Snapshot: The Employment Retention Program and the Wage Subsidy Programs

In light of the COVID-19 pandemic and the Movement Control Order (“MCO”) which was implemented as a consequence, the Malaysian government has introduced several programs.  These programs are options which may be considered by employers to avoid embarking on a retrenchment exercise, also known as a reduction in force exercise.

The programs are the Employment Retention Program (“ERP”) and the Wage Subsidy Programs (“WSP”) which are managed by the Pertubuhan Perkhidmatan Sosial (“PERKESO”), otherwise known as the Social Security Organisation (“SOCSO”).  

The ERP and WSP are separate programs which are available to employees earning RM4,000.00 and below monthly.  An employee may not be placed on both programs at the same time. Both employer and employee must be registered with and be contributors of the Employment Insurance System (“EIS”) and meet the required criteria.  

The Employment Retention Program (“ERP”)

Under the ERP, employees who have been put on unpaid leave / no pay leave for a minimum period of 1 month due to the COVID-19 pandemic will receive a monthly financial assistance of RM600.00 for up to 6 months, provided that the unpaid leave / no pay leave is implemented no earlier than 1st March 2020.

If approved, the financial assistance will be paid to the employer who is then required to transfer the said sum of RM600.00 to each of the relevant employees within 7 days from the date of receipt of funds from PERKESO.

The Wage Subsidy Programs (“WSP”)

2 Wage Subsidy Programs were announced by the Malaysian government.  

The first WSP

The first WSP which was announced on 27th March 2020 as part of the Economic Stimulus Package (“Pakej Rangsangan Ekonomi Prihatin Rakyat”) is summarised in our earlier article entitled “COVID-19: Employment and Industrial Relations Update (Economic Stimulus Package)”.   

Briefly, the first WSP encompasses a wage subsidy of RM600.00 monthly per employee for a period of 3 months.  The employer must show a 50% decrease in income since 1st January 2020. There is a quota of 100 employees.  Employees under the WSP shall not be retrenched, placed on unpaid leave / no pay leave or be subject to any salary reduction exercise for 3 months from the date of implementation of the WSP.

This first WSP has since been superseded by the second WSP which was announced on 6th April 2020.  

The full text of the Prime Minister’s statement on the “Langkah Tambahan bagi Pakej Rangsangan Ekonomi Prihatin Rakyat (PRIHATIN)” is available at https://www.pmo.gov.my/2020/04/langkah-tambahan-bagi-pakej-rangsangan-ekonomi-prihatin-rakyat-prihatin/

The second WSP

Similar to the ERP, the WSP is only available to employees earning RM4,000.00 and below monthly for a period of 3 months.  The employer must be registered with the Companies Commission of Malaysia or the local authorities and also with SOCSO and must have been in operation before 1st January 2020.  

The subsidy amount, quota on number of claims and eligibility criteria differ depending on the size of the company as follows : 

Size of the company75 employees and below76 – 200 employees201 employees or more
Subsidy amount(per employee, per month)RM1,200.00RM800.00RM600.00
Quota75 employees200 employees200 employees
Eligibility criteriaN/aLoss of sales/ income of 50% or more in comparison with the sales / income in January 2020 or its subsequent monthsLoss of sales/ income of 50% or more in comparison with the sales / income in January 2020 or its subsequent months

Employees under the WSP shall not be retrenched, placed on unpaid leave / no pay leave or subject to any salary reduction exercise for 6 months from the date of implementation of the WSP.

Contributed by the Employment and Industrial Relations practice group. 

R. Ravindra Kumar (Partner)
(E): [email protected]
(T): +603-2632 9863

Tham Li Vyen (Partner)
(E): [email protected]
(T): +603-2632 9875

Prasath Thanaraju (Associate)
(E): [email protected]
(T): +603-2632 9935

Lam Jia Jun (Associate)
(E): [email protected]
(T): +603-2632 9956

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