Employment Insurance Scheme (EIS)

What Is Employment Insurance Scheme (EIS)?

The Employment Insurance System (EIS), which will come into effect in 1 January 2018, will not only provide a safety net for retrenched workers but also valuable support services. It contains two components of benefits namely financial assistance and employment services programmes.
Employment Insurance System (EIS) covers all local private sector workers who have been retrench but not those resign voluntarily. It also does not apply to those who do not have their contracts renewed, employees terminated for disciplinary reasons and those who have reached the mandatory retirement age.
There are two phases to the EIS implementation, with the first phase starting in 2018 and the second phase starting in 2019.
First phase (Start in 1 January 2018)
Beginning 1 January 2018, employers and employees will each have to contribute 0.2% of an employee’s base salary which goes towards an accumulated Employment Insurance System (EIS) fund.
The fund will be used for retrenchment payouts and support services from 2019 onwards.
The contributions to the fund is capped at a salary level of RM4,000 a month, which means that although a person may earn more than RM4,000 a month, employer’s and employee’s contribution is fixed at 0.2% of RM4,000 each.
Second phase and support services (Start in 1 January 2019)
Under the second phase of the Employment Insurance System (EIS), which starts on 1 January 2019, Social Security organization (SOCSO) will provide retrenchment payouts known as a job search allowance and support services. The job search allowance is based on a scaled amount.
Depending on how long a retrenched worker has been contributing, they could get up to a certain percentage of their last drawn salary for three to six months.
For the first month, it is 80%, then 50%, 40%, 40%, 30% and 30% in the successive months until the sixth month of searching for a job, or sooner if the person is successful in landing a job.
Social Security organization (SOCSO) will interview the retrenched worker and work with various government and private recruitment agencies to help find him or her a job. If they get a job any time before the sixth month, Social Security organization (SOCSO) will stop paying the job search allowance for the subsequent months due and give them an early re-employment allowance (25% of the remaining job search allowance entitlement).
Additionally, Social Security organization (SOCSO) will pay a maximum RM4,000 training fee if Social Security organization (SOCSO) or potential employers found that a retrenched worker needed to take a course to learn new skills or improve their skills. The retrench worker will receive training allowance between RM10 to RM20 a day while they undergo the training (maximum six months).