Socso should consider giving out dividends to contributors

Even getting back at least 1% or 2% of the contributions in the form of dividends will be a good way to encourage workers to make contributions to Socso willingly.

THE recent move by the government for gig workers to contribute to the Social Security Organisation (Socso) is commendable to allow better protection, as many remain outside the coverage of labour laws.

The Human Resources Ministry said recently it will work to ensure the Gig Workers Bill is passed and enforced as soon as possible, to make it mandatory for gig workers to contribute to Socso.

Human Resources Minister Steven Sim said only 26% of Malaysia’s 1.16 million gig workers contribute to the Self-Employment Social Security Scheme as participation is voluntary.

It is going to balloon Socso’s coffers, once it compels all the gig workers to contribute.

Since Socso is a social security or like an insurance scheme, the government should consider for Socso to give back a portion of their contribution if workers do not make any claims when they retire.

This has been the practice of many insurance companies which return policy holders some cash at the end of the coverage period, based on the cash value of the insurance policy.

Therefore, even getting back at least 1% or 2% of the contributions in the form of dividends will be a good way to encourage workers to make contributions to Socso willingly.

After all, Socso appears to be doing well financially.

Based on available data, Socso’s financial performance was the best in 2023 since its establishment in 1971.

Contribution income and enforcement saw a 14% increase, while gross investment income grew by 27%, achieving a return on investment (ROI) of over 6%.

This robust financial performance enabled Socso to disburse RM5.73bil in benefits to insured persons and their dependents in 2023, up from RM5.1bil in 2022.

As of 2020, Socso’s total assets stood at RM31.4bil and could be even higher now.

Chalking a ROI of more than 6% is indeed a good measure of Socso’s investment acumen.

In the last few years, Socso has been trying to bring in a lot more contributors, including domestic workers and maids who need to contribute to Socso.

As it is, employers already need to take insurance for these domestic helpers and now Socso too. Is this really necessary?

Surely, making it mandatory for these workers to contribute to Socso would mean substantial increase in its asset size.

Already, Socso increased the wage ceiling for contributions from RM5,000 to RM6,000 per month, aiming to enhance social protection for a larger portion of the workforce.

This change is expected to increase Socso’s contribution inflows, which may positively impact its asset size.

It is perhaps timely for Socso contributors to share the rewards of their funds too as when private sector employees retire upon reaching 60 years of age, it will be a zero-sum game as they will no longer be protected by Socso.