What is the Employment Insurance System (EIS)?

Most of you would be familiar with EPF (ie: a compulsory savings and retirement planning for private sector workers) and SOCSO (ie: protection in term of medical & cash benefits for work related injuries, accidents or death), where part of your salary is deducted monthly to sustain the EPF and SOCSO. Are you aware that starting from January 2018, you would have another EIS deduction from salary? This was made mandatory after the Employment Insurance System Bill 2017 (“EIS”) was passed last year.

So…what is EIS and how does it affect me?

• From January 2018 onwards, 0.2% of your salary will be automatically deducted to contribute to EIS. Your employer will also have to contribute an equal amount of 0.2% which means that the total monthly contribution per insured worker would be 0.4%.

• The EIS is designed to help retrenched workers (ie: workers who have lost their jobs) by providing them with benefits including career counselling, job training, job-hunting assistance and re-employment allowance, and other allowances. Besides, the EIS will offer payout contributions for a maximum 6 months during the time a person is unemployed. The contributions will be on a fixed rate based on the employees’ salary, starting from 10 cent for workers earning RM30 a month, while the maximum amount of contribution is capped at RM59.30 for those earning RM4,000 and above.

• EIS covers only workers who have lost their jobs through voluntary or mandatory separation scheme, redundancy through business restructuring or closure of business, constructive dismissal and other unforeseeable events. The law, however, does not cover those who have voluntarily resigned.

Can I opt out of EIS?

• The answer is no. Under sections 14 and 15 of the EIS, all employers would have to register themselves and those who have already registered with the Employees’ Social Security Act 1969 would been deemed to be registered

• All companies with one or more employees must comply to this rule, failing which, employers may be fined not exceeding RM10,000 or imprisonment for a term no more than two years, or both. Section 16 of the EIS confirms that all employees will have to be registered by their employers accordingly.