On 5 June 2020, the Government announced its latest effort in reviving our economy,  through the Short Term Economic Recovery Plan (“STERP”). While the STERP affects many parties across the board, here are some key highlights related specifically to the employment landscape.


  1. Wage Subsidy Program Extended

Through the PRIHATIN package announced by the Government earlier on 27 March 2020, the Government introduced the Wage Subsidy Program (“WSP”) which subsidises the salaries of eligible employees, in order to promote employee retention and reduce retrenchment. The earlier three month program had reportedly saved approximately 2.2 million jobs. The Government has decided to extend the WSP for a further 3 months until September 2020. The subsidised amount during the extension period is fixed at RM 600 per eligible employee per month (up to 200 employees for all eligible employers).


  1. Enhancement of Wage Subsidy Program

Employers in the business of tourism and other economic activities that were prohibited during the CMCO (Conditional Movement Control Order) period may apply for the wage subsidy program for its employees who were required to take unpaid leave. Employers may apply for the wage subsidy provided that the employees receive the subsidy payments directly.

Further, employers who have received the wage subsidy are now allowed to implement reduced work week with a corresponding reduction in salary, subject to an allowable reduced pay of 30%.


  1. Tax Deduction for Flexible Working Hours

Employers implementing flexible working hours or work from home arrangements that satisfies the necessary requirements will be given a further tax deduction effective 1st July 2020. However, to date, it is uncertain as to what forms of tax deduction would be given base on the type of expenses incurred.


  1. Income Tax Exemption for IT Benefits

Income Tax Exemption of up to RM 5,000.00 will be given to employees who have received IT benefits such as laptop, tablet, computers, smartphone from employers from 1st July 2020 onward.


  1. Incentives for Hiring Unemployed Workers and Youth

The Government has also introduced several hiring incentives to encourage employers to hire certain types of employees. These Applications for the above incentives will open from mid June to end December 2020:


Category Incentive for Employers Duration
Unemployed workers below age 40 RM 800 per month Up to 6 months
Unemployed workers above age 40 / those who have special needs RM 1,000 per month Up to 6 months
Retrenched employees not covered under the Employment Insurance Scheme Training allowance of up to RM 4,000 per individual
Apprenticeships for School Leavers and Graduates RM 600 per month Up to 6 months



Zi-Han Lim is an associate in the dispute resolution practice group at Donovan & Ho. He is experienced in dispute resolution, focusing on employment and industrial relations, administrative law and commercial litigation. 

Donovan & Ho is a law firm in Kuala Lumpur, Malaysia. Our practice areas include employment law, dispute resolution (litigation and arbitration), corporate and tax advisory, and real estate/conveyancing. Have a query? Contact us.


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