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Malaysia Budget 2023: All the business & HR-related updates

Malaysia Budget 2023: All the business & HR-related updates

Initiatives announced include the allocation of RM150mn for the Employment Incentive under PERKESO; skills training for more than 800,000 workers, provided by HRD Corp, and more.

Malaysia's Budget 2023 (Bajet 2023) was announced in Parliament on Friday (7 October 2022), which Finance Minister Tengku Zafrul Aziz noted will be guided by 3Rs - Responsive, Responsible, and Reformist:

  1. It will "immediately respond to any challenges and provide comprehensive assistance to Malaysian Families, not just the B40 group but also the M40, women, youth, disabled, and all segments of society".
  2. It is "responsible for balancing the expanding fiscal policy by implementing fiscal reforms towards the Government's financial sustainability in the long term. This budget is responsible for building the country's resilience to face any future crisis."
  3. It is "a reformist [Budget] that takes the opportunity to change the country's development landscape to be more inclusive and sustainable, while building a strong national industry through strategic investment."

A total of will be allocated under this Budget, with the focus on uplifting all segments of society, especially the B40 group, M40 group, women, youth, and persons with disabilities (OKUs). Initiatives that will be implemented under this Budget include the allocation of RM150mn for the Employment Incentive under PERKESO; skills training for more than 800,000 workers, provided by HRD Corp, totalling RM750mn, and more.

This article's coverage will focus on the key aspects for business and HR leaders to know:

[TL;DR: A 2-minute recap of the just-announced Malaysia Budget 2023]

Taxable individual income rate to be reduced for close to 1mn residents

In efforts to increase the disposable income of the M40 group, Tengku Zafrul announced that the resident individual income tax rate will be reduced by two percentage points for the taxable income range of between more than RM50,000 to RM100,000 ringgit. This will benefit close to 1mn taxpayers:

  • For the taxable income range of more than RM50,000 to RM70,000, the rate will be lowered from 13% to 11%; and
  • For the taxable income range of more than RM70,000 to RM100,000, the rate will be lowered from 21% to 19%.

At the same time, the taxable income range of more than RM250,000 to RM400,000 will be combined with the range of more than RM400,000 to RM600,000, and be subject to a 25% tax rate.

The minister elaborated: "With this special income tax treatment, the tax savings for the middle group is up to RM1,000, and for the top group, is up to RM250. This means an estimated RM800mn million will be available as surplus income that the people can spend." 

Support for women at work

In order to further strengthen the role of women at the corporate leadership level, the Securities Commission will introduce a special training programme to improve women's skills, identify, and subsequently increase the number of women who are eligible to be appointed as board members

Additionally, Tengku Zafrul announced, to encourage more women to return to work after taking a career break, the Government is proposing an income tax exemption on income received from the assessment year 2023 to the assessment year 2028.

Increased social protection for the self-employed

To reduce the burden on self-employed individuals who pay for protection under the Social Security Organisation (Pertubuhan Keselamatan Sosial, or PERKESO/SOCSO), the Government will bear 80% of the value of the contribution.

"This means, self-employed people like food delivery people, farmers, fishermen, FINAS artists, and hawkers only pay 20%. Next year, this initiative will provide RM150mn, and be extended to those who are self-employed, such as taxi drivers and gig workers in the technology sector," Tengku Zafrul explained.

He added that next year, the Government will start making SKSPS (Skim Keselamatan Sosial Pekerjaan Sendiri) contributions mandatory to all self-employed sectors, especially risky sectors, progressively higher. This initiative will start with the public transport sector and the delivery of goods or food.

Next, taking into account the importance of building sufficient savings for old age, the EPF voluntary contribution limit will be increased from RM60,000 to RM100,000 per year. To encourage more voluntary contributions, the Government will also expand the scope of tax relief for life insurance premiums or life takaful contributions for covering voluntary contributions to EPF by up to RM3,000.

Further, the minister announced that the i-Saraan programme will be extended to 2023, as well as improved by increasing the matching contribution from RM250 to RM300. With an allocation of RM30, this initiative is expected to benefit more than 100,000 contributors.

Enhanced skills and career training opportunities

On this topic, Tengku Zafrul shared that in 2022, various initiatives under the Jamin Kerja Keluarga Malaysia (JaminKerja) initiative have successfully provided job opportunities and skills training to more than 310,000 people so far.

"Although we have reached the level of full employment, focus will still be given to ensuring career opportunities for certain groups in society," Tengku Zafrul said.

In that vein, next year, the Government will continue the Employment Incentive under SOCSO to encourage employers to provide job opportunities for unemployed Malaysians, from groups such as the disabled, indigenous people, ex-convicts, and women returning to work.

For this, an employment incentive of between RM600 to RM750 per month will be paid for a period of three months to the employer. Incentives will also be provided for veterans as well as employers and private employment agencies that replace foreign workers with local workers. Under this incentive, a total of RM150mn is provided and is expected to open up career opportunities for more than 70,000 job seekers.

Tengku Zafrul further shared that in order to ease the burden of job seekers, the Government will, through PERKESO, provide mobility assistance of RM500 to job seekers who find employment outside their resident state. Meanwhile, mobility aid of RM1,000 will be provided for long-distance migration from Sabah or Sarawak to the Peninsula and vice versa.

In other updates, the government will continue the implementation of MySTEP by offering 50,000 career opportunities on a contract basis, including 15,000 in the public sector and 35,000 through government-linked companies. The public sector MySTEP service period will also be extended up till 31 December 2023. It was also announced that starting 2023, the MySTEP salary will be increased by RM100, to reach between RM1,500 and RM2,100, compared to the current amount of between RM1,400 to RM2,000.

Additionally, Malaysians will continue to be provided with the opportunity to follow various skill improvement and retraining programmes to prepare themselves to meet the demands of the job market. For that, HRD Corp will provide a total of RM750mn to provide skills training to more than 800,000 workers, to increase productivity and income opportunities. Tengku Zafrul added: "As an effort to produce new talent, the Securities Commission in collaboration with the Capital Market Development Fund will establish a Digital Innovation Fund (DIGID) involving RM30mn to increase the marketability of 9,000 graduates in the capital market.

"In addition, RM20mn will also be provided to implement the Graduate Entrepreneur Programme to benefit 1,000 graduates entering the field of entrepreneurship. 

Targeted support for micro-SMEs (PMKS)

As part of efforts to support micro-SMEs (Perusahaan Mikro, Kecil dan Sederhana, or PMKS), the Government will reduce the tax rate on taxable income for the first 100,000, from 17% to 15%, starting from the assessment year 2023. This reduction, Tengku Zafrul said, is expected to save up to RM2,000 for 150,000 PMKS taxpayers.

In addition, as an effort to help especially small businesses, the Government will give a one-off grant of RM1,000 to all registered PMKS companies and registered taxi drivers. It is expected that RM1mn businesses will benefit from this grant, with a total allocation of RM1bn. 

More details on support such as cash grants, loan schemes, and more can be found here

Special civil servant and Aidilfitri 2023 payments

Several remunerations were introduced for civil servants in Malaysia over the past few months. Among these was increase in the maximum rate of paid leave (GCR) that can be collected for the purpose of the cash award, from 160 to 180 days with an estimated financial implication of RM100mn a year. With the increase, Tengku Zafrul has announced that the GCR early redemption permission of up to 50% will be increased to a maximum of 90 days.

The government has also increased the number of special leave granted to education service officers who have served more than 10 years, by five to 15 days, to benefit 500,000 teachers to manage personal matters and have the opportunity to collect a higher GCR.

Next, a salary increase of RM100 to all civil servants will be granted from grades 11 to 56, as a special supplement effective January 2023. This means, if a Grade 11 employee who is paid RM1,600 gets an annual salary increase of RM80 in April for the next year, they will also get the special addition of 100 ringgit starting in January 2023. This makes their final salary in 2023 as much as RM1,780 and this will remain carried over to the next year.

Last, Tengku Zafrul also announced an increase in the Aidilfitri 2023 Special Financial Assistance, to RM600 which will be paid in March 2023.

Photo / Tengku Zafrul's Facebook

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