In this article, we aim to provide some guidance about the Wage Subsidy Programme for all business owners, and SMEs in Malaysia. It should be pointed out that the financial incentives under the Wage Subsidy Programme is to encourage Employers to continue hiring eligible employees in ongoing jobs without resorting to retrenchment.
In other words, under the WAGE SUBSIDY PROGRAMME, your Company will not be allowed to retrench, ask the eligible employees to go on no-pay leave, or reduce their salary during the receipt of the 3 months Wage Subsidy benefit, and 3 months after that.
To put it briefly, just so long as your Company is part of the Wage Subsidy Programme, you must thereby comply strictly with the Government’s 6-month moratorium on retrenchment exercises. In this manner, it is worth noting that any deliberate breach of that condition on your part as the Employer may expose your Company to serious legal ramifications.
Given that, we will attempt to address some common questions posed by our clients here for the benefits of our readers.
1. WHAT IS THE WAGE SUBSIDY PROGRAMME (“WSP”)?
The WSP is a financial aid given by our Government to assist businesses of all shapes and sizes if the COVID-19 pandemic financially impacts them on the condition that those companies meet the eligibility requirement which will be addressed further in Question 2 below.
Following the WSP, all companies with a workforce between 1 to 200 employees can benefit under this programme. The eligible Company can receive wage subsidy in the range between RM600.00 to RM1,200.00 for every employee with salaries below RM4,000.00. The WSP announced by the Government on April 2020 is reproduced as follows:
Size of Enterprise | 75 Employees | 76 – 200 Employees | >200 employees |
Subsidy Amount | RM1,200 per employee per month | RM800 per employee per month | RM600 per employee per month |
No. of Eligible Employees | 75 | 200 | 200 |
Decline in Revenue | No condition | 50% or more reduction in revenue or income compared to January 2020 or the subsequent months must be shown by the Company. | |
Programme Duration | 3 months from 1st April 2020 until 31st December 2020 (subject to fund availability and government decisions). Closing Date: 15 September 2020 | ||
As illustrated, only companies with a workforce of 76 employees and above are required to prove a 50% drop or more in their revenue or sales. In the event, your workforce is below 76 employees; then you will not be required to prove a reduction of sales or revenue.
2. HOW DO I PROVE 50% OR MORE DECLINE IN SALES/ REVENUE?
You are advised to use the total sales/ revenue that you earned before the lockdown period as benchmark to compare with the loss of sales and revenue your Company incurred during the MCO/CMCO period.
That said, for companies that are required to provide such proof, it should be made clear that you do not need your sales reports or financial statements to be audited by an Auditor. Self-certification by the Management of the Company, together with the declaration form in PSU50[1] is enough.
3. WHICH EMPLOYER IS ELIGIBLE FOR THE WAGE SUBSIDY PROGRAMME?
The Employer can access a wage subsidy if they meet the following: –
- The Company must be registered or contributing to SOCSO or Employment Insurance Scheme (EIS) before 1st April 2020.
- The Company must be registered with the SSM or the PBT before 1st January 2020.
- The Company must have commenced operations before 1st January 2020.
4. WHICH EMPLOYER IS NOT ELIGIBLE FOR THE WAGE SUBSIDY PROGRAMME?
Employers are not eligible to apply for wage subsidy if:
- The Company commences operation after 1st January 2020.
- The Company has not registered with PERKESO before 1st April 2020.
- The employees are self-employed.
- The employee’s salary is above RM4,000.
- The employee has received funds from Employment Retention Program (ERP) for the same month.
- The worker is retired.
- The employee is from public sectors, federal and state authority bodies, all statutory remuneration bodies, local authorities, or self-employed (including freelancers).
- The employee is a foreign worker or expatriate.
5. HOW IS THIS RM4,000.00 CALCULATED FOR THE PURPOSE OF THE WAGE SUBSIDY PROGRAMME?
We wish to point out that the interpretation of ‘wages’ (RM4000.00) under the WSP is in line with the definition as provided under the Employees’ Social Security Act 1969.
In simpler terms, “wages” means 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 will not include:
- Any contribution payable by the principal Employer or the immediate Employer to any pension fund or provident fund;
- Any travelling allowance or the value of any travelling concession;
- Any sum paid to an employee to defray special expenses incurred as a result of his employment;
- Any gratuity payable on discharge or retirement;
- Annual bonus; AND
- Any other remuneration as may be prescribed.
Given this, your employee, whose basic salary is RM4,000 with RM500 as his/her travelling allowance, would still be deemed as an eligible employee under the Wage Subsidy Programme.
6. CAN MY COMPANY APPLY FOR THE WSP IF WE HAVE PREVIOUSLY RECEIVED THE BENEFITS UNDER THE EMPLOYMENT RETENTION PROGRAMME (ERP)?
Yes, as long as the Company fulfils the criteria as provided in the table above. You will still be eligible to apply for assistance under the Wage Subsidy Programme. That being said, it is essential to point out that you are not allowed to apply for a wage subsidy and the ERP for your eligible employees in the same month.
7. MY COMPANY HAS DIFFERENT DEPARTMENTS AND BRANCH OFFICES. AM I STILL QUALIFIED UNDER THE WAGE SUBSIDY PROGRAMME?
Yes, you can choose any eligible employees within your organization (with no more than 200 employees) to get the wage subsidy.
8. HOW AND WHEN WILL I RECEIVE THE WAGE SUBSIDY?
9. IF MY APPLICATION TO WSP IS REJECTED, CAN MY COMPANY UNDERTAKE RETRENCHMENT EXERCISE?
Yes, our law generally recognizes that it is the prerogative of the Company to restructure their business/ workforce as it deems fit. That being said, we advised you to observe the following requirements before carrying out any retrenchment exercises. We reproduce the general conditions as follows:
- Your Company must suffer financial loss as a result of the MCO/CMCO.
- You should provide sufficient notice to the affected employees.
- You have exhausted all cost-cutting measures.
- If retrenchment is still imminent, we would recommend that you observe the ‘Last-In-First-Out’ principle. Simply put, the last person that joined your Company, should be let go first.
References:
[1]https://www.perkeso.gov.my/images/pengumuman/psu/Akuan_Pengisytiharan_PSU50-ver_9Apr20202.pdf
In this article, we aim to provide some guidance about the Wage Subsidy Programme for all business owners, and SMEs in Malaysia. It should be pointed out that the financial incentives under the Wage Subsidy Programme is to encourage Employers to continue hiring eligible employees in ongoing jobs without resorting to retrenchment.
In other words, under the WAGE SUBSIDY PROGRAMME, your Company will not be allowed to retrench, ask the eligible employees to go on no-pay leave, or reduce their salary during the receipt of the 3 months Wage Subsidy benefit, and 3 months after that.
To put it briefly, just so long as your Company is part of the Wage Subsidy Programme, you must thereby comply strictly with the Government’s 6-month moratorium on retrenchment exercises. In this manner, it is worth noting that any deliberate breach of that condition on your part as the Employer may expose your Company to serious legal ramifications.
Given that, we will attempt to address some common questions posed by our clients here for the benefits of our readers.
1. WHAT IS THE WAGE SUBSIDY PROGRAMME (“WSP”)?
The WSP is a financial aid given by our Government to assist businesses of all shapes and sizes if the COVID-19 pandemic financially impacts them on the condition that those companies meet the eligibility requirement which will be addressed further in Question 2 below.
Following the WSP, all companies with a workforce between 1 to 200 employees can benefit under this programme. The eligible Company can receive wage subsidy in the range between RM600.00 to RM1,200.00 for every employee with salaries below RM4,000.00. The WSP announced by the Government on April 2020 is reproduced as follows:
| Size of Enterprise | 75 Employees | 76 – 200 Employees | >200 employees |
|---|---|---|---|
| Subsidy Amount | RM1,200 per employee per month | RM800 per employee per month | RM600 per employee per month |
| No. of Eligible Employees | 75 | 200 | 200 |
| Decline in Revenue | No condition | 50% or more reduction in revenue or income compared to January 2020 or the subsequent months must be shown by the Company. | |
| Programme Duration | 3 months from 1st April 2020 until 31st December 2020 (subject to fund availability and government decisions). Closing Date: 15 September 2020 | ||
As illustrated, only companies with a workforce of 76 employees and above are required to prove a 50% drop or more in their revenue or sales. In the event, your workforce is below 76 employees; then you will not be required to prove a reduction of sales or revenue.
2. HOW DO I PROVE 50% OR MORE DECLINE IN SALES/ REVENUE?
You are advised to use the total sales/ revenue that you earned before the lockdown period as benchmark to compare with the loss of sales and revenue your Company incurred during the MCO/CMCO period.
That said, for companies that are required to provide such proof, it should be made clear that you do not need your sales reports or financial statements to be audited by an Auditor. Self-certification by the Management of the Company, together with the declaration form in PSU50[1] is enough.
3. WHICH EMPLOYER IS ELIGIBLE FOR THE WAGE SUBSIDY PROGRAMME?
The Employer can access a wage subsidy if they meet the following: –
- The Company must be registered or contributing to SOCSO or Employment Insurance Scheme (EIS) before 1st April 2020.
- The Company must be registered with the SSM or the PBT before 1st January 2020.
- The Company must have commenced operations before 1st January 2020.
4. WHICH EMPLOYER IS NOT ELIGIBLE FOR THE WAGE SUBSIDY PROGRAMME?
Employers are not eligible to apply for wage subsidy if:
- The Company commences operation after 1st January 2020.
- The Company has not registered with PERKESO before 1st April 2020.
- The employees are self-employed.
- The employee’s salary is above RM4,000.
- The employee has received funds from Employment Retention Program (ERP) for the same month.
- The worker is retired.
- The employee is from public sectors, federal and state authority bodies, all statutory remuneration bodies, local authorities, or self-employed (including freelancers).
- The employee is a foreign worker or expatriate.
5. HOW IS THIS RM4,000.00 CALCULATED FOR THE PURPOSE OF THE WAGE SUBSIDY PROGRAMME?
We wish to point out that the interpretation of ‘wages’ (RM4000.00) under the WSP is in line with the definition as provided under the Employees’ Social Security Act 1969.
In simpler terms, “wages” means 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 will not include:
- Any contribution payable by the principal Employer or the immediate Employer to any pension fund or provident fund;
- Any travelling allowance or the value of any travelling concession;
- Any sum paid to an employee to defray special expenses incurred as a result of his employment;
- Any gratuity payable on discharge or retirement;
- Annual bonus; AND
- Any other remuneration as may be prescribed.
Given this, your employee, whose basic salary is RM4,000 with RM500 as his/her travelling allowance, would still be deemed as an eligible employee under the Wage Subsidy Programme.
6. CAN MY COMPANY APPLY FOR THE WSP IF WE HAVE PREVIOUSLY RECEIVED THE BENEFITS UNDER THE EMPLOYMENT RETENTION PROGRAMME (ERP)?
Yes, as long as the Company fulfils the criteria as provided in the table above. You will still be eligible to apply for assistance under the Wage Subsidy Programme. That being said, it is essential to point out that you are not allowed to apply for a wage subsidy and the ERP for your eligible employees in the same month.
7. MY COMPANY HAS DIFFERENT DEPARTMENTS AND BRANCH OFFICES. AM I STILL QUALIFIED UNDER THE WAGE SUBSIDY PROGRAMME?
Yes, you can choose any eligible employees within your organization (with no more than 200 employees) to get the wage subsidy.
8. HOW AND WHEN WILL I RECEIVE THE WAGE SUBSIDY?
If you are an eligible Employer and your application had been successful. Then, in this case, the wage subsidy would be credited your account within 7-14 days from the date of approval.
9. IF MY APPLICATION TO WSP IS REJECTED, CAN MY COMPANY UNDERTAKE RETRENCHMENT EXERCISE?
Yes, our law generally recognizes that it is the prerogative of the Company to restructure their business/ workforce as it deems fit. That being said, we advised you to observe the following requirements before carrying out any retrenchment exercises. We reproduce the general conditions as follows:
- Your Company must suffer financial loss as a result of the MCO/CMCO.
- You should provide sufficient notice to the affected employees.
- You have exhausted all cost-cutting measures.
- If retrenchment is still imminent, we would recommend that you observe the ‘Last-In-First-Out’ principle. Simply put, the last person that joined your Company, should be let go first.
References:
[1]https://www.perkeso.gov.my/images/pengumuman/psu/Akuan_Pengisytiharan_PSU50-ver_9Apr20202.pdf