Workers’ Compensation

Dr. Irniza Rasdi

Definition
1) General definition of
workers compensation
• All forms of tangible/clear
financial returns, benefits
and services received by
employees as part of their
employment
2) Specific definition of
workers compensation
• A form of insurance providing
wage replacement and medical
benefits to employees injured
in the course of employment
in exchange for mandatory
relinquishment of the
employee's right to sue his or
her employer for the tort of
negligence.
• Protect employees from the
financial hardships associated with Why do we need
work-related injuries and workers
occupational diseases. compensation
• Company/institution can get protection at the
penalized for noncompliance workplace?
• Risk the high cost of claims,
penalties and liabilities
• Company can endure financial ruin
if they lost a court case to the
employee
Perspective of compensation

• Society’s view
• Stockholders’ view
• Employees’ view
• Managers ‘ view
What are the benefits provided?

1) Financial 2) Non- financial

• Compliment
• Direct • Self-esteem
• Indirect
• Recognition
• Self-worth
• Pride
What are the benefits provided?

1) Direct financial 2) Indirect financial

compensation compensation

• Salary (s) • Assurance plan (pension,

insurance, inability scheme)
• Bonuses
• Services (education,
• Commission recreation etc.)
• Gain-sharing • Leave (vacation, breaks,
holidays)
• Incentive
• Insurance plans (medical,
• Cost of living adjustment dental and life)
Work compensation scheme in Malaysia -
General
• Privately
employed -
SOCSO
• Civil servants –
Ex-Gratia
Scheme
• Foreign workers
– insurance
• NONE for the
self-employed
Legislation in Malaysia for workers
compensation
Workmen’s Employees' Social
Compensation Act 1952 Security Act 1969

• Applicable for foreign • Applicable for Malaysian

workers and local workers workers
whose salaries ≤ RM 500
 Workmen’s Compensation Act 1952

• Initially, foreign workers are protected under Employees Social

Security Act, but then it was resolved in 1st April 1993 due
several reasons.

• There are also fund provided for foreign workers under EPF Act,
but it was also resolved in 1st August 1998.

• Now, their benefits are under workmen’s Compensation (Foreign

Worker’s Compensation Scheme) (Insurance) Order 1998.
Workmen’s Compensation Act 1952
• Compensation for foreign workers - Foreign Workers
Compensation Scheme Insurance order 2005
• Employees must ensure that the workers are insured with
the panel insurance company appointed under the Foreign
Workers’ Compensation Scheme by the Human Resources
Minister
• The Subsection 26 (1) - failure to do so is an offence - will
be fined not more than RM20,000, or jailed for not more
than two years or both.
• The Labour Department of Semenanjung Malaysia (JTKSM)
has taken the initiative to develop the e-Compensation
system
• Allianz General Insurance Malaysia Berhad.
• Berjaya General Insurance Berhad.
Compensation
• Kurnia Insurans (Malaysia) Berhad
for foreign
workers
• LonPac Insurance Berhad.
• Malaysian Assurance Alliance Berhad.
List of Foreign Workers
• Mayban General Assurance Berhad.
Compensation Scheme
• Malaysia National Insurance Berhad. Insurance

• Syarikat Takaful Malaysia Berhad.

• Takaful Nasional Sdn. Berhad.
• Tahan Insurance Malaysia Berhad
• AmAssurance Berhad
• AXA AFFIN Assurance Berhad
• Mayban Takaful Berhad
Compensation for foreign workers
(coverage)
1) Injuries during working 2) Injuries outside working
hours hours

• death • death
• temporary disability • permanent disability
• permanent disability
Compensation for foreign workers
(incentive payment)
1) For injuries 2) For death cases

• Direct payment to the • Payment to the dependents

workers through Department of
Labour.
• The department will
identify the dependents
• Bank draft issued to the
dependents by high
commissioners or embassy
Work compensation for foreign workers
Compensation for foreign workers
• All foreign workers:
• Not more than RM500 monthly income
• Manual labour (Unlimited monthly income)

• Employer’s responsibility:
• All employers must pay a Insurance premium, for RM86 yearly for
ach workers from selected insurance company ie:
• Arab Malaysian Assurance Bhd / Mayban Assurance Bhd MNI Bhd /
Sykt Takaful
Compensation for Foreign Workers
• No deduction of employees’ salary for premium insurance
payment purposes

• Compensation is paid directly to the migrant workers

Penalty

OFFENCES PENALTY
Deduct employees’ salary to purchase RM 5,000 / 1 year imprisonment /
premium insurance both
RM 20,000 / 2 year imprisonment /
Fail to purchase employees’ premium
both
insurance

First RM5,000
Fail to report the accident Second RM10,000
Employees' Social Security Act 1969
• Enforced by the Social Security Organisation of Malaysia
(SOCSO) (Pertubuhan Keselamatan Sosial
Malaysia)(PERKESO).
• Among functions of SOCSO
• registering employer/employees
• collection of employers/employee contributions
• processing and disbursing claims made by salaried employees and
their dependants
• provides physical and vocational rehabilitation benefits to claimants
• promotes occupational safety and health awareness.
Schemes under the SOCSO
1. Employment Injury Insurance Scheme
2. Invalidity Pension Scheme
Employment Injury Insurance Scheme

• Provides protection to employees who suffer from accidents

arising from work.
• Employment injury = personal injury to an employee
caused by an accident or an occupational disease arising
out of and in the course of employment in an industry to
which the Employees' Social Security Act 1969 applied.
Employment Injury Insurance Scheme
(coverage)
• Commuting accidents
• While working
• Work environment
• Dealing with equipment
• Crimes
• Accident during emergency (while helping others)
• Occupational diseases - asthma, back pain, hearing loss etc.
Employment Injury Insurance Scheme
(coverage)
• Medical Benefit
• free access to government hospitals and clinics and panel clinics.

• Temporary Disablement Benefit

• off days
• payments of 80% from daily salary

• Permanent Disablement Benefit

• lump sum payments
• payments of 90% from daily salary with maximum limits RM 88.50
Employment Injury Insurance Scheme
(coverage)
• Rehabilitation Benefit
• payments of 80% from daily salary
• artificial limbs
• return to work program

• Dependant's Benefit
• payments of 90% from daily salary

• Funeral Benefit
• RM1500 burial cost

• Education Benefit
• scholarship or education loan
Invalidity Pension Scheme
• Provides twenty four (24) hours coverage for workers from
invalidity or dies irrespective of the cause of death.
• Invalidity = a serious disablement or morbid condition of a
permanent nature that is either incurable or not likely to
be cured, as a result of which an employee is unable to
earn at least 1/3 of what a normal able person could earn.
Invalidity Pension Scheme
• Constant Attendance Allowance
• Survivor's Pension
• pension for life

• Funeral Benefit
• RM1500 burial cost

• Rehabilitation Benefit
• payments of 80% from daily salary
• artificial limbs, vocational
• Return to work programme

• Education Benefit
• scholarship or education loan
Reported Accidents 2003 – 2010
(SOCSO, 2010)
Work compensation for public service
workers
• Called Ex-Gratia Work Disaster Scheme
• “Ex-gratia” in Latin means “compensation payment by
government or organization when compensating victims of
an event such as an accident or similar, but not to admit
liability to pay compensation, or for causing the event”
• Introduced by the Government in Malaysia in 1994,
revised and improved in 2001 to increase the coverage
with better benefits
• Administered by the Treasury, and the two circulars,
Treasury Circular No. 13, 1994 and Treasury Circular
No.7, 2001 are the reference documents for its
implementation
Work compensation for public service
workers (coverage)

• All government servants except those in the military, police

and the fire services;
• Those engaged under the services with the government
Trustee fund or Tabung Amanah;
• Attached officers and daily paid workers who have been
covered under different schemes accordingly
• States, local government and statutory bodies workers
Ex-Gratia Work Disaster Scheme

• An officer is covered within the following period of time:-

a) while traveling to and from home to workplace;

b) while traveling to and from the workplace to the residence at an
approved meal time; and
c) at all times while on official duty.
 Work compensation for public service
workers (benefit)

• Bulk Ex-Gratia Payment

• Monthly ex-gratia - An officer is eligible for a Monthly Ex-Gratia
if he suffers a permanent disability of more than 20%.

• Permanent Care Allowance - A monthly payment to an officer

who suffers 100% permanent disability and will always require others
to care for him.

• Monthly ex-gratia payment for dependents - A monthly fee

paid to the dependents of an officer who dies as a result of
employment injury.

• Workers are not required to pay premium

Work compensation for public service
workers (Issues)

• Only a total of 349 Ex-Gratia applications have been

received by the Ex-Gratia Secretariat
• The average annual number of cases submitted for
compensation claims from 2000 to 2007 is only 30
• In 2008, 320 cases have been processed and 29 cases are
still pending
Group Insurance Scheme
• Example : PDRM, Army
• Usually cheaper premium
• Similar with the other coverage
Conclusion

• Compensation is an important component for the workers

need of security
• Employers are obliged by laws and regulation to ensure
that their employees are covered with compensation
scheme
• Understanding different type of compensation and its
requirement by law and regulations will help in the
management of work compensation at the workplace.