How does EIS contribution work?

For many Malaysian workers in the private sector, the Employment Insurance System can feel like just another small, mysterious deduction on the payslip. It sits there as a few ringgit each month, labelled EIS, and often goes unquestioned because the amount seems too small to worry about. However, understanding how EIS contribution works is part of understanding your larger financial safety net. It shows you who is paying what on your behalf, how that links to your job security, and how you can use this knowledge to read your payslip more confidently and plan for periods when income may be interrupted.

The starting point is to understand what EIS is trying to do. EIS, administered by PERKESO, is essentially a form of unemployment insurance for the private sector. It is designed to provide temporary financial support and employment services if you lose your job through reasons that are beyond your control, such as retrenchment or redundancy. Rather than being a savings account that you can withdraw from at will, it is a risk pooling system. Millions of workers and their employers contribute small amounts into a shared fund, and those who face involuntary job loss can claim benefits for a limited period. The contribution is intentionally small so that it does not create a major burden on employees or employers, but it still builds up into a meaningful safety net when aggregated across the workforce.

Not everyone in Malaysia contributes to EIS. The scheme is aimed at wage earning employees in the private sector. If you are a Malaysian citizen or permanent resident employed in a private company, and you are between 18 and 60 years old, you will usually be covered and required to contribute. Your employer must register with PERKESO and make contributions on your behalf. On the other hand, if you are a public sector employee, a domestic worker such as a live in helper, or self employed, EIS does not apply. Foreign workers are excluded from EIS as well, although they may be covered by other social protection schemes for work injuries. There is also an age nuance. Most employees between 18 and 60 contribute, but if you are 57 or older and have never contributed to EIS before reaching 57, you are not required to start. Once you reach 60, EIS contributions stop altogether.

The actual contribution rate is simple to describe. EIS is calculated as a total of 0.4 percent of your insurable monthly wages. This is shared equally between you and your employer. In other words, your employer pays 0.2 percent of your monthly wages, and you pay another 0.2 percent through a deduction from your salary. If your insurable wages for a given month are RM3,000, your employer contributes 0.2 percent of that amount, which is RM6. You also contribute RM6. That means RM12 in total is credited to the EIS fund for that month. The law does not leave the calculations entirely to chance or rounding. PERKESO publishes an official EIS contribution table that sets out exact contribution amounts in wage bands. Payroll systems refer to that table, which removes ambiguity and ensures uniformity in how contributions are calculated across companies. For most salaried workers, the figures in the table closely match the basic 0.2 percent and 0.2 percent calculation.

There is also a minimum wage threshold in the table. The lowest band typically starts at RM300 of monthly wages. Below this level, contributions may not apply. At RM300, the combined contribution at 0.4 percent comes to about RM1.20 per month, split equally between employer and employee. As salaries rise, the contributions increase gradually, but only up to a certain point. EIS is not designed to completely replace the high salaries of top earners. It is meant to provide a basic income cushion. To reflect this, there is a salary cap used for calculations. Contributions are only calculated up to a maximum insurable wage level. Over time, this cap has shifted upward as the economy and average wage levels have grown. Historically it has moved from RM4,000 to RM5,000, and more recent updates have raised it again. In practice, this means that if you earn at or above the cap, your EIS contribution does not keep growing with your full salary. It stops at the maximum specified in the table.

Consider the situation where the current cap is RM6,000. If you earn RM6,000 or more in insurable wages, your employer contributes 0.2 percent of RM6,000 and you do the same. That works out to RM12 from your employer and RM12 from you, so the total EIS contribution is RM24 per month. If you earn RM8,000 or RM15,000, your EIS contribution is still based on RM6,000 and remains at RM24 in total. This structure keeps the scheme affordable while still providing reasonable protection for most workers. It also means that very high earners are not paying contributions that scale indefinitely with their pay. Because the salary cap can change over time, employers and payroll providers make it a point to refer to the latest contribution table when configuring their systems.

Another important aspect of understanding how EIS contribution works is knowing what counts as wages for EIS purposes. Many payslips include more than just a basic salary. There might be overtime payments, commissions, service charges, or various allowances. EIS uses a fairly broad definition of wages, similar to what is used for SOCSO contributions. In general, regular earnings from employment are included. This usually covers basic salary, overtime pay, commissions, shift allowances, and other recurring incentives that form part of your remuneration. Some items are excluded, such as genuine reimbursements for expenses you paid on behalf of the company, and certain one off payments that are not considered part of your normal wages. Because the detailed rules can be technical, employers often align their treatment of wages for EIS with how they already define wages for SOCSO. For you as an employee, the key figure to pay attention to is the gross wages amount that your employer uses as the basis for EPF, SOCSO, and EIS. If you notice a large change in this figure from month to month, it is reasonable to ask your HR or payroll department what has been included or excluded so that you understand how your contribution is being calculated.

From a process perspective, EIS contributions are collected through your employer, not directly from you. Every month when payroll is processed, your employer calculates the EIS contribution for each eligible employee based on the official contribution table and the insurable wages for that month. The employer then deducts your share of the contribution from your salary and adds their share. The combined amount is paid over to PERKESO together with the relevant SOCSO contributions, usually by a statutory deadline in the following month. If the employer fails to register or does not make the required contributions, they can face penalties, because EIS for eligible employees is compulsory. As an employee, you simply see a small EIS line on your payslip every month. There is no individual EIS account that you can log into and withdraw cash from whenever you wish. Instead, your contribution record is stored and your eligibility for future benefits depends on the pattern and number of contributions over time.

Modern working lives are rarely straightforward, and EIS takes into account the fact that people change jobs, hold multiple roles, or step in and out of the workforce. EIS coverage attaches to you as an insured person, not to a single employer. When you move from one employer to another, your new employer starts contributing EIS for you as long as you remain within the eligible age group and are working in the private sector. Your contribution history continues seamlessly in the background. If you ever need to claim EIS because you have been retrenched or your contract was not renewed under eligible conditions, the system looks at your overall contribution record over a qualifying period, not just at the last employer you worked for.

If you hold two jobs at the same time, for example a full time role and a part time evening job, each employer is responsible for making EIS contributions based on the wages they pay you. This means you could be contributing EIS from two separate sources in the same month. In that scenario, it may look like you are paying more, but the logic is that you are earning income from two roles and thus insured against income loss for both. On the other hand, if you leave formal employment altogether to become self employed, your EIS contributions stop because there is no longer an employer to contribute on your behalf. You will still have a past contribution record, which may help if you meet the conditions for a claim soon after employment ends, but over the long term you would no longer be adding to your EIS history.

To place EIS in context, it helps to see it alongside EPF and SOCSO, the other major statutory schemes that affect your payslip. EPF is primarily a retirement savings system. Contributions accumulate in your personal EPF account and are invested over many years so that you have a pool of funds to draw on in retirement or for specific approved purposes. SOCSO, on the other hand, is a social security scheme that protects against work related injuries, occupational diseases, and related disabilities or death. EIS sits next to these two pillars and focuses on the risk of job loss. While all three appear on your payslip as deductions or employer contributions, their purposes differ. EPF is about building assets for the long term. SOCSO and EIS are about sharing short and medium term risks across the workforce. EIS in particular is not something you automatically get back at retirement. It is a form of insurance. Ideally you never need to rely on it, but it is there in case you are retrenched.

Knowing how EIS contributions work will not change the rate you pay, since the percentages and wage caps are set by law. What it can change is your level of awareness and control. First, you can use this understanding to check whether your payslip seems reasonable. If your gross wages are around a certain figure, your EIS deduction should be roughly 0.2 percent of that amount, and the total combined contribution from you and your employer should not exceed what the contribution table specifies for your salary band. If the numbers look very different, it is fair to ask your HR department for clarification. Mistakes can occur, especially when systems are updated or when there are changes in your allowances or commissions.

Second, you can incorporate EIS into your broader financial planning. The benefits provided by EIS in the event of job loss are temporary and subject to conditions such as the number of contributions made and the reason your employment ended. They are not designed to fully replace your income for a long period. This makes EIS a helpful buffer but not a complete solution. You still need an emergency fund that can cover several months of your living expenses, and you may still want to consider other forms of income protection if your financial commitments are heavy. Thinking clearly about what EIS can and cannot do for you can prompt important questions about how prepared you are for unexpected changes in your job.

Finally, understanding EIS helps shift the way you view those small statutory deductions. Instead of seeing them only as money leaving your account, you can see them as part of a wider system that supports workers during vulnerable moments. EIS is one of the tools that can cushion you if your job ends suddenly, buying you time to search for new work and access reskilling programs. When you look at your payslip, that small line for EIS contribution represents more than just a fraction of a percent of your wages. It represents a modest but important layer of protection that works best when you combine it with your own financial discipline, savings habits, and career planning.