LINDUNG 24/7: From “Mandatory” to “Voluntary” – What Companies in Malaysia Need to Do Now

On 8 July 2026, the Malaysian government made a surprising U-turn: the mandatory contribution obligation under the “LINDUNG 24/7” programme (officially the Skim Kemalangan Bukan Bencana Kerja, SKBBK – Non-Work Accident Scheme) introduced by the Social Security Organisation (SOCSO) on 1 June 2026 has been reversed for local employees – participation is now voluntary.

For foreign employees – and therefore also staff seconded from the DACH region – participation remains mandatory and continues to be governed by the legal provisions introduced on 1 June 2026.

PERKESO issued the detailed procedure on 13 July 2026: local employees who wish to opt out must complete a “Liability Release Declaration” (Perakuan Pelepasan Liabiliti) via the PERKESO LINDUNG Faedah Portal. The opt-out window runs from 13 July to 31 August 2026 – if no declaration is filed by that date, the employee is automatically treated as a continuing participant. Human Resources Minister Datuk Seri Ramanan Ramakrishnan has also announced a fundamental review of the scheme by year-end, covering policy direction, implementation effectiveness and funding sustainability, with any resulting amendments to the Employees’ Social Security Act 1969 to be tabled in Parliament if necessary.

What this means for DACH companies in Malaysia

For companies operating in Malaysia, the government’s U-turn means that a compliance matter which had only just been opened – and, hopefully, closed – in June is back on the table, and this time requires a more differentiated and practically more demanding implementation.

What changes operationally

Until now, the task for HR was straightforward: deduct contributions across the board from all liable employees and remit them via SOCSO. The task now shifts from a blanket payroll deduction to an individual administrative and documentation process:

• Local employees who do not wish to participate must submit a Liability Release Declaration (“Tidak Menyertai”) via the PERKESO LINDUNG Faedah Portal.
• Local employees have until 31 August 2026 to file the declaration; after that date, non-response is treated as continued participation and the ongoing deduction will not be regarded as unauthorised.
• Contributions already deducted in June will not be refunded, since insurance cover was in place for that month.
• Nothing changes for foreign employees: the contribution (currently 0.75% in Phase 1) remains mandatory and must continue to be remitted as before.

Payroll systems will therefore need to distinguish between:

• “mandatory participants” (foreign employees);
• “opted-out local employees”; and
• “continuing local participants”

This requires considerably more complexity than the previous all-or-nothing logic, and you should confirm that your payroll provider can handle it.

What this means for existing employment contracts and employee handbooks

In connection with the June rollout, many companies amended their template employment contracts and employee handbooks, typically with blanket wording along the lines of “The employee participates in the LINDUNG 24/7 programme, and the corresponding contribution is deducted from salary.”

Such clauses are now simply incorrect for local employees, because they suggest an obligation that no longer exists. This typically affects, in particular:

• Payroll/deduction clauses in the employment contract that list SOCSO contributions across the board, without distinguishing by nationality or opt-out status.
• Social security benefits sections in the employee handbook that describe LINDUNG 24/7 as a mandatory part of the remuneration package.
• Onboarding documents and welcome letters that already present the deduction as a standard component of net salary.
• Internal policies on non-work accidents that refer to automatic 24/7 cover for all employees – this now applies only to employees who actually participate.

On 16 July 2026, PERKESO issued an updated LINDUNG 24/7 Participation Form that also allows employees who have already opted out to rejoin the scheme at a later date, and to update their registered employer where relevant. Employers should therefore treat an employee’s initial declaration as revisable, not final, and keep a process in place to capture any subsequent change of election.

Don’t simply keep deducting – and observe the formal requirements

The obvious but risky path is to simply continue the existing deduction for local employees, out of convenience. That is not a good solution, for two reasons:

• First, it no longer has a legal basis unless the employee has given informed consent – a salary deduction without a valid legal basis can be challenged under employment law.
• Second, it merely defers the actual compliance problem to the future, particularly given the fundamental review of the scheme announced for year-end.
• Third, non-compliance carries statutory teeth: under the Employees’ Social Security Act 1969 (Act 4), an employer who fails to deduct and remit the correct SKBBK contribution – including continuing to deduct from an employee who has validly opted out, or failing to deduct from one who has not – risks a fine of up to RM10,000, imprisonment of up to two years, or both.

It is important to consistently observe Malaysia’s formal requirements: amending an employment contract generally requires the written consent of both parties (a variation agreement or side letter) – a unilateral circular is not sufficient where the clause in question forms part of the contract.

For the employee handbook, it should be checked whether it is incorporated into the contract by reference or structured as a policy that may be amended unilaterally; in the former case, the same consent requirements apply as for the employment contract.

In any event, communication to the workforce should be documented and receipt confirmed (for example, by signature or digital acknowledgement), and individual employees’ opt-out declarations should be filed in a structured manner in the personnel file – not least because PERKESO has continued to refine the administrative procedure since its 13 July rollout, and further adjustments cannot be ruled out.

And what about new hires?

For new employment relationships, the question arises differently than for existing contracts: there is no “old” clause that needs correcting – the clause must be drafted correctly from the outset.

Foreign employees

Nothing changes for foreign employees: the clause on mandatory LINDUNG 24/7 participation can be carried over unchanged into the template employment contract.

Local employees

For local employees, the clause should no longer present participation as automatic, but should instead refer to the choice available – and should be deliberately drafted to remain dynamic, since PERKESO has continued to refine the administrative procedure since its 13 July rollout and further adjustments cannot be ruled out before the year-end review. Rather than a fixed contribution clause, wording along the following lines is recommended:

“The employee participates in the LINDUNG 24/7 programme (SKBBK) in accordance with the SOCSO provisions in force from time to time, unless the employee opts out of participation under the procedure prescribed by PERKESO. The corresponding contribution is deducted from salary at the rates applicable at the time of payroll processing.”

This wording avoids the need to amend the clause again at the next adjustment – for instance, in connection with the review announced for year-end – while at the same time documenting the employee’s freedom of choice from the outset.

Recommendation

Companies should now:

• communicate the 31 August 2026 opt-out deadline to local employees now, so that HR has a buffer to process declarations before automatic continued participation kicks in;
• review their template employment contracts and handbooks for the clauses referred to above;
• adapt the payroll process to the new three-category logic;
• amend the template employment contract for new hires accordingly, keeping it dynamic;
• actively monitor developments up to the announced year-end review, as further legislative adjustments are likely; and
• establish an internal process to capture and update any employee’s subsequent change of election – PERKESO's updated 16 July participation form allows an employee who has opted out to rejoin the scheme later, so a declaration on file should not be treated as final.

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Raja Nadhil Aqran is the Managing Partner of Aqran Vijandran in Kuala Lumpur, advising clients on commercial litigation, corporate advisory, ESG and compliance matters across Malaysia and the wider region.

Dr. Harald Sippel is an Austrian-qualified attorney (Rechtsanwalt) and Senior Foreign Advisor at Aqran Vijandran in Kuala Lumpur, supporting foreign companies – with particular depth in DACH-region and Korean client work – on Malaysian law matters across all practice areas

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