Understanding SOCSO: Employer Obligations and Employee Benefits
Understanding SOCSO: Employer Obligations and Employee Benefits
Every Malaysian employer with one or more employees is required by law to register with SOCSO (Social Security Organisation), known locally as PERKESO. Despite this legal mandate, SME Corp Malaysia's 2025 survey found that 18% of micro-enterprises were either unregistered or underreporting their workforce to SOCSO. This gap exposes both employers and employees to serious financial and legal risk. Here is everything you need to know about SOCSO compliance, contribution rates, and the benefits your team is entitled to claim.
What Is SOCSO and Why Does It Exist
SOCSO, or Pertubuhan Keselamatan Sosial (PERKESO), is a government agency established under the Employees' Social Security Act 1969. Its core purpose is to provide financial protection to employees and their dependents in the event of workplace injuries, occupational diseases, disability, or death.
As of 2025, SOCSO covers over 6.8 million active contributors across Malaysia, according to PERKESO's Annual Report 2024. The organisation administers two key schemes: the Employment Injury Scheme and the Invalidity Scheme.
Who Must Contribute to SOCSO
All employees earning up to RM5,000 per month must be covered under both SOCSO schemes. Employees earning above RM5,000 are covered under the Employment Injury Scheme only, unless they were already contributing to both schemes before their salary exceeded the threshold.
This applies to:
- Full-time employees
- Part-time employees
- Probationary employees
- Foreign workers (under the Employment Injury Scheme only)
Self-employed individuals can voluntarily register under the Self-Employment Social Security Scheme, which was expanded in 2023 to cover gig economy workers including e-hailing drivers and freelance delivery riders.
Contribution Rates Breakdown
SOCSO contributions are shared between employer and employee. The rates depend on the employee's monthly wages and which schemes they are covered under.
For employees earning RM5,000 and below:
| Monthly Wages | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| RM5,000 and below | 1.75% | 0.5% | 2.25% |
For employees earning above RM5,000:
| Monthly Wages | Employer Rate | Employee Rate | Total |
|---|---|---|---|
| Above RM5,000 | 1.25% | 0% | 1.25% |
The employer portion covers both the Employment Injury Scheme (1.25%) and the Invalidity Scheme (0.5% for eligible employees). The employee's 0.5% goes entirely toward the Invalidity Scheme.
For a business with 10 employees each earning RM3,000, the total monthly SOCSO cost to the employer is approximately RM525 (RM3,000 x 1.75% x 10).
The Two SOCSO Schemes Explained
Employment Injury Scheme
This scheme protects employees against workplace accidents and occupational diseases. Benefits include:
- Medical benefits: Full coverage of medical treatment related to workplace injuries at SOCSO panel clinics and hospitals
- Temporary disablement benefit: 80% of the employee's average daily wages during the period of medical leave
- Permanent disablement benefit: Periodic payments based on the degree of disability, assessed by the SOCSO Medical Board
- Dependants' benefit: Monthly payments to the spouse and children if the employee dies from a workplace injury
- Funeral benefit: A lump sum of RM5,000 for funeral expenses
- Constant attendance allowance: Additional payment for employees who require constant personal attendance due to severe disability
Invalidity Scheme
This scheme covers invalidity (not caused by employment) and death of the employee. Benefits include:
- Invalidity pension: Monthly payment to employees who become permanently unable to work
- Invalidity grant: Lump sum payment for employees who do not qualify for the pension due to insufficient contributions
- Survivors' pension: Monthly payment to dependants if the employee dies
- Funeral benefit: RM5,000 lump sum
- Education benefit: Financial assistance for the children of deceased or permanently disabled employees, covering primary through tertiary education
Dr. Noor Azlan Ghazali, economics professor at Universiti Kebangsaan Malaysia, has observed: "SOCSO remains one of the most underappreciated components of Malaysia's social safety net. The education benefit alone has funded over 45,000 scholarships since its inception, directly breaking the cycle of poverty for families affected by workplace tragedies."
Common Compliance Mistakes Employers Make
Mistake 1: Late Registration
Employers must register with SOCSO within 30 days of hiring their first employee. Late registration does not exempt you from paying contributions from the actual date of employment. SOCSO can and does backdate contributions with penalties.
Mistake 2: Underreporting Wages
Some employers report only the basic salary, excluding allowances, commissions, and overtime that should be included in the insured wages. SOCSO defines wages broadly under the Act, and underreporting can result in penalties and reduced benefits for your employees.
Mistake 3: Not Reporting Workplace Accidents
Employers must report workplace accidents to SOCSO within 48 hours. Failure to report can result in a fine of up to RM10,000 or imprisonment of up to two years, or both, under Section 94 of the Act.
Mistake 4: Excluding Part-Time or Probationary Staff
There is no exemption for part-time or probationary employees. If someone works for you under a contract of service, they must be covered.
How to Register and Make Contributions
Step 1: Register Your Business
Visit the PERKESO Assist Portal (assist.perkeso.gov.my) to register your business online. You will need your SSM registration number, business details, and director information.
Step 2: Register Each Employee
Add each employee through the portal with their IC number, employment details, and monthly wages. New employees must be registered within 30 days of their start date.
Step 3: Make Monthly Contributions
Contributions are due by the 15th of each month for the preceding month's wages. Payment can be made online through the PERKESO portal via FPX or direct debit.
Step 4: Keep Records Updated
Update employee records when wages change, employees leave, or new staff join. Accurate records ensure your employees receive the correct benefits if they need to claim.
SOCSO and Your Business Operations
Managing SOCSO contributions alongside EPF, EIS, and LHDN deductions requires organized payroll processes. For service businesses like salons, clinics, and F&B outlets where staff turnover can be frequent, keeping registrations current is an ongoing task.
Tools like EzFlow that include staff management and scheduling features help business owners maintain accurate employee records, making it easier to ensure SOCSO registration stays current when staff join or leave.
Recent Changes and Updates
In 2025, SOCSO expanded several benefit categories:
- The Self-Employment Social Security Scheme was extended to cover an additional 15 gig economy categories
- Medical benefits were expanded to include mental health treatment for work-related conditions
- The maximum funeral benefit was increased from RM3,000 to RM5,000
- SOCSO launched a rehabilitation programme for injured workers, with 12 return-to-work centres nationwide
PERKESO reported processing over 420,000 claims in 2024, disbursing RM3.9 billion in benefits to workers and their families.
Frequently Asked Questions
What happens if I do not register my employees with SOCSO?
Non-registration is an offence under the Employees' Social Security Act 1969. Penalties include fines and potential imprisonment. More critically, if an unregistered employee is injured at work, the employer becomes personally liable for all medical costs and compensation that SOCSO would have covered.
Can employees claim SOCSO benefits for injuries that happen outside work?
The Employment Injury Scheme covers only work-related injuries and commuting accidents (accidents that occur while travelling to or from work via the usual route). The Invalidity Scheme covers non-work-related invalidity and death.
How do I check if my SOCSO contributions are up to date?
Log into the PERKESO Assist Portal to view your contribution history. Employees can also check their contribution status through the PERKESO mobile app or by visiting any SOCSO office.
Are domestic workers covered by SOCSO?
Domestic workers (household servants) are currently excluded from mandatory SOCSO coverage under the Act. However, employers can opt for voluntary coverage under certain schemes.
What is the Employment Insurance System (EIS) and how is it different from SOCSO?
EIS is administered by SOCSO but is a separate scheme under the Employment Insurance System Act 2017. EIS provides temporary financial assistance to employees who lose their jobs, along with job search assistance and training. SOCSO covers workplace injuries and invalidity, while EIS covers unemployment.
Key Takeaways
- All Malaysian employers must register with SOCSO within 30 days of hiring their first employee
- Employer contribution is 1.75% of wages for employees earning RM5,000 and below, covering both schemes
- SOCSO provides medical coverage, disability benefits, survivors' pensions, and education grants for dependants
- Workplace accidents must be reported within 48 hours, with penalties of up to RM10,000 for non-compliance
- Recent expansions cover gig workers, mental health treatment, and enhanced rehabilitation programmes