mercer's worldwide benefit & employment guidelines (wbeg)

H E A LT H W E A LT H C A R E E R

2016

WORLDWIDE BENEFIT &EMPLOYMENT GUIDELINESSAMPLE COUNTRYREPORTSAMPLE

ASIA, MIDDLE EAST, AND AFRICA EUROPE

Singapore

Tel: +65 6398 2324

[email protected]

Poland

Tel: +48 22 436 68 68

[email protected]

AUSTRALIA LATIN AMERICA

Sydney

Tel: +61 2 8864 6800

[email protected]

Argentina: +54 11 4000 0954

Brazil: +55 11 3048 1801

[email protected]

CANADA UNITED STATES

Toronto

Tel: +1 800 333 3070

[email protected]

Louisville

Tel: +1 800 333 3070

[email protected]

PUBLICATIONS DIRECTOR

Samantha Polovina

CREATIVE DIRECTOR

Stefani Baldwin

PRODUCT MANAGER

Chrisy Wilson

PRODUCTION MANAGER

Sumit Bajaj

PROJECT MANAGER

Rahi Sardana

ANALYSTS

Ankur Bora

Ashvinder Kaur

Cheshta Dora

Divya M

Karunanjali Tandon

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Vishal Singla

WRITER

Aashi Choudhary

GRAPHIC ARTISTS

Rahul Khannawalia

Ruma Roy

Nidhi Rastogi

Nidhi Shrivastava

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COPYEDITOR

Ankita Rawat

Divya Prakash

Published by:

MERCER

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Copyright © 2016. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or be

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written permission of the publishers. No responsibility for loss occurring to any person acting or refraining from acting as a

result of the material in this publication can be accepted by the authors or the publishers.

REPORTSAMPLE

© 2016 Mercer LLC. 1 Worldwide Benefit & Employment Guidelines

http://www.imercer.com/global

DATA MINING & INSIGHTS

In today’s competitive race to attract and retain highly skilled global talent, organisations require current, in-depth information on everything from local statutory benefits, to

salary trends, to managing a diverse workforce. Through Mercer’s own extensive global presence, we collect and analyse data and insights that help companies take the

actions necessary to support their human capital strategies. You can order any of the publications below by clicking on the title links or by visiting www.imercer.com/global.

REPORTSAMPLE


https://www.imercer.com/products/compensation-handbook.aspx

https://www.imercer.com/products/global-car-policies.aspx

https://www.imercer.com/products/global-comp-planning.aspx

https://www.imercer.com/products/2013/diversity-handbook.aspx

https://www.imercer.com/products/mobilityperspectives.aspx

https://www.imercer.com/products/global-pay-summary.aspx

https://www.imercer.com/products/2015/hr-atlas-asia-pacific.aspx

https://www.imercer.com/products/2013/managementterms.aspx

https://www.imercer.com/products/intl-geo-salary.aspx

https://www.imercer.com/products/international-living-wage-report.aspx

https://www.imercer.com/products/2015/short-term-incentives.aspx

https://www.imercer.com/products/2015/total-employment-costs.aspx

https://www.imercer.com/products/wbeg.aspx

https://www.imercer.com/products/2015/talent-all-access.aspx

https://www.imercer.com/products/2015/mercer-select.aspx

https://www.imercer.com/products/severance-policies-ap.aspx

INTRODUCTION

Whether you operate in two countries or 20, staying competitive through the creation of effective, attractive, and statutorily correct benefit plans remains a challenge. You need

to keep track of constantly evolving benefit laws and regulations, as well as understand employment conditions and statutory and typical benefits.

Mercer’s Worldwide Benefit & Employment Guidelines (WBEG) helps you meet these challenges by providing access to current, reliable information on:

Statutory employee benefits.

Typical employer benefit practices.

Overall employment conditions.

Our global network of country experts gather and interpret current information, offering in-depth data of unparalleled quality for 78 countries.

REPORT SUMMARY

Each country report contains following sections:

Economic environment

Benefits:

1. Social security

2. Retirement benefits

3. Death benefits

4. Disability benefits

5. Medical benefits

6. Maternity/paternity/parental benefits

7. Social benefits

8. Perquisites and allowances

9. Flexible benefits programme

Employment conditions:

1. Severance conditions and termination indemnities

2. Working time

3. Conditions of entry and residence

4. Contract of employment

5. Occupational health and safety

6. Industrial relations

REPORTSAMPLE



SAMPLE COUNTRY

REPORTSAMPLE


51% 49% Male

Female50% 50%

Male

Female

63%

37% Male

Female

1 EUR =

4.42 Inflation 3.1 2.1 3.1

Unemployment 2.9 3.2 3.2

TOTAL POPULATION, 2015 30,714 WORKING AGE RANGE (15-64) POPULATION, 2015

20,278 ECONOMICALLY ACTIVE POPULATION (15-64), 2015

12,709

TOTAL POPULATION GENDER RATIO, 2015

WORKING AGE (15-64) GENDER RATIO, 2015

ECONOMICALLY ACTIVE POPULATION (15-64) GENDER RATIO, 2015

SAMPLE COUNTRY

ECONOMIC ENVIRONMENTECONOMIC INDICATORS 2014 2015 2016 EXCHANGE RATE AS OF MAY 6, 2016

GDP growth 6.0 5.0 4.4 1 USD =

3.90REPORTSAMPLE


READING THIS REPORT

DEFINITIONS

EA: Employment Act

EPF: Employees Provident Fund

IRA: Industrial Relations Act

PK: Labour Department Form

SOCSO: Social Security Organisation

VDR: Visa with reference

Angelica A. Bruzina Chrisy Wilson

Deb Rath

Samantha Polovina

CONTACT DETAILS

LOCAL MERCER OFFICES

MERCERB-09-01, Level 9, Tower B,

Menara UOA Bangsar, No.5,

Jalan Bangsar Utama 1, 59000 Kuala Lumpur

Phone: +603 2302 8575

Fax: +603 2302 8570

CONTRIBUTORS

LOCAL CONTRIBUTORS ICG PEER REVIEWERS PROJECT MANAGERS

Hansern TohJuliana Philip

REPORTSAMPLE


1 SOCIAL SECURITY

GENERAL DESCRIPTION OF SOCIAL SECURITY

There are two major social security schemes: the Employees Provident Fund (EPF) and the Social Security Organisation (SOCSO).

The EPF is a social security institution formed according to the Laws of Malaysia, Employees Provident Fund Act 1991 (Act 452), which provides retirement benefits

for members through management of their savings. The EPF also provides a convenient framework for employers to meet their statutory and moral obligations to their

employees, who consist of private and public-sector employees. The EPF, as of September 2015, has a total of 14.45 million members. The total number of active

and contributing members is 6.74 million; the total number of active employers is 537,123.

The Social Security Organisation (SOCSO) was established in 1971 under the Ministry of Human Resources to implement and administer the social security schemes

under the Employees’ Social Security Act 1969, namely the Employment Injury Scheme and Invalidity Scheme. Effective 1 July 1985, SOCSO had evolved into a

statutory body. Beginning 1 January 1992, SOCSO had implemented its own system,Sistem Saraan Baru PERKESO. The objective of this organisation is to provide

social security protection to all employees and their dependants through social security schemes based on the concept of a caring society in line with the National

Development Policy and Vision 2020.

BENEFITS SECTION REPORTSAMPLE


2 RETIREMENT BENEFITS

OVERVIEW

EFFECTIVE DATE August 2013, remains in effect in 2016.

DATE WHEN FIGURES ARE EXPECTED TO CHANGE NEXT No changes are expected.

EPF increased the age until which full EPF contributions must be made for older workers. Effective with August 2013 wages, members up to age 60 who are still

employed will continue to receive full EPF contributions from their employers at 12% (or 13% for employees earning MYR5,000 and below per month). The standard

employee contribution of 11% has been reduced to 8% for salaries from March 2016 to December 2017, but employees can opt to maintain their contribution at 11%.

For members age 60–75, employees will contribute 4% from March 2016 to December 2017 and employers will contribute 6%–6.5%. Previously, employees between

ages 55 and 60 were required to contribute 5.5%, while their employers contributed 6% (or 6.5% for those earning MYR5,000 and below per month).

PREVALENCE CONTRIBUTIONS SALARY CEILING

(LOCAL CURRENCY)

EMPLOYER

(% of base salary) EMPLOYEE

(% of base salary)

STATUTORY REQUIREMENT 100% Members up to age 60*:

12.00%, 13.00%***

Members age 60 to 75**:

6.00%, 6.50%***

Members up to age

60*: 8.00%

Members age 60 to

75**: 4.00%

None

SUPPLEMENTAL PROVISION, DB PLANS 8% of all companies. Full plan cost. Not required; typically

none.

REPORTSAMPLE


SUPPLEMENTAL PROVISION, DC PLANS

37% of all companies

provide additional

supplementary

benefits in addition to

mandatory EPF

contributions.

Additional voluntary employer

contribution to EPF up to 5% is

the current tax allowable rate.

Typical contribution rate is

3%–4%.

Not required; typically

none.

*Those age 55 before 1 February 2008.

**Those turning age 55 on or after 1 February 2008.

***Those earning less than MYR5,000 a month.

Source: Mercer’s Malaysia Benefits Survey, 2015.

RECENT LEGISLATION APPROVED AND PROPOSED

HR AREA EFFECTIVE

DATE NEW LAW ACTION REQUIRED

No recent legislation of note.

TRENDS

BENEFIT SUMMARY REASONS FOR TREND

RETIREMENT

Trend is to move towards DC in the form of additional

EPF contributions. An increasing number of

companies make voluntary EPF contributions and

are closing existing voluntary gratuity schemes. EPF

provides a cheaper alternative to a self-administered

retirement plan. It is an advantage to employers; they

can place additional EPF contributions for

employees, and the EPF administers the plan at zero

cost to the employer.

Simplified and less costly administration is driving the

trend.

REPORTSAMPLE


STATUTORY REQUIREMENTS

NAME OF STATUTORY RETIREMENT SCHEME

Scheme is the Employees Provident Fund (EPF).

The EPF Act provides for retirement funds for individuals employed in Malaysia. The EPF Act, in general,

imposes statutory obligations on the employee and employer to make contributions into a national fund

managed by the EPF Board. The act creates a statutory duty on the employer, first, to pay both contributions

payable by the employer and also for the employee. In regard to the mode of payment, every employee and

employer under the act is liable to pay monthly contributions on wages; the act provides the contribution

rates. At present, the general rates are 12% for employers and 8% for employees on monthly wages for

March 2016 to December 2017, reduced from the usual 11%. For employees whose wages are MYR5,000

or below, the employer’s contribution rate is 13%.

TYPE OF PLAN Plan is a defined contribution (DC) plan.

ELIGIBILITY

All local private-sector employees must be EPF members. Public-sector employees have the option to

remain an EPF member or become members in the Public Sector Pension Scheme after three years’

service. Foreign employees can voluntarily elect to be covered by EPF.

NORMAL RETIREMENT AGE Effective 1 January 2012, the normal retirement age increased from 58 to 60 for public-sector employees.

Effective 1 July 2013, the retirement age for all private sector employees increased from age 55 to 60.

PENSIONABLE EARNINGS

Generally, earnings is defined as all remuneration that includes monthly base salary, bonuses, allowances,

commissions, arrears of wages, payment of unused leaves, and other payments under contract of service or

otherwise. Exclusions are service charge, overtime pay, gratuity, retirement/retrenchment/layoff/termination

benefits, and travelling allowances.

FINAL PENSIONABLE EARNINGS Not applicable.

PENSIONABLE SERVICE Not applicable.

CONDITIONS FOR RECEIVING BENEFITS Not applicable.

NORMAL RETIREMENT BENEFITS Benefit is accumulated contributions plus dividends. Although dividends are guaranteed at 2.5% per year,

actual returns have been 4%–5%. The declared dividend for 2015 is 6.4%.

REPORTSAMPLE


SUPPLEMENTAL / TYPICAL BENEFITS

REASONS WHY COMPANIES NEED TO SUPPLEMENT STATUTORY REQUIREMENTS Benefits arising from the accumulated balance of mandatory contributions in Account 1 of the Employees Provident Fund (EPF) are inadequate. Providing

supplemental plans maintains competitiveness and can also help retain staff.

TYPICAL SUPPLEMENTARY BENEFITS ARRANGEMENT PROVIDED BY COMPANIES There are multiple plans: Gratuity schemes (defined benefit, or DB), voluntary additional EPF contributions, and defined cont ribution (DC) schemes.

DEFINED BENEFIT PLAN SUPPLEMENTAL

PREVALENCE Only 8% of all companies provide this benefit (Source: Mercer’s Malaysia Benefits Survey,

2015).

SPONSORING EMPLOYER Employer.

NAME OF PLAN Plan is a gratuity scheme.

GOVERNING DOCUMENTATION Trust deed, employment contract, and internal rules govern the plan.

ELIGIBILITY

The plan may be open to executives only or nonexecutives only or both, which is most common.

Usually, an employee can join the plan on the date of hire. Non-permanent employees are

usually not eligible.

NORMAL RETIREMENT AGE 60

PENSIONABLE EARNINGS Earnings are defined as basic monthly salary.

FINAL PENSIONABLE EARNINGS Final earnings are defined as the last drawn monthly salary or average monthly salary over the

final one or two years’ service.

PENSIONABLE SERVICE Service is defined as service from the date of joining the company.

REPORTSAMPLE


TAXATION OF CONTRIBUTIONS

Employer contributions to a tax-approved fund are tax-deductible up to 19% of pensionable

earnings (inclusive of the mandatory 12% or 13% of pensionable earnings to EPF).

Employee contributions to approved funds, insurance policies, and EPF are tax -deductible up to

MYR6,000 per year.

TAXATION OF BENEFITS

All benefits from tax-approved funds are tax-free to recipients, but restrictions are placed on how

benefits are paid. Benefits from unfunded gratuity schemes are taxable unless paid upon death,

permanent disability, or attainment of age 60, with a minimum 10 years’ service.

OTHER COMMENTS

The government has been looking into pension reform, but no announcement has been made

yet on the future direction of reform.

One weakness of the current scheme is that benefits are paid as a lump sum that usually runs

out within 10 years of retirement. There are no tax incentives to purchase annuities. The public

strongly prefer lump sums; any movement towards annuities will be politically difficult for the

foreseeable future.

DEFINED CONTRIBUTION PLAN SUPPLEMENTAL

PREVALENCE One-third (37%) of all companies provide this benefit (Source: Mercer’s Malaysia Benefits

Survey, 2015).

SPONSORING EMPLOYER Employer.

NAME OF PLAN Plan is the EPF or DC plan.

GOVERNING DOCUMENTATION Employment contract and internal rules govern the plan.

Some employers operate a combination of the two.

FREQUENCY OF VALUATIONSValuation is every three years, which is usually stated in the trust document. Nonetheless,

accounting standards require periodic valuations.

LOCAL ACCOUNTING STANDARD Standard is FRS 126 (similar to IAS 19).

HYBRID ALTERNATIVES Not common.REPORTSAMPLE



ELIGIBILITY All employees are eligible.

NORMAL RETIREMENT AGE 60

CONTRIBUTORY EARNINGS Earnings are defined as basic salary plus bonus, allowances, and commissions.

CONDITIONS FOR RECEIVING BENEFITS

Plans that provide additional EPF contributions are subject to the EPF Act.

For approved DC plans: Full-time permanent employees and upon attaining normal retirement

age.

NORMAL RETIREMENT BENEFITS Benefit is accumulated contributions plus interest, payable as a one-time lump sum.

FORM OF PAYMENT Payment is a lump sum or periodic withdrawals.

PENSION INCREASES Not applicable.

DISABILITY BENEFITS Benefit is accumulated contributions plus interest, payable as a one-time lump sum.

DEATH-IN-SERVICE BENEFITS – SURVIVOR AND/OR LUMP-

SUM BENEFITS

Benefit is accumulated contributions plus interest, payable as a one-time lump sum.

DEATH AFTER RETIREMENT BENEFITS None.

LEAVING SERVICE BENEFITS & VESTING PROVISIONS

Employer contributions have immediate full vesting for additional EPF contributions. For tax -

approved plans, the benefit may vest starting from five years, with full vesting after 15–20 years.

Vesting rules are subject to approval of the tax authority. Benefits cannot be payable in cash,

and are usually transferred to the EPF.

EMPLOYEE CONTRIBUTIONS Contribution is not required; typically, there is no contribution.

EMPLOYER CONTRIBUTIONS

Contribution is up to 5% of pensionable earnings; typically, between 3% and 4%.

Supplemental employer contributions are tax deductible up to 7% of pensionable earnings. This

is determined by the total maximum tax deductible contribution (19%) less the statutory

employer EPF contribution (currently, 12% for those earning more than MYR5,000).

REPORTSAMPLE



FINANCING METHODS

The most common method involves contributions made to a central fund run by the EPF. If the

funding vehicle is through an Inland Revenue-approved plan, contributions are payable to a trust

fund set up by the employer.

EMPLOYEE INVESTMENT CHOICE

There are no investment choices in the EPF. EPF members with more than MYR5,000 in

excess of the basic savings in their EPF Account 1 have the option to invest a portion of their

Account 1 with the EPF-approved unit trust funds. Basic savings is a minimum amount in

Account 1, which varies progressively by age from MYR1,000 at age 18 to MYR120,000 at age

60.

HYBRID ALTERNATIVES Not common.

TAXATION OF CONTRIBUTIONS

Employer contributions to approved funds, including EPF, are tax-deductible up to a total 19% of

pensionable earnings (including mandatory EPF pensionable earnings). Employee contributions

to approved funds, insurance policies, and EPF are tax-deductible up to MYR6,000 per year.

TAXATION OF BENEFITS All benefits payable from approved funds, including EPF, are tax-free to recipients.

REPORTSAMPLE


3 DEATH BENEFITS

OVERVIEW




(LOCAL CURRENCY)

EMPLOYER


(% of base salary)

STATUTORY REQUIREMENT, DEATH AND

DISABILITY

100% 0.50% 0.50% MYR3,000 per month

SUPPLEMENTAL PROVISION, LIFE INSURANCE 93% of all companies. Full plan cost. None.

SUPPLEMENTAL PROVISION, ACCIDENTAL DEATH

& DISABILITY

92% of all companies. Full plan cost. None.

SUPPLEMENTAL PROVISION, BUSINESS TRAVEL

INSURANCE

86% of all companies. Full plan cost. None.



HR AREA EFFECTIVE DATE NEW LAW ACTION REQUIRED

There is no recent legislation.

REPORTSAMPLE


TRENDS


No significant trends are evident in the market.


NAME OF SOCIAL SECURITY SCHEME

The scheme is the Social Security Organisation (SOCSO). The SOCSO Act provides for social security for employment injury contingencies in favour of employees

under its scope. It provides for the right to claim for benefits such as invalidity pension, disablement benefit, dependant's benefit, funeral benefit, and survivor’s

pension.

ELIGIBILITY

All employees initially earning MYR3,000 or less per month must, by law, have coverage under SOCSO and

remain members throughout their working lifetime. Once covered by SOCSO, employees remain covered

irrespective of subsequent earnings. Coverage extends only to the maximum coverage earnings of

MYR3,000 per month. Voluntary coverage is possible for persons earning over MYR3,000 per month upon

agreement between the employer and employee. The schemes operate on a “once in, always in” policy.


NONWORK-RELATED BENEFITS – SOCSO INVALIDITY PENSION SCHEME

A pension is payable to the widow of the deceased member who dies:

Before age 60 and did not receive a disability benefit from the SOCSO Invalidity Pension Scheme, or

At any age if the deceased member received the said disability benefit. If the deceased member was a

recipient of the disability benefit, the survivor’s pension is equal to the disability benefit received by the

member while living.

A full pension is payable if the member made at least 24 months’ contributions in the last 40 months, or

made contributions in at least two-thirds of the months since entry into the scheme, with a minimum of 24

months.

A reduced pension is payable if the member made contributions in only one-third of the months, with at least

24 months’ total.

REPORTSAMPLE



Total contribution for death and disability is 0.5% of earnings up to a salary ceiling of MYR3,000 per month.

Earnings includes salary, overtime payment, commissions, service charge, paid leaves and allowances, and

excludes gratuity payments, annual bonus, or payments for dismissal or retrenchment.

OTHER COMMENTS A funeral grant of MYR1,500 is payable to the next of kin. If there is no next of kin, the person who incurred

funeral expenses receives MYR1,500 or the actual funeral cost, whichever is lower.


REASONS WHY COMPANIES NEED TO SUPPLEMENT STATUTORY REQUIREMENTS EPF and SOCSO death-in-service benefits are generally inadequate. For high earners, there is a maximum pension payable covered by mandatory benefits and no

protection after an employee turns age 60. It is common for companies to provide group term-life insurance coverage for employees.

TYPICAL SUPPLEMENTARY BENEFITS ARRANGEMENT PROVIDED BY COMPANIES

Death (natural and accidental causes).

Dismemberment.

Disablement (natural and accidental causes).

DEATH BENEFITS SUPPLEMENTAL

PREVALENCE Nearly all (93%) companies provide this benefit (Source: Mercer’s Malaysia Benefits Survey,

2015).

IS THIS PART OF ANOTHER PLAN? It is not part of another plan.

ELIGIBILITY Typically, all employees are eligible.

RETIREES COVERED No.

CONDITIONS FOR RECEIVING BENEFITS Condition is death or permanent disablement.

BENEFITS DESCRIPTION Lump-sum death benefit is 36 times basic monthly salary.

EMPLOYEE CONTRIBUTIONS Typically, there is no contribution; employers pay the full insurance cost.

REPORTSAMPLE


DEATH BENEFITS SUPPLEMENTAL

EMPLOYER CONTRIBUTIONS Employers pay the full insurance cost.

BENEFITS INSURED Benefit is fully insured.

OVERALL DESCRIPTION OF PLAN FINANCING Financing is through an insurance policy.

TAXATION OF CONTRIBUTIONS Employer premiums are tax-deductible business expenses.

TAXATION OF BENEFITS Benefit is tax-free.

OTHER COMMENTS

If an occupational retirement plan exists, an additional benefit equivalent to the greater of the

accrued retirement benefit or the insured benefit is usually payable. Benefits are also payable

from EPF and SOCSO, where applicable. For EPF, lump-sum survivor benefits are payable to

nominated survivors or legal heirs of a deceased EPF member.

ACCIDENTAL DEATH & DISMEMBERMENT (AD&D) SUPPLEMENTAL

PREVALENCE Nearly all (92%) all companies provide this benefit (Source: Mercer’s Malaysia Benefits Survey,

2015).


ELIGIBILITY Typically, all employees are eligible.


CONDITIONS FOR RECEIVING BENEFITS Condition is accidental death or disablement.

BENEFITS DESCRIPTION Typically, the lump-sum benefit is 36 times the monthly salary and provided for accidental death.

A proportion is payable for accidental dismemberment according to varying disabil ity degrees.

EMPLOYEE CONTRIBUTIONS Typically, there is no contribution; employers usually pay the full insurance cost.

EMPLOYER CONTRIBUTIONS (NEW!) Employers pay the full insurance cost.

BENEFITS INSURED Benefit is fully insured.

REPORTSAMPLE


ACCIDENTAL DEATH & DISMEMBERMENT (AD&D) SUPPLEMENTAL




OTHER COMMENTS

If an occupational retirement plan exists, an additional benefit equivalent to the accrued

retirement benefit is usually payable separately from the retirement plan. Benefits are also

payable from EPF and SOCSO, where applicable.

BUSINESS TRAVEL INSURANCE SUPPLEMENTAL

PREVALENCE The majority (86%) of companies provide this benefit (Source: Mercer’s Malaysia Benefits

Survey, 2015).


ELIGIBILITY All employees who travel on business (typically, management and professionals) are eligible.

CONDITIONS FOR RECEIVING BENEFITS The condition is a company requirement for travel.

BENEFITS DESCRIPTION

Benefits may include:

Lump-sum death benefit.

Costs of emergency evacuation or repatriation.

Costs of healthcare.

Reimbursement for loss of baggage and personal effects.

EMPLOYEE CONTRIBUTIONS Typically, there is no contribution.

EMPLOYER CONTRIBUTIONS (NEW!) Employers pay the full insurance cost.

BENEFITS INSURED Benefit is insured.


REPORTSAMPLE


4 DISABILITY BENEFITS

OVERVIEW




(LOCAL CURRENCY)

EMPLOYER


(% of base salary)

STATUTORY REQUIREMENT, SICKNESS 100% There is no contribution. There is no

contribution.

MYR3,000 per month

STATUTORY REQUIREMENT, DISABILITY AND

SURVIVORS

100% 0.50% 0.50% MYR3,000 per month

STATUTORY REQUIREMENT, ACCIDENT 100% 1.25% There is no

contribution.

MYR3,000 per month

SUPPLEMENTAL PROVISION, SHORT-TERM

Some companies

supplement statutory

requirements.

Employer pays base

salary and, in some cases,

provides financial support.

Median lump-sum limit

for hospitalisation is

MYR45,000.

None.

SUPPLEMENTAL PROVISION, LONG-TERM 4% of all companies. Full plan cost. None.


REPORTSAMPLE





TRENDS




SHORT-TERM DISABILITY BENEFITS

ELIGIBILITY

All employees initially earning MYR3,000 or less per month must, by law, have coverage by social security

and remain members throughout their working lifetime regardless of subsequent earnings. Once covered by

SOCSO, employees remain covered notwithstanding their earnings, although coverage extends only to the

maximum covered earnings of MYR3,000 per month. Voluntary coverage is possible for persons earning

over MYR3,000 per month upon agreement between the employer and employee. The schemes operate on

a “once in, always in” policy.

PERIOD OF DISABLEMENT BEFORE BENEFITS

BEGIN

There is no waiting period.


This benefit is payable to an employee who has been certified by a doctor to be unfit for work for not less

than four days, including the day of the sickness or accident. It is payable for the period the employee is on

medical leave, but not for days that the employee works and earns wages.

DEFINITION OF DISABLEMENT Disablement is inability to work due to sickness or accident.

REPORTSAMPLE



WORK-RELATED BENEFITS – SOCSO EMPLOYMENT INJURY INSURANCE SCHEME

This scheme provides an employee with protection for commuting accidents, work accidents, and sickness

from occupational disease. It provides benefits for temporary disability of at least four work days, amounting

to 80% of the average assumed daily wage (subject to a maximum monthly salary of MYR3,000). The

average assumed daily wage is a minimum of MYR10 and maximum of MYR79.

An employee who suffers from injuries or sickness as a result of work-related accidents or occupational

disease has a right to medical treatment from SOCSO-appointed clinics and state-appointed hospitals and

clinics.

WORK-RELATED BENEFITS See Benefits Description.

EMPLOYEE CONTRIBUTIONS There is no contribution.

EMPLOYER CONTRIBUTIONS There is no contribution.

OTHER COMMENTS

Employees have a right to paid sick leave (and for dental treatment) if certified by a recognised medical

practitioner or dental surgeon. The number of paid days that is granted depends on length of service. Under

the Employment Act, an employee has a right to a minimum sick leave per year with full pay for:

14 days if service is less than two years.

18 days if service is between two and five years.

22 days thereafter.

If the employee is hospitalised or deemed ill enough to be hospitalised, the employee has a right to a

maximum of 60 days’ hospitalisation leave.

LONG-TERM DISABILITY BENEFITS

ELIGIBILITY

All employees initially earning MYR3,000 or less per month must, by law, have coverage by social security

and remain members throughout their working lifetime regardless of subsequent earnings. Once covered by

SOCSO, employees remain covered notwithstanding their earnings, although coverage extends only to the

maximum coverage earnings of MYR3,000 per month. Voluntary coverage is possible for persons earning

over MYR3,000 per month upon agreement between the employer and employee. The scheme operates on

a “once in, always in” policy.

REPORTSAMPLE


EMPLOYEE CONTRIBUTIONS

Total contribution for death and disability is 0.5% of earnings up to a salary ceiling of MYR3,000 per month.

Earnings includes salary, overtime payment, commissions, service charge, paid leaves and allowances, and

excludes gratuity payments, annual bonus, or payments for dismissal or retrenchment.


For both Employment Injury Insurance Scheme and Invalidity Pension Scheme benefits, the employer

contribution is approximately 1.75% of total remuneration subject to a maximum monthly contribution of

MYR51.65 per employee. It applies to most employees under age 60; however, a separate set of employer

SOCSO contributions apply to prescribed employees, such as those age 60 or over.

OTHER COMMENTS In addition to SOCSO benefits, employees can also withdraw the whole amount of the accumulated balance

in their EPF account upon total permanent disablement.


REASONS WHY COMPANIES NEED TO SUPPLEMENT STATUTORY REQUIREMENTS Long-term and temporary disability benefits from social security may be adequate for low-income individuals but not for middle-to-high income earners. Companies

usually provide total partial/permanent disability as a rider under an insured group term life program.

TYPICAL SUPPLEMENTARY BENEFITS ARRANGEMENT PROVIDED BY COMPANIES

Short-term disability benefits.

Total partial/permanent disability benefits (lump sum).

If earnings capacity loss exceeds 20%, the permanent disability benefit is 90% of the average assumed

daily wage (subject to the maximum MYR3,000 per month). The minimum daily rate is MYR10. The

benefit is payable as a lifetime pension or 20% of it may be commuted into a lump-sum payment.

If earnings capacity loss is less than 20%, the benefit is payable as a lump sum. A constant attendance

supplement is also payable, equal to 40% of the permanent disability pension benefit to a maximum of

MYR500 per month.REPORTSAMPLE


SHORT-TERM DISABILITY BENEFITS SUPPLEMENTAL

PREVALENCE Some companies supplement statutory requirements.





BEGIN

There is no waiting period.


DEFINITION OF DISABLEMENT Disablement is inability to work due to illness.


Typical practice is to provide sick leave and hospitalisation leave. Employees have a right to paid sick leave

(non-hospitalisation) as per the following schedule:

14 days for less than two years’ service.

18 days for two years’ service or more, but less than five years.

22 days for five years’ service or more.

If hospitalisation is necessary, an employee has a right to a maximum 60 days’ paid leave per calendar year

(inclusive of nonhospital leave). This amount of leave is the minimum under the Malaysian Employment Act.

All sick leave and hospitalisation leave must have substantiation with medical certificates from the company -

approved registered practitioner or medical officer, as stipulated by company policy.

A company’s medical benefit plan typically covers medical treatment.

The median lump-sum limit for hospitalisation is MYR45,000 per year.


EMPLOYER CONTRIBUTIONS Employer pays base salary and, in some cases, provides financial support. Median lump-sum limit

for hospitalisation is MYR45,000.

REPORTSAMPLE


SHORT-TERM DISABILITY BENEFITS SUPPLEMENTAL

BENEFITS INSURED Benefit is partly insured.

OVERALL DESCRIPTION OF PLAN FINANCING

Employers self-fund sick leave entitlement.

Medical treatment incurred in conjunction with sick leave (not exceeding

25 days a year) can be self-financed or covered by the company’s medical benefit plan.

An insurance plan typically covers hospitalisation benefits. If there is no insurance plan, the employer self-

funds the hospitalisation benefits.

TAXATION OF CONTRIBUTIONS Employer’s cost is a tax-deductible business expense.


LONG-TERM DISABILITY BENEFITS SUPPLEMENTAL

PREVALENCE Only 4% of all companies provide this benefit (Source: Mercer’s Malaysia Benefits Survey, 2015).

IS THIS PART OF ANOTHER PLAN? Where provided, it is usually part of the rider to the life insurance policy.




BEGIN

Benefits begin on cessation of short-term disability benefits.


DEFINITION OF DISABLEMENT Disablement is inability to work due to sickness or accident.


The median benefit level is 60% of employee’s monthly salary (income continuance).

Group long-term disability income insurance is rare. If a benefit is provided for prolonged illness, companies

provide 100% of paid leave for the first six months, 50% of paid leave for the next three months and none

thereafter.


REPORTSAMPLE


LONG-TERM DISABILITY BENEFITS SUPPLEMENTAL

EMPLOYER CONTRIBUTIONS Employer pays full cost.

BENEFITS INSURED? Benefit is fully insured.

OVERALL DESCRIPTION OF PLAN FINANCING Financing for total permanent disability is through an insurance policy. Long-term disability is insured.



OTHER COMMENTS

Almost all companies that provide group term life also provide total permanent disability coverage, as it is

usually a rider to the basic group term life policy. They provide it in addition to statutory requirements.

If an occupational retirement plan is provided, the plan may include disability benefits equal to the accrued

retirement benefits, or the greater of the accrued retirement benefit and the insured benefit.

REPORTSAMPLE


5 MEDICAL BENEFITS

OVERVIEW




(LOCAL CURRENCY)

EMPLOYER


(% of base salary)

STATUTORY REQUIREMENT

No national health

insurance system exists,

and no statutory benefits

are available.

There is no contribution. The

government provides healthcare

services that include outpatient

and inpatient treatment at state-

appointed hospitals and clinics for

all residents.

There is no

contribution.

Government provides

healthcare services

that include

outpatient and

inpatient treatment.

–

SUPPLEMENTAL PROVISION, MEDICAL

99% of companies

provide outpatient clinical,

92% provide specialist,

99% provide hospital, and

surgical benefits; 36%

provide major medical

benefits.

Employers typically pay 100% of

employee coverage cost. They

typically share the cost of

dependant benefits between

employee and employer.

Typically not required

for employee

coverage; cost of

dependant benefits

typically shared

between employee

and employer.

REPORTSAMPLE


SUPPLEMENTAL PROVISION, DENTAL

89% of all companies. A majority of employers cover

employees up to annual median

MYR250 (per employee) or

MYR400, including dependants.

None.

SUPPLEMENTAL PROVISION, VISION

47% of all companies. Typically bundled with dental

benefits when provided at a

combined annual limit of MYR500

per employee or MYR2,200 per

family.

None.



HR AREA EFFECTIVE


HEALTH

Various In light of rising inpatient and outpatient treatment costs, the

government launched the 1Malaysia clinic and received an

overwhelming response; it has impacted local communities by

reducing treatment cost and facilitating healthcare access to

treatment. Following the Budget 2013 announcement, the

government will allocate MYR20 million for an additional 70

new 1Malaysia clinics in 2013. These clinics will now provide

blood test services, which include cholesterol and glucose

tests as well as urine tests. MYR100 million will be allocated to

upgrade 350 clinics nationwide. The government also placed

emphasis on heath as the essence to well-being. With that,

SOCSO will allocate MYR200 million to enable its 1.4 million

members to undertake free health screening in government

hospitals or SOCSO's panel clinics to detect non-

communicable diseases.

None.

REPORTSAMPLE


TRENDS




MEDICAL BENEFITS

ELIGIBILITY All citizens and residents are eligible.

CONDITIONS FOR RECEIVING BENEFITS There are no conditions.


No national health insurance system exists, and no statutory benefits are available. But the government

provides healthcare services that include outpatient and inpatient treatment at state-appointed hospitals and

clinics for all residents. The services are available at a nominal cost or free of charge for disadvantaged

groups such as the poor, pensioners, and elderly. Prescription charges are MYR1 per prescription

regardless of actual cost (only in government hospitals), and accommodation and medical services in such

establishments are limited.

EPF members have the option to withdraw their Account 2 savings under the Medical Withdrawal Scheme to

meet the cost of treating critical illnesses suffered by the member or spouse/children/parents/siblings. This

type of withdrawal is permissible if the employer does not fully cover the member’s medical costs. The

amount that can be withdrawn is the actual medical costs not covered by the employer or savings in Account

2, whichever is less.

SOCSO also covers medical costs resulting from employment-related injury/accident, as described under

“Short-term disability benefits” and “Long-term disability benefits.”

WORK-RELATED BENEFITS Not applicable.

DEPENDANT COVERAGE Members may withdraw EPF Account 2 savings under the Medical Withdrawal Scheme to meet

REPORTSAMPLE


health/medical care costs of spouse/children/parents/siblings.


EMPLOYER CONTRIBUTIONS There is no contribution.


REASONS WHY COMPANIES NEED TO SUPPLEMENT STATUTORY REQUIREMENTS Although there is good quality care, access to state facilities is limited, and private hospitals are becoming costly. Companies have implemented plans to help provide

access to medical care at more reasonable prices.

TYPICAL SUPPLEMENTARY BENEFITS ARRANGEMENT PROVIDED BY COMPANIES Benefits include outpatient services (clinical and specialist), hospitalisation and surgical benefits, ambulance services, prescription drugs, and dental.

MEDICAL BENEFITS SUPPLEMENTAL

PREVALENCE

Nearly all (99%) companies provide for outpatient clinical, 93% provide specialist, 99% provide

hospital and surgical benefits, and 36% provide for major medical benefits (Source: Mercer’s

Malaysia Benefits Survey, 2015).


ELIGIBILITY All employees are eligible. Companies typically set up more than one plan to provide different

benefit levels to different employee categories.


CONDITIONS FOR RECEIVING BENEFITS It applies to full-time employees.


Private medical plans usually cover outpatient care and hospitalised medical care. Outpatient

care typically includes doctor fees, hospital diagnostic tests, and prescription medicines.

Inpatient care typically includes hospital accommodation (room and board and ICU), operating

theatre, hospital supplies, and surgical fees.

REPORTSAMPLE


MEDICAL BENEFITS SUPPLEMENTAL

Companies provide extra benefits depending on employee categories, adding physiotherapy,

medical aid, preventive care and wellness, and ambulance fees. 89% of companies provide

annual dental benefits up to (median) MYR250 (per employee) or MYR400 (including

dependants); 47% also provide vision care coverage, typically bundled with dental benefits

when provided at a combined annual limit of MYR500 per employee or MYR2,200 per family.

DEPENDANT COVERAGE Employers usually provide dependant coverage.

COINSURANCE / CO-PAYMENT Co-payment is not typically practiced. When it is, the usual rate is 10% of claims.

INDIVIDUAL/FAMILY DEDUCTIBLES Usually, there is no deductible.

ANNUAL/LIFETIME MAXIMUM Outpatient treatment typically has an annual cap of MYR2,500 per family (including clinical and

specialist visits).

EXCLUSIONS Employers typically do not provide maternity benefits.

EMPLOYEE CONTRIBUTIONS Typically, there is no contribution from employee.

EMPLOYER CONTRIBUTIONS Employers typically pay 100% of employee coverage cost. They typically share the cost of

dependent benefits between employee and employer.

BENEFITS INSURED Typically, only hospital, surgical, and major medical are fully insured.

OVERALL DESCRIPTION OF PLAN FINANCING

Group insurance contracts commonly provide hospitalisation benefits. Outpatient clinical

benefits and dental benefits are usually self-insured. There are also health maintenance

organisations.


TAXATION OF BENEFITS There is no taxation.

REPORTSAMPLE



HR AREA EFFECTIVE



TRENDS




MATERNITY

ELIGIBILITY A female employee who is employed for not less than 90 days in the nine months immediately preceding

confinement is eligible for maternity benefits.


Every female employee has a right to maternity leave and full pay for at least 60 consecutive days for the

first five surviving births. Maternity leave typically does not start earlier than 30 days immediately preceding

the confinement or later than the day immediately following confinement. But if the registered medical

practitioner appointed by the employer certifies that the employee cannot perform her duties satisfactorily,

the employee may start maternity leave at any time during the 14 days preceding the confinement date.

MALAYSIA — MATERNITY / PATERNITY / PARENTAL BENEFITS

6 MATERNITY / PATERNITY / PARENTAL BENEFITS

REPORTSAMPLE


PATERNITY

BENEFITS DESCRIPTION There are no specific Employment Act provisions for paternity leave; an employee is only entitled to paternity

leave if the employment contract, employee handbook, or collective agreement specifically provides for it.

PARENTAL

BENEFITS DESCRIPTION There are no specific EA provisions for parental leave; an employee is only entitled to parental leave if the

employment contract, employee handbook, or collective agreement specifically provides for it.

FAMILY ALLOWANCES


The family of the deceased employee, who had contributed to the SOCSO fund, if eligible, may receive a

monthly allowance. If the children are orphans, depending on age and marital status, they may receive an

allowance if they are currently in school or pursuing tertiary education until the completion of their schooling

or tertiary education

REPORTSAMPLE



REASONS WHY COMPANIES NEED TO SUPPLEMENT STATUTORY REQUIREMENTS Not available.

TYPICAL SUPPLEMENTARY BENEFITS ARRANGEMENT PROVIDED BY COMPANIES Not available.

MATERNITY LEAVE SUPPLEMENTAL

PREVALENCE Not available.

PATERNITY LEAVE SUPPLEMENTAL

PREVALENCE

It is common practice to provide one-to-two paid days for paternity leave. There are no specific

EA provisions for paternity leave; an employee is only entitled to paternity leave if the

employment contract, employee handbook, or collective agreement specifically provides for it.

PARENTAL LEAVE SUPPLEMENTAL

PREVALENCE

There are no specific EA provisions for parental leave; an employee is only entitled to parental

leave if the employment contract, employee handbook, or collective agreement specifically

provides for it.

REPORTSAMPLE


7 SOCIAL BENEFITS

OVERVIEW


(LOCAL CURRENCY)

EMPLOYER


(% of base salary)

UNEMPLOYMENT There is no provision

for entitlement to

unemployment

benefits.




TRENDS



UNEMPLOYMENT

BENEFITS DESCRIPTION There is no provision for entitlement to unemployment benefits. Malaysia currently does not have

unemployment benefits.

REPORTSAMPLE


8 PERQUISITES & ALLOWANCES

OVERVIEW

CAR & TRANSPORTATION BENEFITS

Typical practice is to provide allowance in lieu of company cars to management and executives. If a car is

provided, models range from 2,000 cc engines for management (driver not provided) to 2,200 cc engines for

executives (driver provided).

For companies providing car allowances in lieu of a company car, monthly amounts vary by employee

categories, typically:

Management (nonsales): MYR1,135 to MYR2,000.

Management (sales): MYR1,500 to MYR2,000.

Top management executives (nonsales): MYR3,000 to MYR3,500.

Top management executives (sales): MYR3,000

It is common to include petrol, insurance, maintenance costs and road tax in the car allowance. Parking and

toll is usually covered in addition to allowance.

Car loans are not typically provided. However, when provided, the median value for the interest subsidy is

3.5% per year. The loan amount varies:

MYR70,000 for top management.

MYR60,000 for management.

MYR50,000 for professionals.

MYR40,000 for staff.

Employers usually provide a mileage claim of MYR0.70 (median) per kilometre of business travel if

employees travel using their personal vehicle. Source: Mercer’s Malaysia Benefits Survey, 2015

HOUSING, COMPANY-PROVIDED OR

ALLOWANCES

Employers usually provide furnished accommodations to expatriates, local plus individuals (foreigners hired

and based in a host country on a local package), or those who relocate domestically. But there are

companies that provide home purchase loans to employees, limited to (median) MYR250,000 and charged

at 4.5% interest.

REPORTSAMPLE


9 FLEXIBLE BENEFITS PROGRAMME

OVERVIEW

PREVALENCE Not common.

BENEFITS TYPICALLY INCLUDED Typical benefits are medical, additional group term life, personal accident, annual leave, dental and optical

expenses, maternity expenses, and vacation.

PROGRAMME STRUCTURE

Enrolment is usually on an annual basis. Employees can buy their choices of benefit programmes for a year

from available credits. A default plan is in place for employees who do not make elections. Changes to

elections are permissible at certain times of the year following pre-specified events (for example, change in

marital status and birth of a child). Any balance credits usually go into a flexible spending account for

purchasing other noncore flexible benefits.

REPORTSAMPLE


EMPLOYMENT CONDITIONS

1 SEVERANCE CONDIT IONS & T ERMINAT ION INDEMNIT IES

INDIVIDUAL TERMINATION

DEFINITION AND CONDITIONS OF FAIR AND UNFAIR TERMINATION

Termination of employment or dismissal of an employee must be for just cause. Essentially, it means there must be a sufficient and recognised reason to justify dismissal.

Accepted reasons include misconduct, poor performance, medical incapacity , and redundancy. Each case is reviewed individually to determine whether a particular

termination is fair or unfair. An employer must be in a position to justify that the termination is for a just cause or excus e, failing which the dismissal is viewed as unfair by

the Industrial Court.

Termination with just cause is broadly divided into the following categories:

Termination on grounds of non-performance.

Termination for gross misconduct.

Retrenchment/redundancy arising out of re-organisation, closures, or transfers of businesses.

Termination due to medical incapacity or breach of employment contract.

A dismissed employee has the option of bringing an action to the Industrial Court if the employee believes the dismissal was without just cause. But the employee must file

the action within 60 days from the date of dismissal, after which the claim cannot be entertained by relevant authorities. Once the reasons for dismissal are determined, the

Industrial Court must be satisfied that the worker did indeed commit the acts for which the worker was dismissed and determine whether dismissal was merited. In

REPORTSAMPLE


determining if the dismissal was with cause, the Industrial Court examines the reasons provided and whether the action taken was i n proportion to the gravity of the

misconduct.

COMPANY NOTICE PERIOD

The Employment Act (EA) generally covers employees who earn monthly wages of MYR2,000 and below, as of 1 April 2012, and this is still in effect in 2016. The EA also

applies to the following employees, even though their monthly salary may exceed MYR2,000:

Employees engaged as manual labour.

Employees who supervise manual labour.

Employees engaged in the operation or maintenance of any mechanically propelled vehicle operated for the transport of passengers or goods for reward or commercial

purposes (drivers).

Domestic servants.

The EA provides that the notice period follows the notice period in the employment contract. In the absence of such a provision, the required notice period per the EA is:

Four weeks’ notice if the employee is employed less than two years on the date the notice is given .

Six weeks’ notice if the employee is employed two years or more, but less than five years on the date the notice is given.

Eight weeks’ notice if the employee is employed five years or more on the date the notice is given.

Notice must be in writing, and the day the notice is given is included in the notice period. Probationers also come within the EA’s purview, although the category is not

expressly defined in the EA.

There is no statutory notice period for employees outside the EA’s purview. A notice period in such a situation depends on the employment contract terms.

EMPLOYEE NOTICE PERIOD The required employee notice period as per the EA is:

Four weeks’ notice if the employee is employed less than two years on the date the notice is given .

Six weeks’ notice if the employee is employed two years or more, but less than five years on the date the notice is given.

Eight weeks’ notice if the employee is employed for five years or more on the date the notice is given .

There is no statutory notice period for employees outside the EA’s purview. The notice period in such a situation depends on the employment contract.

REPORTSAMPLE


BENEFITS PAID ON VOLUNTARY RESIGNATION If an employee voluntarily resigns, there is no legal obligation on the employer’s part to pay any form of payment unless stipulated in the employment contract or collective

agreement.

DESCRIPTION OF FINANCING There is no advance financing. Benefits are payable when required from company assets.

COLLECTIVE DISMISSAL

DEFINITION AND CONDITIONS OF REDUNDANCY AND RETRENCHMENT The employer retains the prerogative to restructure its business. The courts are generally reluctant to interfere in such an exercise as long as it is conducted in a bona fide

manner.

A company undertaking a restructuring exercise might have to retrench some or all employees for various reasons:

Need for fewer people to do the job.

Redundancy of some employees.

Downsizing.

Termination due to closure or transfer of business.

The court has found these reasons to be justifiable grounds for termination/retrenchment as they concern a business decision.

Generally, to justify a retrenchment exercise, the employer must establish the following:

There must be a valid basis to justify the reorganisation, such as business losses, reduced profits , and increased costs.

The re-organisation resulted in a redundancy or surplus of employees.

The employer carried out the selection process of redundant employees in accordance with accepted industrial principles and practices, such as “last in, first out .”

The retrenchment is conducted in accordance with guidelines stipulated under the Code of Conduct for Industrial Harmony.

The Code of Conduct for Industrial Harmony recommends that prior to a retrenchment exercise, the employer should, in consultation with employees’ representative, trade

union, and Ministry of Labour, take positive steps to avert or minimise reductions of the workforce by adopting appropriate measures, such as a limitation on recruitment,

restriction of overtime work, restriction of work on weekly day of rest, reduction in the number of shifts or days worked in a week, reduction in the number of hours of work,

or retraining or transfer to another department. Although the Code has no legal force, a blatant refusal to follow the code may result in the court viewing the retrenchment

as unfair.

COMPANY NOTICE PERIOD The notice applicable in such a situation is the same as that under “Company notice period” for individual termination.

REPORTSAMPLE


2 W ORKING T IME

WORKING HOURS

An employer cannot require an employee under the contract of service to work:

More than five consecutive hours without a break of at least 30 minutes.

More than eight hours in a day.

More than 10 hours over the course of a single day.

More than 48 hours in a week.

For work that is continuous in nature, it can be eight consecutive hours with a paid rest period not less than 45 minutes. There are provisions for exceptions by the nature

and environment of the work.

Generally, working hours are:

Monday to Friday: 08:30 to 17:30 (a five-day week).

Monday to Saturday: 09:00 to 17:00; Saturdays from 09:00 to 13:00 (a five-and-a-half-day week).

OVERTIME

Hours in excess of normal work time constitute overtime, which is limited to a maximum of 104 hours in any single month.

Employees employed on a monthly rate who work in excess of normal working hours receive pay as follows:

Overtime work on a rest day: Two times the employee’s hourly rate.

Overtime work on public holidays: Three times the employee’s hourly rate.

NIGHT WORK

Employees cannot work more than 12 hours in any one day. The law prohibits female employees from working in any industrial or agricultural sites between 22:00 (night)

and 05:00 (morning), unless exemption is obtained under regulation 2 of the Employment (Employment of Women) (Shift Workers) Regulations 1970. One of the conditions

to obtain the exemption is to ensure that no female employee starts work without having had 11 consecutive hours free from such work.

REST PERIODS

An employee has a right to a break of at least 30 minutes after five consecutive hours of work. The general practice is usually one hour from 13:00 to 14:00, or 12:30 to

13:30.

REPORTSAMPLE


An employee also has a right to a single day of rest per week, which is usually Sunday.

ANNUAL VACATION & LEAVE

MANDATORY VACATION ENTITLEMENT An employee under the purview of EA has a right to annual leave:

Eight days for every 12 months’ continuous service with the same employer for less than two years .

12 days for every 12 months’ continuous service with the same employer for two years or more, but less than five years.

16 days for every 12 months’ continuous service with the same employer for five years or more.

For employees not governed under the EA, it is prudent for the employer to provide annual leave entitlement not less than that provided under the EA.

SUPPLEMENTAL VACATION PROVIDED

Companies do not have an obligation to supplement statutory requirements. If a company would like to supplement the statutory requirements, the employer needs to

specifically state that in the contract of service.

OPTIONS FOR CARRY-FORWARD OF UNUSED VACATION DAYS The EA provides that an employee shall take such leave no later than 12 months after the end of every 12 months’ continuous s ervice. An employee who fails to take the

vacation entitlement within the one year loses entitlement to it once that one year is up, unless the failure to use the leave was at the employer’s request.

For those employees not governed under the EA, their employment contract needs to state whether they are entitled to carry forward unused vacation days.

OPTIONS FOR PAY-OUT IN CASH OF UNUSED VACATION DAYS The EA provides that an employee has a right to payment in lieu of such annual leave if, at the employer’s request, the employee agrees in writing not to use any or all the

annual leave entitlement.

For those employees not governed under the EA, their employment contract needs to state whether they will be paid for unused annual leave entitlement.

LEAVE PASSAGE Sections 13(1)(b)(ii)(A) and (B) of the Income Tax Act 1967 provides that a leave passage given to employees as a benefit is exempt from tax, as follows:

(A) Leave passages including meals and accommodation for travel in Malaysia not exceeding three times in any calendar year.

(B) One leave passage for travel between Malaysia and any place outside Malaysia in any calendar year, limited to a maximum MYR3,000.

REPORTSAMPLE


MANDATORY PUBLIC HOLIDAYS’ ENTITLEMENT Under the EA, an employee is entitled to the following public holidays in a calendar year:

11 gazetted public holidays, five of which shall be:

National Day.

Birthday of the Malaysia King.

Birthday of the state ruler or head of a state.

Workers’ Day.

Malaysia Day.

Any day declared as a public holiday under section 8 of the Holidays Act 1951.

The gazetted public holidays are:

PUBLIC HOLIDAY 2016 2017

New Year’s Day 1 January 1 January****

Milad un Nabi (Birth of the Prophet Muhammad)* 12 December Not available

Federal Territory Day*** 1 February 1 February

Chinese New Year** 8,9 February 28, 29 January****

Labour Day 1 May**** 1 May

Wesak Day (Buddha's Birthday) 21 May**** Not available

King's Birthday 4 June**** 3 June****

Hari Raya Puasa (End of Ramadan) 6 July Not available

Merdeka Day (National Day) 31 August 31 August

Hari Raya Qurban (Feast of Sacrifice) 12 September 2 September****

Awal Muharram (Islamic New Year) 2 October**** 22 September

Deepavali (Festival of Lights)

29 October Not available

Christmas Day 25 December**** 25 December

REPORTSAMPLE


3 CONDIT IONS OF ENT RY & RESIDENCE

CONDITIONS OF ENTRY

The government allows entry for social or limited business purposes for 14 days up to 90 days for citizens of almost all countries except Israel. Generally, visitors who are

not prohibited immigrants only require a passport, an internationally recognised travel document, or a document in lieu of a passport valid for six months beyond entry, as

well as proof of return travel tickets and sufficient funds.

Those with passports or travel documents not recognised by the government must apply for a document in lieu of a passport and a visa issued by Malaysian consulates

abroad. A foreigner who does not have a passport or travel documents recognised by Malaysia may verify with a Malaysian consulate abroad for their authenticity.

Examples of travel documents are a Certificate of Identity, Laisser Passer, Permanent Residence Certificate, and Titre de Voyage. One can apply for a document in lieu of

a passport at any Malaysian representative office abroad.

In general:

Nationals of certain countries do not require a visa to enter for social/limited business visits if such visits do not exceed three months: Argentina (visa with reference),

Albania, Australia, Algeria, Austria, Bahrain, Belgium, Bosnia and Herzegovina, Brazil, Croatia, Cuba, the Czech Republic, Denmark, Egypt, Finland, France, Germany,

Hungary, Iran, Iceland, Ireland, Italy, Japan, Jordan, Kyrgyzstan, Kuwait, Lebanon, Liechtenstein, Luxembourg, Morocco, Netherlands, Norway, Oman, Peru, Poland,

Qatar, Romania, Saudi Arabia, Slovakia, South Korea, Spain, St. Marino, Sweden, Switzerland, Syria, Turkmenistan, Tunisia, Turkey, United Arab Emirates, United

Kingdom, Uruguay, and Yemen (including North Yemen).

Nationals of certain countries require a visa to enter for social/limited business visits exceeding one month: Armenia, Azerbaijan, Barbados, Belarus, Benin, Bolivia,

Bulgaria, Cambodia, Cape Verde, Chad, Chile, Costa Rica, Ecuador, El Salvador, Estonia, Gabon, Georgia, Greece, Guatemala, Guinea Republic, Haiti, Honduras,

Hong Kong SAR, Iraq, Kazakhstan, Latvia, Lithuania, Macau SAR, Macedonia, Madagascar, Mauritania, Mexico, Moldova, Monaco, Mongolia, Nicaragua, North Korea,

North Yemen, Palestine, Panama, Paraguay, Portugal, Russia, Sao Tome and Principe, Senegal, Slovenia, Somalia, Sudan, Surinam, Tajikistan, Togo, Ukraine, Upper

Volta, Vatican City, Uzbekistan, Venezuela, Zaire, and Zimbabwe.

Nationals of certain countries that require a visa for visits exceeding 14 days for social/limited business visits are: Libya, Macao (Travel Permit/Portugal CI), Sierra

Leone, and South Yemen.

Nationals of the US do not require a visa to enter for social, limited business, or academic visits (except for employment).

Commonwealth citizens (except Bangladesh, Cameroon, Ghana, Mozambique, Nigeria, Pakistan, and Sri Lanka) do not need a visa to enter. But social/limited business

visits longer than three months may require a visa.

REPORTSAMPLE


A Short-Term Visit Pass (Social) may be issued at the point of entry, if the person is not a prohibited immigrant and has a valid passport and confirmed ticket home or a

visa and ticket to a third country (where applicable).

All foreigners wishing to study or work in Malaysia must generally first obtain the necessary approval of Student’s Pass application, Employment Pass application, or Visit

Pass (Professional) application, in addition to the visa application for entry , where necessary.

In general, foreigners wishing to reside permanently must live in Malaysia for a minimum of three years under a valid Pass before applying for permanent residency. The

Entry Permit is issued to foreigners who are entering to reside in Malaysia with the intention to acquire permanent residency. The application of an Entry Permit is eligible

only for certain categories, such as those who possess professional qualifications , experts, or investors with a minimum of USD2 million — or is a spouse or dependant of

such persons. Approval of the application is given at the government’s discretion.

EMPLOYMENT OF EXPATRIATES

Foreigners wishing to work in Malaysia must apply for one of the following:

Professional Visit Pass, issued to professionals and experts, artists performing in the entertainment business , or religious missionaries.

Employment Pass, issued to any person who holds a key post, executive post, or nonexecutive Post (expatriates).

Apart from expatriate professionals, there has been a growing trend to hire foreign semi-skilled and unskilled workers:

These workers are limited to nationals from Bangladesh, Cambodia, India (restricted to construction [high-tension cable only], services [goldsmith, wholesale/ retail,

restaurant-cook only, metal/scrap materials and recycling, textiles, and barbers], agriculture and plantation sectors only), Indonesia, Kazakhstan, Laos, Myanmar,

Nepal, Pakistan (male only),Philippines, Sri Lanka, Thailand, Turkmenistan, Uzbekistan, and Vietnam.

They can only work in industries such as plantations, construction, manufacturing (except male Indonesian workers), services resort islands, cleaning and sanitation,

restaurant (cooks only), agriculture, and domestic helpers.

Any employer that wishes to hire foreign and unskilled workers must first use the services of the Job Clearing System (JCS)/Jobs Malaysia to show efforts of hiring

locally. Subsequently, an application to the One-Stop Centre of the Ministry of Home Affairs is made to obtain the quota for allotted number of foreign workers. The

employer must then submit an application for a Visa with Reference (VDR) to the nearest State Immigration Office. After passing the Foreign Workers’ Medical

Examination Monitoring Agency (FOMEMA), foreign workers will be issued a Visit Pass (Temporary Employment).

The employer is fully responsible for all payments associated with deposits, visas, and foreign workers’ levy passes for obtaining relevant passes from the Immigration

Department. Effective 30 January 2013, employers now have the option to charge foreign workers for the cost of levy payments. When applying for a Temporary Visit

Pass, employers must pay a personal bond of MYR250–MYR1,500 per year, depending on the foreign worker’s country of origin and a MYR 125 processing fee.

For domestic help, the employer’s monthly income must be at least MYR3,000 to qualify for employing Cambodian, Indonesian, Laos, Vietnam, or Thai domestic

helpers, or have a minimum monthly income of MYR5,000 to qualify for employing an Indian, Philippine, or Sri Lankan domestic helper.

New applications for a Temporary Visit Pass or pass for a foreign maid take one to two months to be approved; other sectors take about the same time.

REPORTSAMPLE


4 CONT RACT OF EMPLOYMENT

GENERAL CHARACTERISTICS

Although EA covers only employees within its umbrella of protection (those earning MYR2,000 per month or less or engaged in manual labour), it is also a reference for

employment contracts of all other employees.

An employment contract need not be in writing to be binding. But if special terms are agreed to (for example, a trial period), it is advisable to document the agreement in

writing. It is usual practice to provide all employees with employment letters outlining the employment terms.

The EA provides special protection for female employees:

No female may work in any industrial or agricultural facility between 22:00 and

05:00, or start work for the day, without having 11 consecutive hours free from

such work.

No female may work between 22:00 and 01:00 in public service vehicles, or

start work for the day, without having 11 consecutive hours free from such

work.

Women have a right to 60 days’ maternity leave for each confinement, limited

to a maximum of five surviving children.

The employer cannot dismiss a female employee who remains absent after the

end of maternity leave due to illness arising from pregnancy, up to 90 days

after the end of maternity leave.

Women cannot work underground.

Applications for exceptions to the first and second situations must go in writing to the Director General or Minister of Human Resources.

EMPLOYMENT OF YOUNG PERSONS AND MINORS IN WEST MALAYSIA YOUNG PERSON

A young person, under the Children and Young Persons (Employment) Act 1966 (Revised 1998), is a person who has completed the 15th

, but not the 18th

, year.

The law generally prohibits employment of young persons, except in certain industries specified in Section 2(3) of the Children and Young Persons (Employment) Act 1966

(Revised 1998). The act generally prohibits any minor or young person from being employed in any hazardous work or employment other than those specified in the act.

The act provides that a young person may be engaged in employment:

Involving light work suitable to their capacity (whether or not the undertaking is

carried out by the family).

In any public entertainment, in accordance with the terms and conditions of a

licence granted in that behalf under the act.

Requiring them to perform work approved or sponsored by the federal or state

government and carried on in any school, training institution, or training vessel.

As an apprentice under a written apprenticeship contract approved by the

Director General with whom a copy is filed.

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TYPES OF CONTRACTS

PART-TIMERS The statutory protection under the EA extends to part-time employees. Part-time employees are persons included in the EA’s first schedule, whose average hours of work

do not exceed 70% of the normal hours of work of a full-time employee engaged in a similar capacity in the same enterprise. The Employment (Part -Time Employees)

Regulations 2010 provide that a part-time employee has a right to overtime pay, paid holidays, paid annual leave, paid maternity leave, and a rest day.

WHITE-COLLAR WORKERS There are no specific provisions relating to white-collar workers.

BLUE-COLLAR WORKERS There are no specific provisions relating to blue-collar workers. Most blue-collar workers come within the purview of the EA.

DURATION

An employment contract can be for a definite or indefinite period. If it is for a specified period, it is deemed to be terminated when such contract expires under the EA or

contract.

FIXED-TERM CONTRACTS Fixed-term contracts are contracts that run for a period or for performance of a specific job. An employee on a fixed-term contract may receive different employee benefits

from those on indefinite contracts. Wages should be payable no later than the day on which the contract of service terminates.

TRIAL PERIOD

The employment contract may specify a probation period. It is typically three-to-six months for nonexecutives and six-to-12 months for executives, and may be extended if

necessary.

INVALID CONTRACTS

Individual employment contracts are subject to relevant laws. When a term in the employment contract violates any written law or is against any public policy, the term is

void and unenforceable.

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OBLIGATIONS OF THE PARTIES

EMPLOYER OBLIGATIONS The employer has an obligation to:

Pay the employee in full and on time. Under the EA, an employer is required to pay salary not later than the 7th

day after the last day of any salary period.

Supervise the employee’s work in accordance with the employment contract terms.

Comply with the implied term of mutual trust and confidence, which requires the employer to not act in any manner to harm the employment relationship.

Ensure and provide a safe system of work at the workplace for its employees.

EMPLOYEE OBLIGATIONS

The employee has an obligation to:

Perform, personally, the work for the employer in a diligent and faithful manner.

Comply with the implied term of mutual trust and confidence, which requires the employee to not act in any manner to harm the employment relationship.

MINIMUM WAGE

Malaysia has implemented national minimum wage legislation. Under the Minimum Wages Order 2012, the minimum wage rates payable to employees are:

MONTHLY RATE HOURLY RATE

Peninsular Malaysia MYR900 (RM1,000, as of

1 July 2016)

MYR4.33

Sabah, Sarawak & Labuan MYR800 (RM920, as of 1

July 2016)

MYR3.85

There are two significant dates on the implementation of the minimum wages:

Effective 1 January 2012, the Minimum Wages Order came into force to apply to (i) an employer who employs more than five employees; and (ii) regardless of the

number of employees employed, an employer who carries out a professional activity classified under the Malaysia Standard Classification of Occupations (MASCO) as

published officially by the Ministry of Human Resources.

Effective 1 July 2013, the order applies to an employer that employs five employees or less.

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DATA PROTECTION PERSONAL DATA PROTECTION ACT 2010

Employee data privacy is regulated under the Personal Data Protection Act 2010 (PDPA), which came into force on 15 November 2013. The PDPA was enacted to

regulate the processing of personal data in commercial transactions. The PDPA widely defines “commercial transactions” to cover service contracts, which would include

employment contracts.

Personal data is comprised of normal personal data and sensitive personal data. Personal data essentially refers to any data related to an identifiable individual. Sensitive

personal data includes information on health, religious beliefs, commission, or alleged commission of any offence.

EMPLOYER’S OBLIGATIONS UNDER THE PDPA An employer in Malaysia is required to comply with the 7 Data Protection Principles:

1. General Principle: This principle requires an employer to generally obtain the consent of the employees in the course of data processing and prohibits the excessive

collection of personal data.

2. Notice and Choice Principle: This principle requires an employer to issue a written notice to employees to inform them of several mandatory matters, such as the

purpose of data collection, sources of personal data, consequences of not providing such data, employee’s right of request, and the class of third parties to which data

will be disclosed.

3. Disclosure Principle: This principle prohibits disclose of data to any third party without the employee’s consent. If the collection of employee data is used for other

purposes, the employer is obliged to go back to the employee for fresh consent for the new purpose.

4. Security Principle: This principle obliges the employer to ensure that all employee data is securely kept .

5. Retention Principle: This principle prohibits the retention of data without any time limit. Employers are no longer allowed to keep employee data longer than necessary

for fulfilment of the employment, unless required or permitted by law.

6. Data Integrity Principle: This principle mandates the employer to ensure that employee data is accurate, not misleading, and kept up to date.

7. Access Principle: This principle mandates the employer to provide employees with the right of access to their respective personal data.

A failure to comply with any of the above principles is an offence under the PDPA; upon conviction, it would make the employer liable to a fine up to MYR300,000 or

imprisonment up to two years, or to both.

REGISTRATION REQUIREMENTS The PDPA introduced a compulsory registration requirement for certain industries such as banking and financial institutions, housing developers, communications ,

insurance, healthcare, tourism and hospitality, transportation, education, direct selling, service industry (legal, accounting, engineering, architecture, audit, supermarkets

and hypermarkets, and utilities).

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5 OCCUPAT IONAL HEALT H & SAFET Y

MEASURES OF OCCUPATIONAL HEALTH AND SAFETY

The principal legislation that deals with employment health and safety is the Occupation Safety and Health Act 1994 (OSHA). OS HA imposes a statutory duty upon all employers to ensure, so far as practicable, the safety, health, and welfare at work of all employees. Such duty extends to the following specific duties:

Provide and maintain plans, facilities, and systems of work that are safe and without risks to health.

Make arrangements for ensuring safety and absence of risk to health in connection with the use, operation, storage, and transport of plant and substances.

Provide training and supervision to ensure safety and health at work.

Formulate safety and health policies.

Maintain any place of work that is within the control of the employer or self-employed persons, and provide a safe access and exit from it.

Employers with more than 40 employees must establish workplace safety and health committees. Companies with fewer than 40 employees may also have a requirement

to do so if directed by the Director General of OSHA.

The committee must ensure the safety and health of all individuals at the workplace, and is also responsible for investigating any matter pertaining to industrial accidents or

breaches of safety and health regulations. A failure to comply with the OSHA obligation attracts a legal penalty, whereby an employer, on conviction in court , would be

liable for a fine not exceeding MYR50,000 or an imprisonment term not exceeding two years or both.

WOMEN

There are provisions prohibiting employment of a female employee in any underground work, and in any industrial or agricultural undertaking between 22:00 and 05:00.

The Director General may exempt, in writing, any female employee or class of female employees from this restriction, subject to conditions the director may im pose.

RULES AND IMPLEMENTATION

OSHA:

Provides policies and guidelines for the general duties of employers, employees, the National Council for Occupational Safety and Health, and the Safety and Health

Organisation.

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6 INDUST RIAL RELAT IONS Two main acts govern industrial relations:

Industrial Relations Act, 1967 (IRA).

Industrial Relations Regulations, 2009.

The Trade Unions Act 1959 and the Employment Act 1955 are also applicable. The IRA regulates relations between employers, workers, and trade unions, and the

prevention and settlement of differences or disputes.

SOCIAL PARTNERS

EMPLOYER ORGANISATIONS The Malaysian Employers Federation (MEF) is the central representative organisation for employers. Its objectives are to:

Be part of the joint consultative council with the Ministry of Human Resources and the Workmen’s Union to influence policies on industrial and employment matters.

Advise and represent its members in disputes.

Provide advisory and development services to its members.

TRADE UNIONS

The Malaysian Trade Union Congress represents the general interests of all employee trade unions. Its affiliates comprise the national industry unions such as:

Congress of Unions of Employees in the Public and Civil Services

(CUEPACS).

Electrical Industry Workers’ Union (EIWU).

National Union of Bank Employees (NUBE).

National Union of Commercial Workers (NUCW).

National Union of Plantation Workers (NUPW).

National Union of Teaching Professionals (NUTP).

Transport Workers’ Union (TWU).

The role of the unions has largely focused on:

Being part of the joint consultative team with the Ministry of Human Resources and the MEF, to influence policies on industrial and employment matters.

Advising and representing its members in disputes and collective bargaining.

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WORKS COUNCILS There are no binding guidelines for an in-house works council or in-house unions; in-house unions may be formed to forward their members’ views collectively.

COLLECTIVE AGREEMENTS

Under the Industrial Relations Act of 1967, only a collective agreement in writing, duly signed by the appropriate authorised personnel, duly deposited in court and

recognised by the Industrial Court under the IRA, is enforceable. A collective agreement generally has a three-year duration, but will continue until superseded by a new

collective agreement.

BARGAINING PROCEDURES If a trade union has been recognised by an employer, the union may invite the employer to start collective bargaining. The employer must respond to the invitation within 14

days. If the employer agrees to start collective bargaining, both parties must start bargaining within 30 days from receipt of the reply accepting the invitation.

If the employer fails to respond to the invitation or start collective bargaining within the 30 days, the party making the invitation may notify the Director General, in writing, to

request further action. The Director General then takes the necessary steps with a view to have the parties start collective bargaining without delay. If such steps fail, a

trade dispute exists, and the parties may ask the minister to refer the matter to the Industrial Court for adjudication.

INDUSTRIAL COURT For arbitrating over industrial disputes, the Industrial Court consists of:

A president appointed by the King.

A panel of employers and workers appointed by the minister.

Any awards met by the Industrial Court, which are disputed, may be referred to the High Court on a question of law under IRA Section 33A. The alternative is for the

aggrieved party to challenge the award by way of judicial review proceedings in the High Court.

INDUSTRIAL ACTION

STRIKES AND PICKETS Strike and pickets are industrial actions recognised by the IRA. But before such actions can be taken, the trade union must comply with procedural and substantive

requirements under the IRA and the Trade Unions Act 1959. Failure to comply renders the strike and pickets illegal.

The purpose of a strike generally must be in furtherance of a trade dispute. However, there are several circumstances under the IRA where strikes are expressly prohibited. No employee can go on strike in any of the following circumstances:

During the pendency of the proceedings of a Board of Inquiry appointed by the Minister under Part VIII of the IRA, involving such worker and employer, and seven days

after the conclusion of such proceedings.

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ABOUT THIS REPORT

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Mercer’s Data Mining & Insights (DM&I) team coordinates sources across all lines of Mercer’s business including Retirement, Health, and Talent, in each local market. Where

Mercer does not have a physical presence, the DM&I team works with local vendors to ensure an update is conducted. Over 150 subject matter experts are involved in this

update.

Mercer’s International Consulting Group then peer reviews the content as a final verification.

The 2016 edition includes information in the economic environment section: gross domestic product (GDP), inflation, and unemployment economic data for 2014, 2015, and

2016. Also provided are details of the composition of the total population, working age, and economically active groups. All population data presented as part of the economic

environment for each country are reported in thousands.

The exchange rate details in EUR and USD are as of May 2016.

R’S WORLDWIDE BENEFIT & EMPLOYMENT GUIDELINES (WBEG) IS DEVELOPED IN CONJUNCTION WITH MERCER’S LOCAL

COLLEAGUES TO ENSURE THAT CONTENT IS RELIABLE, ACCURATE, AND UP-TO-DATE.

METHODOLOGY

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GLOSSARY

TERMS AND DEFINITIONS

Accidental death and dismemberment (AD&D) coverage: Insurance protection that pays out upon the insured’s death, if death is the result of an accident. AD&D also

provides benefits for the accidental loss of hands, feet, sight, speech, or hearing.

Account-based pension: A defined contribution (DC) retirement account that is drawn down regularly for “pension payments.” The pension ceases when the account balance

runs out. The individual must draw down a mandatory minimum amount each year, depending on age.

Acquired rights: The legal notion that once an employer provides an employee with a benefit on a regular basis, there is a contractual agreement between the employer and

the employee to continue to provide that benefit.

Actuarial valuation: Valuation by an actuary to determine benefit liability and test future funding or current solvency of the value of the pension fund’s assets with its liabilities.

Beneficiary: A person or legal entity designated as the recipient of any benefits provided by life insurance and/or an accidental death and dismemberment plan or from a

benefactor.

Bereavement leave: Paid time off to which an employee is entitled for the death of a close relative. Book reserve plan: A retirement arrangement funded through allocations

on a company’s balance sheet.

Cap: (1) The total incentive opportunity a sales representative can earn in a given period. (2) A cap on other pay elements (for example, an expatriate allowance). Also known

as a maximum, lid or ceiling.

Childcare leave: Leave for female and male employees who take care of their child; it is provided after maternity leave.

Childcare support: The support provided by an organisation in various ways to look after dependant children.

Christmas bonus: The annual guaranteed bonus associated with Christmas.

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Claim: A demand to the insurer by, or on behalf of, the insured person for benefit payment under a policy. Although medical billing personnel process many claims, sometimes

the individual may need to make direct payments to the medical provider and be reimbursed by the policy.

Claims base: Actual incurred claims for the employee base during the previous two- or three-year period under the same benefits plan.

Claims fiduciary: A fee assessed to a client by the insurance company to take on a liability for them. A fiduciary relationship field exists when a self-funded client hires an

insurance firm to control its claims. The client uses the insurance company’s specialised skill of processing health insurance claims.

Claims review: Review of claims by government, medical foundations, professional standards review organisations (PSROs), insurers, or others responsible for payment to

determine liability and payment amount. The review may include determination of the claimant’s eligibility; of the provider’s eligibility so the benefit is covered; that the benefit is

not payable under another policy; and that the benefit was necessary and of reasonable cost and quality.

Claims sharing: A payment method that involves the employer and employee paying a set portion of the bill in terms of a percentage or a fixed amount.

Clothing allowance: The annual guaranteed cash allowance for uniform- or other dress-related expenses.

Club subscription: An annual subscription fee for golf club or equivalent membership.

Coefficient of determination: The proportion of variation in the dependent variable that can be attributed to the relationship with another variable or a combination of

variables. It has values between 0.0 and 1.0. For simple linear regression, it has a value equal to the square of the correlation coefficient.

Coinsurance: An arrangement under which the covered person pays a fixed percentage of the cost of medical care after the deductible has been paid. For example, an

insurance plan might pay 80% of the allowable charge, with the insured individual responsible for the remaining 20% (the coinsurance amount).

Collective bargaining agreement: An agreement between employee groups and employers that details work conditions, including work hours, vacation and holiday

entitlements, termination of service provisions, and sometimes benefit entitlements. These agreements may be specific to one company or industry or apply nationally.

Company car: A car provided to an employee on the basis of status, not job need. It is a benefit only for employees who can use company cars for private use on an ongoing

basis.

Compensation: Cash and non-cash remuneration provided by an employer to an employee for services rendered.

Compressed work week: An alternative work schedule, such as four 10-hour days or more complicated rotations that produces extended “weekends.”

Consumer price index (CPI): A statistical indicator of the cost of living published by an official government statistical agency, measuring the changes in prices of a fixed

market basket of goods and services purchased by a hypothetical family; it usually includes housing and education costs (except where education is mostly financed by the

government).

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GLOSSARY


Contracted salary: The salary stated in a labour contract.

Contributory plan: A group insurance plan issued to an employer under which both the employer and employee contribute to the plan’s cost.

Cost-of-living adjustment: An across-the-board wage and salary increase or supplemental payment designed to bring pay in line with increases in the cost of living to

maintain real purchasing power.

Covered wages: The amount of employee wages or salaries used to determine corresponding benefit amounts (for example, pension calculations are usually based on salary

and normally do not include variable compensation such as bonuses).

Critical illness coverage: Coverage that pays living benefits upon the diagnosis of a critical illness regardless of treatment, actual expenses, or other insurance coverage.

Death-in-service lump sum: A payment covering death due to any cause, which is provided to the spouse, registered civil partner, or family, depending on the country and

plan rules.

Death-in-service pension: A pension covering death due to any cause, typically as a provision of a defined benefit (DB) plan.

Post-retirement death is usually in the retirement plan value (built into the annuity factor). This pension, provided to the spouse or a registered civil partner, depends on the

country and plan rules. Actual payout may be as a pension or lump-sum equivalent.

Deductible: The amount of eligible expenses that must be incurred and paid by an insured member before benefits become payable. It is a special cost-containment measure,

wherein the claim is not payable up to a certain amount mentioned in the policy.

Defined benefit (DB) plan: A retirement plan where employee benefits are allocated based on a formula, using factors such as salary history and employment duration. It

does not specify the level or rate of employer contributions; contributions are determined actuarially on the basis of benefits expected to become payable. The plan promises

the participant a specific monthly benefit at retirement; the benefit may be accrued as a lump sum (one large payment converted to pension at retirement) or pension. There

may be additional employee contributions, depending on country-specific legislation and plan design. The employer makes contributions to fund future benefits, with risks

(investment, salary increases, inflation) transferred to the employer.

Defined contribution (DC) plan: A retirement plan where a certain amount or percentage of money is set aside each year by a company for the benefit of the employee. It

provides an individual account for each participant, with benefits based on the amount contributed into the plan, income, expenses, gains, and losses. The ultimate benefit is

the accumulated value of the contributions paid by both the employer and employee. A DC plan with benefit at retirement age is equal to the accumulated contribution plus

interest or a fixed formula benefit, whichever benefit is higher. At retirement, the employee converts collected funds into a life pension. The plan guarantees the contribution

amount (fixed amount or percentage of salary), not the benefit level (which is a function of the total contribution and rate of return on accumulated capital). The contribution

amount may vary depending on different factors (age, level, service), country-specific legislation, and plan construction. It transfers the risks (investment, inflation) to the

employee.

Dependant coverage: Coverage extended to the spouse and dependant children of the insured head of a family.

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GLOSSARY

GLOSSARY


Disablement: Inability to work due to a substantial physical, intellectual, or psychiatric impairment.

Earnings: Total wages or cash received during a specified period (for example, pay period, month, year) for time worked or service rendered, including all regular pay,

overtime, premium pay, bonuses, and so on.

Effective date: (1) The date on which a benefit plan or insurance policy takes effect, and from which time coverage is provided. (2) The date on which increases in salary or

pay rate take effect.

Eligibility for plan: The basis for determining the individuals or employee classes eligible to participate in a particular plan, such as an incentive or supplemental benefit plan.

The employer may base this eligibility on salary, job grade, organisation unit or function, or a number of other criteria.

Expatriate: An employee assigned to live and work outside the home or base country temporarily (usually for one-to-five years), other than for a short-term assignment or

permanent transfer. Also known as a foreign-service employee or international assignee.

Family (care) leave: Time off, either paid or unpaid, provided to employees (male or female) to care for their own serious medical condition or a seriously ill family member,

new baby, or adopted child. Family leave policies are usually broader than parental leave policies.

Flexible benefits: A programme where employees choose, within limits, the benefits provided by the employer. It follows the idea that individual employees have a better

understanding of their benefit needs than the employer does.

Flexible benefits component: A non-cash option to which employees can choose to allocate beforeand/or after-tax salary. Employees typically take these items as salary

sacrifices, which reduce taxable salary – and, hence, pay-as-you-go (PAYG) tax – as shown on the payment summary. Some items are subject to fringe benefit tax (FBT).

Gross Domestic Product (GDP): GDP is defined broadly as the output of goods and services produced by labour and property. GDP has five main components: private

consumption expenditure, fixed capital formation, increase in stocks, government consumption expenditure, and the net of exports of goods and services less imports of goods

and services. The GDP data in this report refers to percentage change over the previous year’s GDP, at a constant price.

Health insurance: A plan that covers or shares the expenses associated with healthcare. It covers expenses for sickness or injury, including insurance for losses from

accident, disability, medical expense, or accidental death and dismemberment (AD&D).

Holidays: Specific days when most employees do not work but are paid as if they did. Employees who work on such days typically receive premium pay or compensatory time

off. The number of paid holidays granted by employers varies considerably by industry and, to a lesser extent, by geographic region.

Hospitalisation coverage: Expenses on hospitalisation for a minimum period of 24 hours, which are admissible under a policy. This time limit does not apply to specific

treatments defined under day-care treatment in a hospital or nursing home.

Hybrid benefit plan: A mixture of defined benefit (DB) and defined contribution (DC) features in a single plan. Companies may provide DB plans to existing employees and

DC plans for new hires (in effect, two separate plans) under retirement benefits. Examples include:

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GLOSSARY


A DC plan that provides a guaranteed minimum DB payment upon retirement.

A DC plan with benefit at retirement age equal to accumulated contributions plus interest or a fixed formula benefit, whichever benefit is higher.

Inclusions: Benefits provided in a specific policy in addition to benefits offered in the policy coverage.

Inflation: Inflation figures refer to the average annual changes in the consumer price index (CPI), which may differ from end-of-year figures. The CPI is an economic factor

designed to measure changes over time in the price paid by households for the goods and services they normally purchase for consumption.

Inpatient: An individual admitted to a hospital as a registered bed patient for treatment by a physician for at least 24 hours.

Inpatient services: Services provided under the direction of a physician for at least 24 hours to an individual admitted to a hospital as a registered bed patient.

Instalment vesting: A characteristic of some retirement plans by which employees’ matching contributions are exercisable in a series of successive instalments. Vesting

occurs over a period, typically three-to-five years.

Integration of benefits: In the context of retirement plans, a coordination of plan benefits or contributions with social security. Integration allows more benefits or contributions

for higher-paid employees due to the fact that, once they retire, a smaller percentage of their pre-retirement earnings will be paid by social security.

Involuntary terminations: The number of employees dismissed by a company during the 12-month period of the most recently ended calendar year. It includes only full- or

part-time permanent staff; it does not include contract or casual staff.

Lockout: A temporary company shutdown by the employer, or a situation whereby the employer bans a number of employees from reaching their workplace, with the aim of

forcing employees and the union to abandon their claims and demands.

Long-term care (LT C): Assistance provided to employees or their family members who are unable to provide for themselves as the result of a disability or prolonged illness.

Unlike other healthcare benefits, LTC premiums can be payable from the employee’s cheque only on an after-tax basis, with the premium waived while the employee is

receiving benefits. The premiums increase with age. LTC involves custodial care given at home or in a nursing home for people with chronic disabilities and lengthy illnesses.

Long-term disability (LTD ) coverage: Coverage that protects employees from catastrophic illness or injury that permanently disables the employee from any kind of

employment. Benefits may take the form of a pension or lump sum.

Lump-sum payment: The delivery of a compensation element, such as a mobility premium, paid in one (or more) sum(s), as compared to a foreign-service premium, which is

typically paid on an ongoing basis throughout the assignment. Payment of more than one component of expatriate-related compensation without separate identification of the

components.

Mandatory practice: The benefits provided by social security or mandatory employer-sponsored plans.

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GLOSSARY


Mandatory termination indemnity: A lump-sum payment that must be made by the company (or that has been prefunded by the company, possibly through an outside

agency other than social security) when an employee retires.

Maternity and pre-/post-natal care: Preventive care programmes for female employees that provide health coaching and improve awareness for managing maternity and

labour.

Maternity benefit: The treatment taken in a hospital arising from, or traceable to, pregnancy and childbirth.

Maternity leave: A leave of absence for female employees before and after childbirth.

Meal allowance: An annual guaranteed cash allowance for subsidised meals or luncheon vouchers.

Median: The middle item in a set of ranked data points containing an odd number of items. When an even number of items are ranked, the median is the average of the two

middle items. Also known as the 50th percentile.

Medical insurance: Insurance that can cover costs of hospitalisation, outpatient, surgery, and others; it is a supplemental insurance in addition to statutory health insurance.

Normal retirement age (NRA): The age at which a person may first become entitled to full or unreduced benefits based on age.

Outpatient: A provision for coverage for employees’ outpatient visits to general practitioners (GPs) and specialists. An individual who receives healthcare services on an

outpatient basis and does not stay overnight in a hospital or inpatient facility. Services provided to an individual who is admitted to a hospital or clinic for treatment that does not

require an overnight stay.

Overtime pay: A payment for work outside ordinary work hours or for time worked in excess of standard hours during the reporting period.

Part-time employee: An employee who may be hired for jobs other than skilled or unskilled, manual or clerical, for any period as per the terms agreed between the parties.

Paternity leave: A leave of absence for male employees after childbirth.

Pay as you go (PAYG): A system whereby businesses and individuals can pay instalments of expected tax liability on income from employment, business or investment for

the current income year.

Pension: A sum of money paid as a series of regular payments to an individual as a retirement benefit.

Permanent employee: An employee engaged in work of a permanent nature likely to last for more than nine months and who should have satisfactorily completed a

probationary period of three or six months.

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GLOSSARY


Perquisite: A benefit or “perk” tied to a specific key or management level job (for example, a company car for personal use, free meals, financial counseling, or use of

company facilities). A perk’s status value often exceeds its financial value. It is an incident payment, privilege, or advantage over and above the regular income, salary or

wages.

Plan document: The document governing the benefit plan, and defining the benefits provided by the plan and the rules for administering it. It is a legal document, so the plan

terms are binding, and usually lengthy and difficult to read.

Point of origin: The city/country of primary residence in the expatriate’s home country prior to the assignment; the location to which the company agrees to return the

assignee for home leave and at repatriation.

Premium: (1) The extra pay, beyond the base wage rate for work performed outside or beyond regularly scheduled work periods (for example, Sundays, holidays, weekends,

night shifts). Also known as a differential. (2) The extra pay for high-demand knowledge or skills. Also known as a differential. (3) In an international context, an incentive paid

to expatriates for undertaking a foreign assignment; it is typically 10%–20% of base pay and continues month to month for as long as an employee is an expatriate. (4) In a

benefits context, the amount paid to a health plan or insurance company by an employer or beneficiary for health insurance coverage; it can be a flat monthly or quarterly fee.

Probation period: An evaluation period for newly hired employees. It is usually the first three or six months of employment (as per company policy), during which an

employment contract can be terminated by either party with prior notice.

Probationary contract: A contract for employees provisionally hired to fill a permanent vacancy and who have not completed a probationary period of three months.

Provident fund: A fund that pays benefits to employees who are fund members upon termination of their employment.

Public holiday: A statutory and local public holiday at the place of work in addition to holidays.

Reimbursement: A payment that compensates the employee exactly for all or an agreed part of an expense already incurred (for example, kilometre reimbursement while

travelling for business), although not necessarily disbursed. The employer considers the expense to be its own, and the employee incurs the expenditure on behalf of the

employer.

Remuneration: A term interchangeable with compensation, relating to all monies, perquisites, and benefits delivered to an employee in exchange for services.

Retrenchment: The process of terminating workers’ employment contracts to reduce the costs of running a business or organisation. The employees generally receive

financial compensation according to law or per a formula decided by the company.

Rider: A clause that indicates whether a benefit is financed as part of another policy (for example, a dental benefit may be a rider to a medical plan).

Severance amount: The money in addition to wages and any other money an employer owes employees when their employment ends, such as through a mass layoff.

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GLOSSARY


Severance/benefits continuation: Continuation of an employee’s salary after termination, paid either in a lump sum or on a continuation basis. The amount is usually on

the basis of the employee’s length of service. Benefits continuation may be part of a severance package to provide continued coverage under the medical or other benefit

plans for the employee and/or dependants for a period after termination.

Severance pay: The average pay and benefits package given to employees who left the organisation during the 12-month period of the most recently ended calendar year.

It includes all the necessary payments, such as leave entitlement, medical continuity benefits, and so on.

Short-term disability (STD) coverage: An insurance that covers a percentage of an employee’s lost salary in the event of a temporary injury or illness that can last for a

few weeks.

Sick leave: Paid time-off for employees suffering from illness or non-occupational injury. The employer usually coordinates or integrates it with short-term disability (STD)

plans.

Social security: The comprehensive federal programme of benefits providing workers and their dependants with retirement income, disability income, and other payments,

funded by social security tax.

Statutory requirement: A provision or law enacted, regulated, or authorised by a legislative body.

Step-rate formula: The method for determining a benefit on compensation above the social security integration level in a defined benefit (DB) plan.

Strike: A “turn out” or cessation of work organised by employees in any industry, acting in combination, to protect their professional and economic interests. Partial

stoppages of work, hunger strikes accompanied with cessation of work, sit-ins, and “pen-down” strikes all fall within the definition of strike.

Superannuation: A monthly payment to an individual who has retired from work. An organisational pension programme created by a company for the benefit of its

employees, whereby employees have the option of contributing a certain amount towards their pension payment.

Supplemental plan: A plan serving as a supplement or addition to a basic plan. Also known as an ancillary plan or voluntary plan.

Term life insurance: A renewable life insurance contract that specifies beginning and ending dates for coverage and has no cash value at termination. It provides financial

protection to an employee’s dependants against the employee’s loss of life due to any cause (natural, accidental, or otherwise) to the extent of the sum assured and opted

for by the company.

Termination: The act of ending an employee’s employment for any reason.

Termination indemnity: A legally required payment due to the employee upon dismissal or retirement. These payments can be extremely high in certain countries and, at

times, may be payable under any termination circumstances, including the employee’s voluntary resignation.

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GLOSSARY


Total permanent disability: A condition where an individual has been continuously absent from work through injury or illness for a specified period and has become

incapacitated to the extent that the individual can never engage in any work for which he or she is uited by education and training.

Unemployment: Generally, data represent the percentage of economically active persons wholly unemployed or temporarily laid off. Unemployment generally comprises

all persons above a specified age who during the reference period were without work, currently available for work, and seeking work. National definitions of employment

and unemployment differ from country to country.

Vesting: Acquisition by a plan member of an absolute right to an immediate or deferred benefit by fulfilling prescribed conditions, especially service requirements. The

process (time period) by which employees accrue non-forfeitable rights over employer contributions that are made to the employee’s qualified retirement plan account. The

right of an employee to all or a portion of benefits accrued, attributable to employer contributions, that is not contingent upon a participant’s continuation of employment.

Employer contributions vest according to a schedule defined by the plan and are usually based on years of service.

Vesting period: The time required for options/shares/performance units/long-term cash to vest and (in the case of options) become exercisable in full. It refers to all plan

types.

Voluntary contribution: A contribution in addition to the mandatory contribution that a member can pay to the retirement scheme to increase future retirement benefits.

Voluntary plan: Also known as ancillary plan.

Voluntary separation: The termination of employment where the employee initiates the separation process through resignation.

Voluntary termination: The number (headcount) of employees who resigned or retired voluntarily during a 12-month reporting period.

Waiting period: A specific period set forth in an insurance policy or healthcare plan document that requires an individual to wait a certain period before being eligible for

coverage under the plan. For example, a healthcare plan may require an individual to wait 90 days before coverage under the plan is permitted, and to have healthcare

expenses paid or reimbursed for services or treatment received from a healthcare provider. Working hours per day: The number of hours an employee works in a day,

exclusive of lunch and other breaks.

Working hours per week: The minimum hours an employee needs to work during a work week. The work week and working hours may vary based on gender, country,

and industry/sector.

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GLOSSARY


ABOUT MERCER

Mercer is a global consulting leader in talent, health, retirement, and investments. Mercer helps clients around the world advance the health, wealth, and performance of

their most vital asset – their people. Mercer’s 20,500+ employees are based in more than 40 countries, and we operate in more than 140 countries. Mercer is a wholly

owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of

risk, strategy, and human capital.

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http://www.mmc.com/

mercer's worldwide benefit & employment guidelines (wbeg)

Documents