Budget 2021: Payroll & HR Highlights
On 6 November 2020, the government announced its proposed Budget 2021 amidst our ongoing battle against the COVID-19 pandemic. This article focuses on several payroll and human resources highlights from the proposed budget:
Reduction of Individual Income Tax Rate
It is proposed that the resident individual tax rate be reduced by 1% (from 14% to 13%) for the chargeable income band RM50,001 to RM70,000
Non-resident individual tax rate remains at a flat rate of 30%
(Effective from year of assessment 2021)
Personal Tax Reliefs
| Type of Relief | Current | Proposed |
| Expenses on medical treatment special needs or carer expenses for parents | RM5,000 | RM8,000 (Effective YA 2021) |
| Medical expenses for self, spouse or child undergoing treatment for a serious disease or expenses incurred on fertility treatment (including expenses up to RM500 incurred by self, spouse or child for complete medical examination) | RM6,000 | RM8,000 The scope of qualifying expenses is expanded to include expenses incurred on cost of vaccination, up to RM1,000. Type of vaccine includes Pneumococcal, Human Papillomavirus, Influenza, Rotavirus, Varicella, Meningococcal, Combination of tetanus-difteria-acellular pertussis and COVID-19 vaccine. The limit of RM500 for medical examination to be increased to RM1,000 (Effective YA 2021) |
| Disabled spouse (additional spouse relief) | RM3,500 | RM5,000 (Effective YA 2021) |
| Private Retirement Scheme (PRS) contributions and Deferred annuity scheme premium (Effective from YA 2012 until YA2021) | RM3,000 | Period of relief is extended for another 4 years (Effective YA 2022 until 2025) |
| Lifestyle relief | RM2,500 | RM3,000, in which an additional of up to RM500 is allocated for the cost of purchasing sports equipment, entry/rental fees for sports facilities and participation fees in sport competitions Scope of relief for printed daily newspapers be expanded to include subscription for electronic newspapers. (Effective YA 2021) |
| Deposits in Skim Simpanan Pendidikan Nasional (SSPN) Account | RM8,000 (YA 2019 – YA 2020) | Existing SSPN relief is extended for another 2 years. (Effective YA 2021 to YA 2022) |
| Education fees expended on self | RM7,000 | The scope of RM7,000 a year is expanded to cover fees for attending up-skilling and self-enhancement courses in any field of skill recognized by the Department of Skills Development, Ministry of Human Resources limited to RM1,000 (Effective YA 2021 to YA 2022) |
Increase in the Limit of Income Tax Exemption on Compensation for Loss of Employment
To assist taxpayers who have lost their jobs due to the pandemic, for years of assessment in 2020 and 2021, the income tax exemption limit for compensation for loss of employment will be increased from RM10,000 to RM20,000 for each full year of service.
Reduction in EPF Contribution Rate
The employees’ portion of EPF contribution will be reduced from 11% to 9% for a period of 12 months from the beginning of January 2021.
(Effective from 1st January 2021)
Exemption from HRDF
Exemption from HRDF will be given for 6 months. The exemption will cover the tourism sector and companies affected by the COVID-19 crisis.
(Effective from 1st January 2021)
Wage Subsidy Programme
The implementation of the wage subsidy programme will be extended for another 3 months with a more targeted approach, specifically for the tourism sector, which includes the retail sector, at a rate of RM600 per month for workers earning RM4,000 and below. The limit of 200 employees per application would also be increased to 500 employees.
Penjana Kerjaya Training Programme
The Government will continue the hiring incentive programme under PERKESO, which is now known as PenjanaKerjaya with several enhancements as below.
1) The incentive for employees earning RM1,500 and above will be enhanced from a flat rate of RM800 per month to 40% of their monthly income, subject to a maximum incentive of RM4,000.
2) To encourage employment for the disabled, long-term unemployed, and retrenched workers, employers will be given an additional incentive equivalent to 20% of the employee’s monthly income making the total incentive to employers’ amount to 60%.
3) For sectors with a high reliance on foreign workers such as construction and plantations, a special incentive of 60% of monthly wages will be provided whereby 40% will be channeled to the employer while 20% will be channeled, as a wage top-up for the local worker replacing the foreign worker.
The above three incentives will be given for a period of six months.
4) For those employed under the PenjanaKerjaya, the maximum training rate which can be claimed by employers will be increased from RM4,000 to RM7,000 to enable workers to take up high skilled training and professional certifications.
