Covid-19 Pandemic: Frequently Asked Questions on Employment-Based Incentives

To assist corporations, especially small and medium enterprises, weather the downturn in business owing to the Covid-19 pandemic and the Movement Control Order, the Prime Minister (“PM”) has announced various employment-based benefits. We have prepared the followings FAQs which we hope will provide further information on these benefits, for which you or your business may be eligible.
 
  1. What employment-based incentives have the Government announced to help employers who are adversely affected by the Covid-19 pandemic and/or MCO?
The most important benefits which the Government has announced is the Employee Retention Program (“ERP”) and the Wage Subsidy Program (“WSP”).

ERP

The ERP was announced by the PM on 1 March 2020 and provides financial assistance to employees who have agreed with their employer to take unpaid leave for a duration of between 1 to 6 months from 1 March 2020.

Under the ERP, employers may apply to the Government for provision of financial assistance to their affected employees in the sum of RM 600 for each affected employee for a period of up to 6 months. Only employees who are contributors to the Employment Insurance System and earn less than RM 4,000 are eligible to receive the financial assistance.

If eligible, the Government will credit the relevant monies to the bank account of the employers; who must then credit these monies to the affected employees within 7 days of receiving the same.

WSP

The WSP was first announced by the PM on 27 March 2020. An enhanced version was announced on 6 April 2020. Under the WSP, the Government will provide subsidies to employers to defray the cost of salaries for employees who continue to be in employment.

The amount of subsidy is related to the number of employees in the each business as set out in the table below:-
 
Number of Employees 75 and below 76 - 200 201 and above
Amount of Subsidies per Employee RM 1,200/ month/  employee RM 800/ month/ employee RM 600/ month/ employee
Limit on Number of Employees 75 200 200

There are a few conditions to the WSP:-
 
  • The subsidy is only available for local employees earning below RM 4,000/month but foreign employees and local employees earning more than RM4,000/month are taken into account in determining the number of employees a business has;
  • The WSP subsidy will only be given for a 3 month period, and employers may make an application for any consecutive 3 month period from 1 April 2020 to 15 September 2020. However, receipt of funds is subject to the sufficiency of funds allocated for the WSP i.e. even if you qualify, it does not mean that you are guaranteed payment of the subsidy;
  • Businesses with more than 75 employees are required to show a 50% downturn in business for the affected months compared to January 2020 or its subsequent months;
  • Only businesses which are registered with the Companies Commission of Malaysia (“CCM”) or a local authority, have been in operations from before 1 January 2020 and who contribute to PERKESO or EIS are eligible; and
  • Businesses which receive this benefit are required to retain their employees without any reduction in salary for a period of 6 months being the 3 months during which the benefit is received and 3 months thereafter.
Other Initiatives
 
Other announced initiatives include the following:-
 
  • Exemption from Human Resources Development Fund levy payments for a period of 6 months, i.e. from April 2020 to September 2020 for 63 sub-sectors under the manufacturing, service and mining & quarrying sectors;
  • Ability to defer, restructure, or reschedule Employee Provident Fund contributions by employers;
  • Deferment of income tax payments;
  • 25% discount on foreign work levy payments for foreign workers whose work permits expire between 1 April 2020 to 31 December 2020; and
  • Various bank loan moratoriums for a period of 6 months.
  1. Am I allowed to receive more than one of the benefits above?
Yes, you can even apply for both the WSP and ERP together, provided the conditions for both programmes are met. However, you cannot receive assistance from both programs in respect of the same employee.
 
  1. How do I apply for the ERP?
The application is to be made by completing the ERPC-19 form which can be obtained here and submitting the same to erpc19@perkeso.gov.my.
 
  1. I am interested in the WSP and have more than 75 employees. How do I show a 50% downturn in business?
To show a downturn in business, you must show at least a 50% reduction in sales or revenue. To do this, you will need to furnish financial statements, bank statements, sales records and other relevant documents which evidence the reduction in business and which are certified by the management.

You will be eligible to apply for the WSP for the months in which your business suffers a 50% downturn in business, provided that you apply between 9 April and 15 September 2020. The period of assistance will be from 1 April 2020 to 31 December 2020.
 
  1. Am I allowed to choose which employees receive the WSP benefit if I have more than 200 employees or if I do not receive the WSP in respect of all eligible employees?
Yes, provided that the employee receiving the benefit is a local employee and earns below RM 4,000.
 
  1. I have employees who earn a basic salary of RM 4,000 but also receive fixed monthly allowances on top of that. Am I eligible to receive WSP subsidies in respect of these employees?
In considering how much wages an employee earns for the purposes of the WSP, the definition of “wages” in the Employees’ Social Security Act 1969 will apply. The applicable definition of wages is all remunerations 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 the following:-
 
  1. any contributions payable by the employer to any pension fund, social security fund or provident fund;
  2. any traveling allowance or the value of any traveling concession;
  3. any sum paid to the employee to pay for special expenses incurred as a result of his employment;
  4. any gratuity payable on discharge or retirement;
  5. any annual bonus;
  6. any benefit under any other written law administered by the Organization; and
  7. any other remuneration as prescribed Therefore, if your employee contractually earns more than RM 4,000 after taking into account allowances (except travel allowances), you will not be eligible to receive the subsidy for that particular employee.
  1. How do I make an application for the WSP?
Employers can make the application online here.

You will need the following supporting documents:-
  1. Where can I find out more about the WSP?
More information can be obtained here.
 
  1. If my employees agree to take unpaid leave for the duration of the Movement Control Order (“MCO”), may I apply for the ERP on their behalf?
The ERP was announced before the MCO and is meant for businesses which have had to undertake cost cutting measures, such as placing their employees on unpaid leave, to keep the business afloat. If you have requested your employees to take unpaid leave for between 1 to 6 months, regardless of the MCO, then you may apply for the ERP.
 
  1. In summary, what is the difference between the Employment Insurance System (“EIS”), ERP and WSP?
The salient differences are set out in the table below:-

  Table-2.jpg
 
The information provided on this FAQ does not, and is not intended to, constitute legal advice.

The Skrine Employment Practice Group is monitoring the relevant developments and will from time to time issue updated FAQs.

Please contact the following if you have any queries :-
 
Siva Kumar Kanagasabai
Partner
skk@skrine.com
 
Selvamalar Alagaratnam
Partner
sa@skrine.com
 
Foo Siew Li
Partner
foo.siewli@skrine.com

Sara Lau Der Yin
Senior Associate
sara.lau@skrine.com

Tan Su Ning
Senior Associate
tan.su.ning@skrine.com

Chen Mei Quin
Associate
meiquin.chen@skrine.com

Corrinne Chin May Suet
Associate
corrinne.chin@skrine.com