How to Calculate EPF Percentage for Employers in Malaysia

If you’re running a business in Malaysia, understanding how EPF employee contributions work is essential for both compliance and good HR practice.

The Employees Provident Fund (EPF) is Malaysia’s national retirement savings scheme under the EPF Act 1991, where both employers and employees contribute a percentage of monthly wages. These contributions ensure financial security for workers after retirement and form a core part of statutory obligations for employers.

What is EPF?

The EPF, or Employees Provident Fund, is a retirement savings program in Malaysia. Both employers and employees contribute a percentage of the employee’s monthly salary to the fund, which helps ensure financial stability after retirement.

For employees, this is a safety net for their future, offering financial peace of mind. For employers, EPF contributions are a way to support staff beyond their active working years. It also builds trust and loyalty within the workforce, which is vital for maintaining a motivated and engaged team.

EPF Contribution Rates (Updated 2025)

EPF contributions are shared between employers and employees according to age, citizenship status, and registration type.

The following table summarises the latest EPF employee and employer contribution rates effective 2025:

Employee Category	Monthly Salary (RM)	Employee Contribution	Employer Contribution	Section Reference
Malaysians & Permanent Residents (Below 60)	≤ 5,000	11%	13%	Section A
Malaysians & Permanent Residents (Below 60)	> 5,000	11%	12%	Section A
Non-Malaysians (Registered Before 1 Aug 1998)	≤ 5,000	11%	13%	Section A
Non-Malaysians (Registered Before 1 Aug 1998)	> 5,000	11%	12%	Section A
Non-Malaysians (Registered From 1 Aug 1998)	All salary levels	2%	2%	Section F
Malaysians (Aged 60 and Above)	All salary levels	0%	4%	Section E
Permanent Residents & Non-Malaysians (Before 1 Aug 1998, Aged 60+)	≤ 5,000	5.5%	6.5%	Section C
Permanent Residents & Non-Malaysians (Before 1 Aug 1998, Aged 60+)	> 5,000	5.5%	6.0%	Section C
Non-Malaysians (From 1 Aug 1998, Aged 60+)	All salary levels	2%	2%	Section F

Key Notes

The RM5,000 threshold determines whether employers contribute 13% or 12% for employees below age 60.
For employees aged 60 and above, the employee contribution is 0%–5.5%, while employers contribute 4%–6.5% depending on category.
Foreign employees registered after 1 August 1998 contribute a fixed 2% each, regardless of salary.
All contributions must be rounded up to the nearest ringgit based on the employee’s gross monthly salary.

How EPF Contributions Are Calculated

EPF contributions are based on an employee’s gross monthly salary, which includes wages, allowances, and overtime (if applicable).

Example 1: Salary RM4,500 (Below RM5,000)

Employer contribution (13%): RM585
Employee contribution (11%): RM495
Total EPF contribution: RM1,080

Example 2: Salary RM6,500 (Above RM5,000)

Employer contribution (12%): RM780
Employee contribution (11%): RM715
Total EPF contribution: RM1,495

Rounding rule: All EPF amounts must be rounded up to the nearest ringgit.

Tip: Employers can use tools like the official KWSP Contribution Calculator or payroll software for accurate automation.

EPF Contribution Cap & Wage Ceiling

EPF contributions are capped at a monthly wage ceiling of RM20,000. This means contributions only apply to the first RM20,000 of salary.

For instance, if an employee earns RM25,000, EPF is only calculated on RM20,000.

Special Conditions & Exemptions

Most employees are covered by EPF, but some exceptions and voluntary cases apply:

Voluntary or Partial Contributions

Employees aged 60 and above: Employee contribution 0%–5.5%, employer 4%–6.5%.
Part-time and contract employees are eligible if under a valid contract of service.

Exempted Categories

Domestic servants
Temporary or casual workers
Foreign employees (who opt out after registration)

Always check the EPF’s official Third Schedule to confirm exemption eligibility.

Contribution Payment Deadlines & Methods

Employers are responsible for deducting and paying both employer and employee contributions monthly.

Deadline

The payment deadline is the 15th of the following month.

Example: January contributions must be paid by 15 February.

Payment Methods:

KWSP i-Akaun (Employer Portal)
FPX Online Banking
Authorized bank partners (Maybank, CIMB, etc.)
EPF service counters

Penalties for Late or Underpayment

Late payments are subject to interest and dividend-based penalties (EPF declared dividend rate + 1%, minimum RM10).

Repeated late payments may lead to fines up to RM10,000 or imprisonment under Section 43(1) of the EPF Act 1991.

Tax Benefits of EPF Contributions

Both employees and employers enjoy tax advantages under Malaysia’s Income Tax Act:

Employee tax relief: Up to RM4,000 under Section 49(1)(k).
Employer tax deduction: Contributions are fully deductible up to 19% of employees’ remuneration.

Example:

An employee earning RM4,000 contributes RM440 (11%) to EPF. This lowers taxable income, reducing overall tax payable.

Higher EPF rates can also be a competitive employee benefit while remaining tax-efficient.

Changes & Updates to EPF Contribution Rates

The Malaysian government periodically revises EPF contribution rates:

2020–2022: Temporary employee rate reduction (11% → 9%) during COVID-19.
October 2025: New contribution table and clarifications under the latest Third Schedule.

Always refer to the latest KWSP circulars before payroll processing.

Common Mistakes Employers Make

Employers often make small but costly errors such as:

Applying incorrect rates for employees aged 60 and above.
Confusing local and foreign worker categories.
Using outdated contribution tables.
Missing payment deadlines or underpaying contributions.

How to avoid this: Always cross-check calculations with the official EPF Contribution Table (Jadual Ketiga) on the KWSP website.

EPF Withdrawal Overview

EPF provides flexibility for various withdrawal purposes:

Age-based: 50, 55, or 60 years old.
Housing & Education: Buying a home or paying tuition fees.
Medical: For critical illness or hospitalization.
Investment & Retirement: Partial withdrawals for approved investments.

This structure makes EPF one of Asia’s strongest employee welfare systems—balancing security and flexibility for workers.

FAQ

What is 13% and 11% in EPF contribution?

Employers contribute 13% and employees 11% for salaries up to RM5,000. For higher salaries, employers contribute 12%.

What is the 12% rule in EPF?

The 12% rate applies to employer contributions for employees earning above RM5,000 monthly.

Is 13% the employer’s contribution?

Yes. Employers contribute 13% for employees earning RM5,000 or less.

Is EPF mandatory for foreign workers?

Yes, for those registered before 1 August 1998. For others, it’s optional but encouraged.

Can employees increase their contribution?

Yes. They can make voluntary contributions through i-Akaun or at KWSP counters.

What happens if an employer pays late?

Late payments incur penalties and may lead to fines or imprisonment under Section 43(1).

How can employees verify their EPF payments?

They can log in to KWSP i-Akaun (Member) to check monthly contributions.

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