Lawyer Niki Lim Hui Min warns that misunderstood exemptions and looming reforms could leave businesses exposed
Many Malaysian employers are still falling short of their legal obligations under the Employees’ Social Security Act 1969, and the numbers are not small. Recent reports suggest that 17–20% of companies have yet to register their workers with Perkeso.
For Niki Lim Hui Min, Advocate & Solicitor at Tam Yuen Hung & Co., the reasons often come down to a mix of misunderstanding and administrative oversight. She points out that some employers assume that paying workers in cash or hiring part-timers exempts them from registration.
“The issue is not always intentional non-compliance. Many smaller businesses, particularly family-run enterprises or those operating informally, still lack awareness of their legal obligations under the Act,” she says. “In other cases, it is simply administrative oversight or cost-cutting, where employers underestimate the risks of non-compliance.”
But that underestimation is not just risky – it’s dangerous, both legally and financially. Under the Act, the penalties for failing to register are severe. Section 94 of the Act provides that failure to comply with registration requirements constitutes an offence punishable by fines and/or imprisonment.
Meanwhile under Section 14, when an employer fails to make the necessary contributions, the Director-General of Perkeso may recover the unpaid contributions as a civil debt. There is also exposure to surcharge and interest on late payments. For employers, this means that costs compound quickly once they are in breach, she explains.
Misunderstood exemptions and the cost of non-compliance
The legal obligations also stretch further than many assume. Employers often think they can rely on exemptions, but Lim warns that this is a frequent mistake.
“The Act defines ‘employee’ broadly, and registration applies to probationary, part-time and foreign workers alike,” she says.
The one real exemption applies to casual workers hired outside of business purposes, but this is commonly misinterpreted.
“For example, a one-off gardener hired for private purposes may be exempt, but a casual cashier in a shop is not. Employers frequently overextend this exemption and wrongly assume short-term or daily rated staff do not need registration, when in fact the law requires it,” she explains.
The consequences of misjudgment can be devastating if a workplace accident occurs, as without Perkeso coverage, all liability sits squarely with the employer.
“Non-registration itself is already a breach of statute. On top of that, the employer could be sued for damages at common law or under negligence principles, covering medical expenses, loss of earnings, and potentially long-term benefits,” Lim says. “The employer personally absorbs the full liability, which can cripple even a well-established company.”
Lim makes it clear that compliance should not be treated as an afterthought but as a structured process within organisations. She also urges vigilance beyond the first day of employment by conducting regular internal audits to confirm all eligible employees are registered, including probationary and part-time staff.
“HR leaders should embed Perkeso registration into their standard onboarding checklist, alongside issuing contracts and opening EPF accounts,” she says. “It’s also wise to stay updated with Perkeso circulars and Ministry of Human Resources announcements, because those updates have binding legal effect.”
Widening employer liabilities
Looking ahead, the scope of employer obligations is only set to expand. Lim highlights that Parliament will soon table legislation for a new scheme that reshapes how workplace and non-workplace accidents are treated under the law.
“The government has announced that a bill will be tabled in Parliament this year to introduce a new employment injury scheme called the Skim Kemalangan Bukan Bencana Kerja,” she says.
Unlike the current framework, this one won’t be limited to incidents on the job.
“This scheme is significant because, for the first time, it extends coverage beyond traditional ‘workplace accidents’ to include accidents occurring outside of working hours, such as non-work-related travel accidents,” she explains.
The implications for HR and business leaders are serious. Lim notes that gig workers, long a grey area in employment law, will also fall under the scheme, reflecting a legal shift toward recognising the realities of flexible work.
“For HR leaders, this means two things: first, there may be additional statutory registration and contribution duties once the scheme comes into force; and second, compliance will need to be monitored closely, because the scope of employer obligations is clearly widening,” Lim says.
What’s clear is that employers who continue to delay compliance are not just risking fines. They are positioning themselves, and their employees. on unstable ground, with looming liabilities and a legal framework that is only becoming stricter.
