising their financial plan such as:

• The document needed in order to claim (will be listed in Appendix 1)

• The condition for eligibility

• The details of the benefits

• Under what kind of circumstances they can claim what kind of benefits

The reason it play an important role in financial planning is when something happen to an employee, SOCSO is a protection for their financial position like an individual insurance plan. The things different of the SOCSO and individual insurance is the contribution to the SOCSO is partly or wholly paid by employer, under protected when carry out the job, and it is protected under laws and regulation. Besides, financial position of the dependant of employees also be insured when employees is decease.

3.1 Employment Injury Insurance Scheme

Employment Injury Insurance Scheme is implemented in a lot of countries in Asia and it is also one