The wage subsidy program (“WSP” or “PSU” which stands for Program Subsidi Upah) was first launched in April 2020 as part of the government’s initiative to help businesses cope with headcount costs, due to the COVID-19 pandemic. The PSU is administered by the Social Security Organisation (SOCSO) and has undergone many changes since then, with the current version of the program now known as PSU 2.0 effective 1 October 2020.

What is PSU 2.0?

The PSU is a wage subsidy program whereby employers will receive a cash subsidy for each applicable employee. The original PSU was initially meant to last for a period of 3 months, and it was extended for an additional 3 months (total of 6 months).

On 23 September 2020, the Prime Minister announced that the original PSU will be extended for an additional 3 months for existing employers currently receiving the subsidy, while businesses who have yet to apply for PSU may receive a total of 6 months of aid in total. This is known as PSU 2.0.

PSU 2.0 takes effect 1 October 2020.

How much is the wage subsidy under PSU 2.0 and what are the conditions?

Wage Subsidy Program 2.0 (PSU 2.0)

When can I apply for the PSU 2.0? Applications are open from 1 October 2020 to 31 December 2020. Who is ineligible for PSU 2.0? These categories of employers/employees are ineligible:

  • Employers and employees who have not registered with or contributed to SOCSO before 1 September 2020;
  • Employers who have not registered with SSM or relevant local authorities before 1 September 2020;
  • Employees who earn more than RM4,000 a month
  • Employees who are not registered with the Inland Revenue Board
  • Foreign workers or expatriates
  • Retrenched employees
  • Civil servants or employees of statutory bodies, self employed
  • Employers who withdrew their successful PSU 2.0 applications after already receiving approval

How do you calculate the wage limit of RM 4,000 a month?

The definition of “wages” is as set out in the Employees’ Social Security Act 1969, ie:  all remuneration payable in money by an employer to an employee including any payment in respect of leave, holidays, overtime, and extra work on holidays but does not include-

(a) any contribution payable by the principal employer or the immediate employer to any pension fund or provident fund, or under this Act;

(b) any travelling allowance or the value of any travelling concession;

(c) any sum paid to an employee to defray special expenses incurred as a result of his employment;

(d) any gratuity payable on discharge or retirement; (e) annual bonus; (f) any other remuneration as may be prescribed. How do you prove that the business has decreased by 30%?

Employers are required to provide monthly sales figures as part of their application, and these figures should show that revenue or sales in a month has decreased by at least 30% compared to the same month in the previous year after the RMCO. This was the example provided by SOCSO:

Month / Year Sales / Revenue
September 2019 RM100,000
September 2020 RM69,500
August 2019 RM120,000
August 2020 RM78,000

The above demonstrates that the employer’s sales/revenue had decreased by more than 30% compared to the corresponding month in the previous year.

If I am receiving PSU 2.0, can I retrench my employees?

The conditions of PSU 2.0 state that “employers are forbidden from retrenching all employees earning RM4,000 or less. However, they are allowed to reduce working hours or wages if their workers agree after negotiation.”

Therefore, the prohibition against retrenchment is in respect of ALL employees earning RM4,000.00 or less, not just those employees who were submitted under the PSU2.0.

Can I retrench my employees after the PSU 2.0 program is over?

In the original PSU program, the restriction against retrenchment included the period of 3 months after the PSU program. However, in PSU 2.0, this additional timeline appears to have been removed.

Is the employer supposed to pay the wage subsidy received to the employee?

No. The wage subsidy received by the employer is meant to assist employers who are negatively impacted by COVID-19 to retain their employees. Therefore, the wage subsidy is a subsidy for the employer in exchange for the employer agreeing not to retrench their employees who are earning below RM4,000 a month.

What are the consequences if an employer defies the PSU2.0 requirements? Eg: What happens if an employer still proceeds to retrench an employee who was submitted under PSU 2.0?

The Social Security Organisation has a right to suspend future payments and reclaim any money that has been paid to the employer.

SOCSO has also stated that the employer may face legal action, although it is currently unclear what is the legal basis for SOCSO to initiate action and what would be the penalties or fines applicable, given that the PSU2.0 is not a written law.

Where can I get more information about PSU 2.0?

Please visit or contact SOCSO directly for more information.


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.



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