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Understanding the SOCSO Contribution Process

Global Payroll for Malaysia enables you to make SOCSO contributions on behalf of employers and employees to pay for the invalidity pension benefit and employment injury benefits.

This section discusses:

Employee Eligibility and Scheme Type

Payees should not begin making SOCSO contributions if they have an income of more than 2000 MYR. However, this eligibility rule does not mean that payees earning more than 2000 MYR cannot continue contributing if they made less than 2000 MYR when they enrolled in SOCSO. Later, the payee's income level could have risen above 2000 MYR. In this case, employees can continue to make SOCSO contributions even though they currently make more than the maximum income. For this reason, eligibility to SOCSO is user-controlled. The payee can be enrolled in the employment injury scheme and the invalidity pension scheme, or the employment injury scheme only. Age determines eligibility, but you determine which scheme the system applies. Payees younger than 55 can be part of the former category, while those over 55 can only be part of the latter. Each scheme is linked to a different contribution schedule.

The array SOC AR EEDATA reads the SOCSO category, the employee SOCSO membership number, and the employer SOCSO reference number from the Payee Maintain SOCSO MYS page.

The formula SOC FM CATEGORY determines the SOCSO category (scheme type) by using the duration SOC DR AGE to calculate the payee's age by comparing the birth date and the period end date.

Definition of SOCSO Wages

The formula SOC FM CONTRIB uses the accumulator SOC AC INCOME MTD to calculate the earnings that apply to SOCSO contributions. Arrears earnings are kept separate from SOCSO earnings. This enables the system to forward retroactive SOCSO contributions. Elements liable to SOCSO must contribute to accumulator SOC AC INCOME SEG.

The accumulator SOC AC INCOME YTD stores the employee's SOCSO income for the year.

Calculation of SOCSO Contributions

SOCSO contributions are deducted as a percentage of each ringgit earned. Therefore, contributions are calculated in each pay period of the month, regardless of the earnings per period.

The contribution calculation always uses the same calculation method for every frequency and every period in the month. In all cases, the system calculates:

  • The employer and employee contributions, assessing the contribution schedule table starting from the month-to-date income.

  • The difference between the calculated monthly contribution and the month-to-date contributions that were previously deducted.

    If the difference is a negative amount, the amount is refunded.

No special processing requirements exist for termination payments.

Delivered SOCSO Elements

This table lists and describes the delivered SOCSO deductions:

Element Name

Description

SOCSO EE

SOCSO payee contribution

SOCSO ER

SOCSO employer contribution

SOCSO EE RTO

SOCSO employee retro

SOCSO ER RTO

SOCSO employer ctr retro

Global Payroll for Malaysia uses an array, formulas, variables, and deductions to:

  1. Read payee SOCSO data.

    The array SOC AR EEDATA stores the information that is entered on the Payee Maintain SOCSO MYS page. The employee's SOCSO Category is stored as the variable SOC VR CATEGORY.

  2. Read SOCSO Contributions.

    SOC BR CTREMPLOYEE lists the employer and employee contribution, based on the income (SOC AC INCOME MTD) of the employee. There are two variables for SOC VR CATEGORY, GE which is the pensioner part of SOCSO, and LT, which is the combined Injury and pension scheme.

  3. Check whether to calculate SOCSO.

    The formula SOC FM CALCULATE checks the employee's SOCSO status and category to determine whether to calculate SOCSO.

  4. Calculate the monthly SOCSO contribution based on the contribution schedule table.

    The bracket SOC BR CTREMPLOYEE contains the variables and values that are needed to determine the monthly contribution based on payee income.

  5. Calculate sliced Income for SOCSO.

    SOC FM SLICEINC is used to slice the income for SOCSO calculation. It the employee has an increase in rate and the element is segmented, it calculates each slice correctly.

  6. Split the contribution between employer and employee.

    The formula SOC FM CONTRIB uses variables SOC VR CTREE and SOC VR CTRER to create employee and employer contributions.

  7. Create SOCSO deductions.

    The system uses the variables SOC VR CTREE and SOC VR CTRER to supply the SOCSO EE and SOCSO ER deductions.