A wage subsidy programme was announced by the government as part of its economic stimulus package. The wage subsidy programme is intended to both protect job security and assist employers who are undergoing cash flow difficulties due to headcount costs. Since the announcement, there have been many queries about how the wage subsidy programme will take effect. Here is a list of frequently asked questions about the programme.
What are the benefits under the wage subsidy programme? What are the criteria to apply for the wage subsidy?
The criteria and amount of subsidy depends on the size of the workforce of the business:
|Employers with 75 workers or less||Employers with 76 to 200 workers||
Employers with more than 200 workers
Amount of subsidy received
|RM 1,200.00||RM 800.00||RM 600.00|
|Applicable employees||(a) Employees with monthly wages of RM 4,000 and below
(b) Employer and employee must be registered with and contributing to PERKESO
|Employer criteria||(a) Employer must be registered with Companies Commission of Malaysia or the applicable local authorities before 1 January 2020
(b) Employer must have commenced operations before 1 January 2020
|Requirement to show loss of revenue||No requirement||The employer must be able to demonstrate a decrease in revenue of at least 50% from January 2020 compared to the following months.|
Who doesn’t qualify for the wage subsidy programme?
The wage subsidy programme doesn’t cover:
- Employers who began operations after 1 January 2020;
- Employers and employees who have not/are not registered with or are not contributing to PERKESO;
- Employees who have received the financial aid under the Employment Retention Program for the same months;
- Employees who are earning above RM 4,000 a month;
- Employees who have already been dismissed;
- Civil servants or employees of statutory bodies and local authorities;
- Foreign employees and trade officers; and
- Those self-employed, including freelancers.
The wage subsidy programme only applies for employees earning RM 4,000.00 and below a month. How is this RM 4,000.00 calculated? Is it just basic salary?
The definition of “wages” under the Employment Insurance System Act 2017 will apply, i.e all remunerations payable in money by an employer to an employee but does not include:
- any contributions payable by the employer to any pension fund, social security fund or provident fund;
- any traveling allowance or the value of any traveling concession;
- any sum paid to the employee to pay for special expenses incurred as a result of his employment;
- any gratuity payable on discharge or retirement;
- any annual bonus;
- any benefit under any other written law administered by SOCSO; and
- any other remuneration as prescribed
Therefore, if an employee is earning a basic salary of RM 3,500 but they also receive other fixed monthly allowances (excluding travelling allowance) of RM 1,000, this employee would be deemed as earning more than RM 4,000 a month and would not qualify for the wage subsidy programme.
If an employee is earning a basic salary of RM 3,800 but they also receive a travelling allowance of RM 500 a month, this employee would still be deemed as earning below RM 4,000 a month because travelling allowance is excluded from the definition of wages. This employee would therefore qualify under the wage subsidy programme.
Can different companies within the same group of companies apply for the wage subsidy?
Yes. Provided they meet the criteria mentioned above.
Can different branches or offices of the same company apply for the wage subsidy?
Yes. However, as branches or offices are treated as part of the same legal entity, the limit of 200 employees per company will apply.
Can the employer apply for the wage subsidy programme for only some of its employees?
Yes. The employer is free to choose which employees to apply for the wage subsidy programme and is not required to apply for the wage subsidy for all employees who qualify. The conditions of the wage subsidy programme will only apply to employees over which an application was made and approved.
Can an employer who has began operations before 1 January 2020 but have not registered for the Employment Insurance Scheme (EIS) apply for the wage subsidy?
Yes. Employers who wish to apply for the wage subsidy but have not registered with PERKESO have to fulfil the following conditions:
- Registered with the Companies Commission of Malaysia or Local Authorities before 1 January 2020;
- Have at least 1 employee; and
- Register with PERKESO.
Are there any obligations on the employer after they receive the wage subsidy?
Yes. The employer is not allowed to retrench, force the employees to take annual leave, or decrease the employee’s salary during the wage subsidy period, and for a period of 3 months after.
Does this mean that if the employer does not apply for the wage subsidy, they can retrench their employees?
Yes, provided the employer complies with the required labour law principles for retrenchment.
Can an employer retrench its employees after the wage subsidy period?
Under the wage subsidy programme, an employer who receives the wage subsidy cannot retrench that employee throughout the period of the wage subsidy programme and for a period of 3 months after. For example, if the employer receives the wage subsidy for an employee in April, May and June 2020, he cannot retrench that employee in the period of April to September 2020.
When does the wage subsidy programme take effect?
Employers can start making applications through the new Prihatin PERKESO website (prihatin.perkeso.gov.my) from 9 April 2020. The final application deadline is 15 September 2020 or subject to balance of allocated funds or decision of the Government.
Is this wage subsidy the same thing as the Employment Retention Programme (ERP)?
No. They are different incentives. The incentive under the ERP is paid to the employee, whereas the wage subsidy is paid to the employer.
However, an application for ERP and the wage subsidy cannot be made on the same month for the same employee.
How is the wage subsidy paid to employers?
The wage subsidy will be paid directly to the employer’s bank account within 7 to 14 days from date of approval.
What supporting documents are required to apply for the wage subsidy programme?
- List of employees
- Employer’s bank account statement (front page only)
- The Business Registration Number (BRN) details used when opening the bank account
- Company or business registration or business license registration document
- Declaration Form PSU50
- If applicable, proof of loss of revenue such as financial statements or sales reports that are certified by management or any other related document
What is the BRN details?
The BRN Form can be downloaded from the Prihatin PERKESO website. It is to assist the employer in providing the relevant banking details to enable direct payment to the employer’s account through Electronic Fund Transfer (EFT).
What is the declaration form PSU50?
The PSU50 can be downloaded from the PERKESO website. It is a declaration by the employer that the employer:
- has suffered a loss of revenue of at least 50% since 1 January 2020;
- has and will pay the salaries of employees involved in the wage subsidy programme without any reduction
- will inform PERKESO within 14 days of any change in the status of the business and / or the number of employees earning RM 4,000 and below throughout the wage subsidy period;
- has or will register under EIS and PERKESO during the wage subsidy period;
- will produce any documents requested by PERKESO in connection with the above
The PSU50 requires the employer to confirm that the information provided to PERKESO is true and accurate.
Does an employer have to apply for the wage subsidy every month?
No. The employer only needs to submit the application for the first month. However, the employer has an obligation to notify PERKESO if there any change in their status that would disqualify them from the wage subsidy programme.
The wage subsidy programme announced on 27 March 2020 was enhanced pursuant to an announcement on 6 April 2020, which resulted in some changes to the criteria and conditions. Can employers who have already applied for the wage subsidy following the previous conditions reapply given that the conditions have changed?
Yes, employers who have already submitted an application based on the programme announced on 27 March 2020 and has more than 100 employees, can make a new application for the remainder of his employees up to a total maximum of 200 employees.
How does an employer prove or calculate the loss of revenue of at least 50%?
The loss of revenue is calculated by comparing the revenue or sales in January 2020 compared to the subsequent months.
The employer must produce the declaration form in PSU50 which declares that the employer has suffered that loss of revenue, together with supporting documents such as financial statements or sales reports that have been certified by management. Employers who make false declarations may be subject to legal action.
Does this wage subsidy apply for foreign employees?
How does the wage subsidy programme affect the salary that is paid to employees?
The employer must continue to pay the affected employee’s salary like normal without deduction, since the subsidy will be credited into the employer’s bank account for the employer’s use, and will not be paid directly to the employee.
How about statutory contributions? Are these payments affected?
The employer must continue to make the statutory contributions for the affected employee’s salary like normal without change, even though the employer is receiving the wage subsidy.
In other words, how does the wage subsidy programme affect the employees’ take-home pay?
Practically, the wage subsidy programme should have no bearing on the employee’s take home pay since the wage subsidy is paid directly to the employer (not the employee) and the employer is not allowed to make any changes or deductions to the employee’s salary or contributions as a result of the wage subsidy. Therefore, the employee’s take home pay should remain the same even though the employer has received a wage subsidy.
NB: This article is updated as of the date of publication stated above. As this situation is novel and the government’s response to the outbreak is continuously developing, this article may not necessarily include updates or developments after this date. In situations of doubt, you are advised to check for updates directly with the government authorities.
This article was written by Donovan Cheah. Donovan has been named as a recommended lawyer for labour and employment by the Legal 500 Asia Pacific 2017, 2018, 2019 and 2020, and he has also been recognised by Chambers Asia Pacific and Asialaw Profiles for his employment law and industrial relations work.
Donovan & Ho is a law firm in Malaysia. Our practice areas include employment law, dispute resolution, tax advisory and corporate advisory. Have a question? Please contact us.