What Employers and HR Must Understand About Employee Protection

Many employers and employees still view SOCSO (PERKESO) as just another mandatory payroll deduction.

In reality, SOCSO is one of Malaysia’s most critical employee protection systems. It provides financial security when employees face workplace accidents, serious illness, disability, or job loss—situations that can severely impact both livelihoods and business continuity.

For employers, timely and accurate SOCSO contributions are not just a legal obligation. They are a risk management safeguard that protects employees while reducing potential disputes, liabilities, and compliance exposure.

This guide breaks down the three key SOCSO protections every Malaysian employer should understand.

The 3 Key SOCSO Protections Employers Must Know

SOCSO covers employees under three main schemes:

1. Employment Injury Scheme

2. Invalidity Pension Scheme

3. Employment Insurance System (EIS)

Each plays a different role in protecting employees—and employers—during unexpected events.

1. Employment Injury Scheme (EIS – Work Injury Protection)

The Employment Injury Scheme protects employees who suffer injuries, accidents, or occupational diseases arising out of or in the course of employment.

What Does It Cover?

Employees are protected in work-related situations such as:

• Accidents while commuting to and from work

• Injuries during business trips

• Short work-related errands during working hours

• Accidents while assisting in emergencies or rescue efforts

• Occupational diseases caused by work conditions

Benefits Provided

Under this scheme, eligible employees may receive:

• Full medical coverage at SOCSO-approved clinics and hospitals

• Temporary Disablement Benefit

  • 80% of daily wages

  • Up to RM158.67 per day

• Permanent Disablement Benefit

  • Daily payments up to RM178.50

• Dependants’ benefits & constant attendance allowance

• Children’s education assistance

• Vocational and physical rehabilitation, including free training programmes

• Funeral benefit of up to RM3,000

Employer Insight

This scheme significantly reduces employer risk by ensuring medical costs and compensation are handled through SOCSO—not directly by the company.

2. Invalidity Pension Scheme (Non-Work-Related Disability Protection)

The Invalidity Pension Scheme applies when an employee becomes invalid due to serious illness or disability not related to work, but is no longer able to earn a living.

Key Benefits

Eligible contributors may receive:

• Monthly invalidity pension starting from RM550

• Constant attendance allowance of RM500 per month

• Education benefits for dependants

• Survivors’ pension for family members

• Funeral benefit of up to RM3,000

Employer Insight

This scheme ensures long-term financial protection for employees and their families, reinforcing responsible employment practices and reducing reputational risk.

3. Employment Insurance System (EIS – Job Loss Protection)

The Employment Insurance System (EIS) is designed to support employees who lose their jobs due to retrenchment, redundancy, or business closure.

⚠️ EIS requires an additional 0.2% contribution, shared equally between employer and employee.

EIS Benefits Include:

• Job Search Allowance for up to 6 months

• Free reskilling and upskilling training (up to RM4,000)

• Training allowance of RM10–RM20 per day during courses

• Early Re-Employment Allowance for employees who secure jobs faster

Employer Insight

EIS supports workforce transitions responsibly, helping employers manage retrenchment situations more professionally and compliantly.

Why SOCSO Compliance Matters for Employers

Paying SOCSO contributions on time is not just about avoiding penalties.

For employers, proper SOCSO compliance helps to:

• Protect employees during accidents, illness, or unemployment

• Reduce financial exposure and dispute risks

• Demonstrate strong corporate governance and duty of care

• Ensure compliance with Malaysian labour and social security laws

• Maintain accurate statutory records for audits and inspections

Late or incorrect contributions can delay employee benefits and expose employers to enforcement action.

Managing SOCSO Contributions Accurately with Pandahrms

Manual payroll processing increases the risk of:

• Incorrect SOCSO calculations

• Missed contribution deadlines

• Incomplete statutory records

With Pandahrms, employers can:

• Automatically calculate SOCSO and EIS contributions

• Ensure accurate payroll deductions every month

• Maintain clear contribution records for audits

• Generate statutory reports efficiently

• Reduce compliance risk through automation

A connected HR and payroll system ensures statutory compliance is built into daily operations, not handled as a last-minute task.

Conclusion: SOCSO Is Protection, Not Just a Deduction

SOCSO is more than a line item on a payslip. It is a critical safety net that protects employees during life’s most challenging moments—and shields employers from unnecessary risk.

For HR teams and business owners, understanding SOCSO’s coverage and ensuring accurate contributions is part of responsible workforce management.

With the right systems and processes in place, compliance becomes simple—and protection becomes meaningful.