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Malaysia Employees Provident Fund (EPF)

What is the Employees’ Provident Fund (EPF)?

The Employees’ Provident Fund (EPF) or commonly known as Kumpulan Wang Simpanan Pekerja (KWSP) is a social security institution formed according to the Laws of Malaysia, Employees Provident Fund Act 1991 (Act 452) which manages the compulsory savings plan and retirement planning for private sector workers in Malaysia. The EPF also provides a convenient framework for employers to meet their statutory and moral obligations to their employees.

Membership to the EPF

Membership to the EPF is mandatory for Malaysian citizens employed in the private sector, and voluntary for the non-pensionable public sector employees and non-Malaysian citizens. Once enrolled in the fund, a member will have an account and savings in the Provident Fund.

Employer Responsibility

Employer

An employer is defined as a person(s) with whom an employee has a contract of service or apprenticeship. This includes:

  • A manager, agent or person responsible for the payment of wages to an ’employee’
  • Any group of persons whether statutory or non-statutory or incorporated
  • Any Government, Government Department, Statutory Body, Local Authority or other bodies as specified in the Second Schedule to the EPF Act 1991

Duties of an Employer

1. An employer shall register with the Employees Provident Fund Board within 7 days of employment of its first employee.

2. An employer shall be liable to pay EPF contributions in respect of any person whom he has engaged to work under a Contract Of Service or Apprenticeship.

3. An employer shall prepare and furnish statement of wages to each and every employee. The statement shall contain information as may be prescribed by the rules set forth by the Act.

4. An employer shall prepare and keep one or more registers containing information as may be prescribed by the rules of the ACT. The register shall be kept for such period that every particular recorded therein shall be available for inspection for not less than six years after the recording thereof.

Employee Responsibility

Employee

An employee is defined as a person who is employed under a contract of service or apprenticeship. The contract of service or apprenticeship can be written or oral, expressed or implied.

Duties of an Employee

An employee within the meaning of the EPF Act shall be liable to pay monthly contributions on the amount of wages at the rate respectively set out in the Third Schedule of the Act.

Employees Obligated to Contribute

EPF contributions are obligated for the following private sector employees:

  • Part time, temporary and probationary employees
  • Directors who receive wages from company;
  • Employees until the age of 75 years old if they are still working regardless whether they have or have not made the full withdrawal/part of it after attaining the age 55 or 60 years old;
  • Employees who have withdrawn their savings under the Pensionable Employees and Optional Retirement Withdrawal, and work with employers other than the Federal or State Governments, or any statutory bodies or local authorities;
  • Employees who have previously made full withdrawal under the Incapacitation Withdrawal and have since recovered and are re-employed in any service.

Wages Liable for EPF Contribution

All remuneration in money (as described below) due to an employee under his/her contract of service or apprenticeship whether it was agreed to be paid monthly, weekly, daily or otherwise.

Payments that are liable for EPF contribution include:

  • Salary
  • Payment for un-utilised annual or medical leave
  • Bonus
  • Allowance
  • Commission
  • Incentive
  • Arrears of wages
  • Wages for maternity leave
  • Wages for study leave
  • Wages for half day leave
  • Other payments under services contract or otherwise

Payments not liable for EPF contribution include:

  • Salary
  • Payment for un-utilized annual or medical leave
  • Bonus
  • Allowance
  • Commission
  • Incentive
  • Arrears of wages
  • Wages for maternity leave
  • Wages for study leave
  • Wages for half day leave
  • Other payments under services contract or otherwise

Rate of Contributions

Subject to the provisions of section 52 of the ACT, every employee and every employer of a person who is an employee within the meaning of this Act shall be liable to pay monthly contributions on the amount of wages at the rate respectively set out in the Third Schedule or the Rate of Monthly Contributions table.

Subject to section 52, the monthly contribution of every employee and employer who are subject to the minimum wages order made under the National Wages Consultative Council Act 2011 [Act 732] shall not be less than the monthly contributions based on the amount of the minimum wages for the month as determined under the minimum wages order at the rate respectively set out in the Third Schedule.

Minimum Contribution Rates:

For Employees aged 60 years old and below)

1. Monthly salary of RM5,000 or less:

  • Employee contributes 11% of his monthly salary.
  • Employer contributes an amount equivalent to 13% of the employee’s salary

2. Monthly salary greater than RM5,000:

  • Employee contributes 11% of his monthly salary.
  • Employer contributes an amount equivalent to 12% of the employee’s salary

For Employees aged 60 years old and above and up to 75 years old

The minimum contribution rates are halved:

1. Monthly salary of RM 5,000 or less:

  • Employee contributes 5.5% of his monthly salary.
  • Employer contributes an amount equivalent to 6.5% of the employee’s salary

2. Monthly salary greater than RM 5,000:

  • Employee contributes 5.5% of his monthly salary.
  • Employer contributes an amount equivalent to 6% of the employee’s salary

Contribution Payment Period

EPF contributions payable for any month must be paid to EPF, no later than the 15th day of each succeeding month (For example: Contributions for July 2017 must be paid latest by 15 August 2017).

Interest on Late Payment of Contributions (ILPC)

Late contribution payment refers to the payment received by EPF for a certain contribution month after the 15th of that month. Defaulting employers, regardless of whether their employees opted for Simpanan Shariah or not, will be imposed with the following:

1. Late Payment Charge

  • The lower dividend rate between Simpanan Konvensional and Simpanan Shariah for each respective year with an additional one (1) percent.
  • The minimum late payment charge imposed is RM10.

The late payment charge will be rounded up to the nearest Ringgit denomination.

  • For example: The late payment charge imposed is RM13.21 and this must be rounded up to RM14.

2. Dividend

The dividend rate to be paid will be based on the lower between that of Simpanan Konvensional and Simpanan Shariah. For the years prior to the introduction of Simpanan Shariah, the calculation of late payment charges and dividend will be based on the EPF dividend rate declared for the respective years.

Late payment of contribution includes:

  • Overdue contribution
  • Under-paid contribution