CJMYEmployee Provident Fund (EPF) is a retirement benefits scheme governed under the Employee Provident Fund Act 1991 in Malaysia.
Generally known as Kumpulan Wang Simpanan Pekerja (KWSP), the social security institution was formed in 1951 and has went through several iterations.
As per the EPF scheme, contributions from employer and deduction from employee’s income are deposited into an EPF account and invested under Simpanan Konvensional or Simpanan Shariah.
The savings which is comprised of the monthly contributions and yearly dividends earned will be will be available for withdrawal upon retirement.
Is it mandatory to contribute to EPF?
Participation in the EPF is mandatory for all private sector employees who are Malaysian citizens and Permanent Residents and voluntary for non-Malaysian citizens.
It is mandatory for an employer to ensure accurate monthly contributions are deducted from their employees’ salary and remitted on or before the 15th of every month.
Can employee choose not to contribute EPF?
An employer who fails to make a contribution can either be jailed not exceeding 3 years, or fined not more than RM10,000, or both. Companies with multiple partners or directors may face bankruptcy or have their assets confiscated.
Employers who are found guilty of making deductions without making any payment could face a 6 years imprisonment and/or RM20,000 fine. They shall also be liable to pay late payment fees and dividends for outstanding contributions.
What is the current EPF contribution rate?
The government through the tabling of Budget 2022 announced that employee’s EPF contribution rate for those below 60 years of age is reduced from 11% to 9% from February 2021 contribution to July 2022 contribution.
Below is EPF employer and employee contribution details
| Employee | Employer’s Contribution | Employee’s Contribution | ||
| Monthly income | Below RM5,000 | RM5,000 and above | Below RM5,000 | RM5,000 and above |
| Malaysian below age 60 | 13% | 12% | 9% | |
| Malaysian age 60 and above | 4% | 0% | ||
| Permanent resident below age 60 | 13% | 12% | 9% | |
| Permanent resident age 60 and above | 6.5% | 6% | 5.5% | |
| Non-Malaysian below age 60 | RM5.00 | 9% | ||
| Non-Malaysian age 60 and above | RM5.00 | 5.5% |
How can I calculate my EPF contribution?
The 4 main contribution types are Mandatory Contributions, Voluntary Contributions, Unclaimed Contributions and Contributing more than statutory rates.
The contribution amount should not be calculated based on exact percentage value for salaries RM 20,000 and below. Instead it should be based according to the rate stated in the Third Schedule of the EPF Act 1991.
Payment must be made only in ringgit denominations and rounded up without any cent value.
What payments are subject to EPF Contributions?
All monetary payments that are considered as wages are subject to EPF contribution. Below are list of payments which are liable and exempted from contributions
Payments liable for EPF contribution:
- Salary
- Bonus
- Allowance
- Commission
- Incentive
- Wages for Half Day Leave
- Payment for unutilized annual or medical leave
- Arrears of Wages
- Wages for Maternity Leave
- Wages for Study Leave
- Other payments under contract of service or otherwise
Payments exempted from EPF contribution:
- Overtime payment
- Service charge
- Gratuity
- Retirement benefit
- Retrenchment or termination benefits
- Travelling allowance
- Gifts
- Director’s fee
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