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Wondering if your bonus is subject to SOCSO deductions? Bonuses are always a rewarding experience, but the rules and guidelines surrounding SOCSO contributions can be confusing. Without a proper understanding of SOCSO regulations, there can be frustration over this issue. This article will provide a detailed explanation of SOCSO and clarify if bonuses are subject to deductions, helping you to stay informed.
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Are Bonuses Subject to SOCSO Deductions?
No, bonuses are not subject to SOCSO deductions. SOCSO deductions are calculated based on the employee’s monthly wages, which include basic salaries, overtime payments, commissions, payments in respect of leave, and service charges.
What Is SOCSO
Social Security Organization (SOCSO), also known as Pertubuhan Keselamatan Sosial (PERKESO), is a Malaysian government agency that provides social security protections to employees in Malaysia as per the Employee's Social Security Act 1969.
SOCSO provides social security protection in terms of benefits and cash to employees in case of workplace emergencies, injuries, occupational sickness, and death.
There are two social security schemes, which are:
The Employment Injury Scheme: This gives protection for employees in case of occupational diseases and accidents that may happen to an employee in the course of their duty.
The Invalidity Scheme: This scheme gives protection for employees against invalidity or death due to any cause.
Both the employees and employer are required to contribute to SOCSO payments. The SOCSO payments will be deducted from their salary, including specific service charges, and are subject to calculations for monthly deductions.
Types of Bonuses
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A bonus is a financial reward given to the employees as a way to appreciate their performance and work. The amount given depends on the company profit and employee appraisal. Bonus is not included with the employee salary and it is given as a separate pay to the employee.
The different types of bonuses are:
Annual Bonus: This is given annually at the end of the year as per employees salary percentage.
Signing Bonus: This bonus will be given to the employee when another company wants to recruit them.
Referral Bonus: This bonus is given when an employee helps the company recruit a new employee.
Holiday Bonus: This is given during holiday seasons as a way to appreciate the employee.
Profit Sharing Bonus: This bonus is given by the profit gain of the company through the percentage of company earnings.
Which Payments Are Subject to SOCSO Deduction?
Wages for SOCSO contributions are any remuneration paid in money to an employee by the employer.
Wages that contribute to SOCSO deductions are:
Commission
Basic Salaries
Service charges
Payments in respect of leave
Overtime payments
Which Payments Are Exempted from SOCSO Deductions
The payments below are not considered “wages” and are not included in the calculations for monthly deductions. The following payments are not included for SOCSO deductions:
Annual bonus
Holiday bonus
Travelling allowance
Retirement benefits or pension/provident fund
Reimbursement to cover expenses incurred for work-related matters
Gratuity payable on discharge or retirement
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Frequently Asked Questions
What wages are subject to SOCSO contribution?
Any remuneration paid in money will be subject to SOCSO deductions, which are basic salaries, service charges, commissions, payments in respect of leave, and overtime payments.
Are bonuses subject to EPF?
Yes, certain bonuses, such as performance bonuses, annual bonuses, incentives, or commissions, will contribute to the EPF deduction.
Is the bonus subject to Hrdf?
No, bonuses are not subject to HRDF (Human Resources Development Fund) contributions. HRDF contributions are calculated only on the basic salary and exclude any bonus, commissions, allowances, or any sum paid to cover expenses.
Is a bonus included in earnings?
Yes, bonuses are included in earnings, but how they are treated varies based on scenarios, whether for payroll, taxation, or contributions for EPF and SOCSO.
Is the bonus subject to CPF deduction?
Yes, bonus will be contributed for CPF deduction in Singapore. This savings scheme requires both employers and employees to contribute based on the employee’s wages. However, just like SOCSO, not all bonuses are subject to deduction.
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