How to Calculate EPF Percentage for Employers in Malaysia

To help secure the well-being of its people in retirement, the Malaysian government has introduced the Employee Provident Fund (EPF).

This program is designed for Malaysian workers, where a percentage of their monthly salary is saved in the EPF and can be used when the workers retire.

So, how is EPF calculated? Does the employer play a role in contributing? Find out more in the explanation below.

What is EPF?

The EPF, or Employee 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 builds trust and loyalty within the workforce, which is vital for maintaining a motivated and engaged team.

EPF Contribution Rates for Employees

Not only Malaysian, but foreign workers also can have EPF with certain rules. Below are the two types of EPF contribution rates for employees that you need to know:

1. Standard Contribution Rate

Employees in Malaysia contribute 11% of their monthly salary to their EPF accounts.

This percentage is automatically deducted from their wages every month.

For example, if an employee earns RM3,000 per month, their contribution would be RM330.

2. Employee Contribution for Non-Malaysians

For foreign employees, the rules can vary. Non-Malaysian workers who registered with the EPF before August 1, 1998, often follow the same rates as Malaysians which is 11% of their monthly salary.

However, this can depend on their contracts and employment agreements, so employers should double-check the specifics for each worker.

Employer Contribution to EPF

Employers contribute to the EPF, and the rate depends on the employee’s salary:

For employees earning RM5,000 or below, the employer contributes 13%.
For employees earning above RM5,000, the employer contributes 12%.

This contribution is crucial because it matches or even exceeds what employees contribute to themselves.

For example, if an employee earns RM4,500, the employer would contribute RM585 (13% of RM4,500) to their EPF account.

If the salary is RM6,500, the employer’s share is RM780 (12% of RM6,500).

How EPF Contributions Are Calculated for Employers

Calculating EPF contributions starts with the employee’s gross salary.

The percentage (12% or 13% for employers and 11% for employees) is applied to the monthly salary. Let’s break it down with an example:

Employee’s monthly salary: RM6,250
Employer’s contribution (12%): RM750
Employee’s contribution (11%): RM688
Total contribution to EPF: RM1,438

Round-up amounts to the nearest ringgit when calculating contributions, as per EPF regulations.

EPF Contribution Cap and Limits for Employers

The EPF contribution cap and limits for employers refer to the salary thresholds used to calculate contributions.

Employers contribute 13% for employees earning RM5,000 or less and 12% for those earning more than RM5,000.

However, for very high salaries (above RM20,000), contributions are calculated up to the RM20,000 limit.

Any salary amount beyond RM20,000 is not subject to EPF contributions.

This cap helps standardize contributions while maintaining fairness for employers and employees.

Changes to EPF Contribution Rates for Employers

Over time, the Malaysian government has made adjustments to EPF contribution rates to support economic conditions.

For instance, during the pandemic, temporary reductions were introduced to ease financial pressure on employers and employees alike.

Staying informed about such changes helps employers plan their payroll and budgets effectively.

FAQ

What is 13% & 11% in EPF contribution?

The 13% and 11% in EPF contributions mean employers contribute 13% for employees earning RM5,000 or less, and employees contribute 11% of their salary.

What is the 12% rule of EPF?

The 12% rule of EPF applies to employees earning more than RM5,000 per month, where employers contribute 12% of the employee's monthly salary to their EPF account. For example, if an employee earns RM6,500, the employer contributes RM780.

What is the EPF percentage?

The total contribution percentage is 23% for employees earning RM5,000 or below (11% from employees and 13% from employers) and 22% for those earning above RM5,000 (11% from employees and 12% from employers).

Is 13% the employer’s contribution?

Yes, the 13% rate applies to employers for employees earning RM5,000 or less per month.

By understanding EPF contributions, employers can not only comply with legal requirements but also demonstrate their commitment to employee welfare.

Whether it’s calculating the correct percentages, staying updated on changes, or managing contributions efficiently, handling EPF properly benefits both your workforce and your business in the long run.

If you need help or further details, always refer to the official EPF guidelines or consult with payroll experts to handle contributions smoothly.

Are you hiring in 2025?

Start your hiring journey with Ajobthing today! Post your job ads, connect with top talents, and streamline your recruitment process with our easy-to-use platform.