On 6 November 2020, the government announced its proposed Budget 2021 amidst our ongoing battle against the COVID-19 pandemic. This article focuses on several employment / human resources highlights from the proposed budget:
- EPF contribution to be reduced to 9% to Employees Provident Fund (“EPF”)
Employees’ minimum EPF contribution is reduced from 11% to 9% starting January 2021. The intention of the reduction in contribution is to allow employees to have more “take home pay”.
- EPF Account 1 allowed to be withdrawn with limitation of RM500 per month
Prior to retirement age, funds in EPF can only be withdrawn for very limited and special circumstances. However, in the proposed Budget 2021, the government has announced a targeted EPF Account 1 withdrawal facility, limited to RM500 per month for 12 months (total of RM6,000). Withdrawal from Account 2 is also allowed, however limited to the purchase of life insurance and takaful coverage products and for critical illnesses.
- Hiring Incentives
These are the planned hiring incentives to help reduce unemployment rates:
- The introduction of Skim Jaminan Penjanaan Pekerjaan (JanaKerja) which is targeted to provide 500,000 new job opportunities including skills development and retraining;
- Incentive for hiring employees earning RM1,500 and above will be enhanced from a flat rate of RM800 per month to 40% of monthly income for 6 months, subject to a maximum incentive of RM4,000. For example, an employer who hires an employee at a monthly salary of RM10,000 a month will be entitled to a RM4,000 hiring incentive;
- Employers will be given a hiring incentive of 20% of monthly income per month for 6 months, to encourage job opportunities for the OKU group, terminated workers, single mothers and those who have been unemployed long-term;
- In sectors that rely heavily on foreign workers such as construction and plantation, an incentive of 60% of the monthly salary per month will be provided for the hiring of local workers, for 6 months 40% of it will be channeled directly to employers and 20% will go to the local workers that replace the foreign workers;
- Additionally, if an employer hires an elderly person, ex-convicts, ex-drug dependents and / or parolees, they will also be given additional tax reductions;
- The tax deduction for employing senior citizens will be extended until 2025;
- RM20 million is allocated for prisoners to gain vocational training
- Wage Subsidy Programme
The Government will extend the implementation of the Wage Subsidy Program for another 3 months with a more targeted approach specifically for the tourism and retail sector. RM600 per month will be given to those earning RM4,000 and below. There will also be an increase in the limit from 200 to 500 workers especially for big companies in the tourism industry.
- Personal Income Tax for Employees
- Personal income tax is reduced by one percentage point for the chargeable income band of RM50,001 – RM70,000;
- To assist taxpayers who have lost their jobs due to the pandemic, for years of assessment in 2020 and 2021, the income tax exemption limit for compensation for loss of employment will be increased from RM10,000 to RM20,000 for each full year of service;
- Tax relief for personal, spouse and children’s medical care expenses for serious illness is increased to RM8,000 from RM6,000;
- Individual income tax relief of up to RM3,000 on Private Retirement Scheme (PRS) contributions is extended until the year of assessment 2025.
- MyStep – Contract based jobs in public sector
The Government will introduce MyStep, a short-term employment programme which will be given an allocation of RM700 million offering 50,000 contract-based jobs in the public sector and government-linked corporations (GLCs).
- Penjana Kerjaya training program under SOCSO
The government will be allocating RM2billion to continue the program under SOCSO. The allocation is expected to aid 250,000 job seeking individuals. For those hired under Penjana Kerjaya, the maximum cost of the training programme that can be claimed will be raised from RM4,000 to RM7,000. This is so that employees can undergo a high-skilled programme or a professional certificate programme.
As at the time of writing of this article (9 November 2020), the initiatives above are still proposals and have not been passed by Parliament. Therefore, the above may still be subject to change and amendments, as the budget is fully debated.
This article was written by Donovan Cheah and Zi-Han Lim. 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.