Do Employers Need to Pay EPF for Foreign Workers in Malaysia?

Since 1 October 2025, companies that hire foreign workers must include EPF contributions in their monthly payroll.

Under requirements set by the Employees Provident Fund (EPF / KWSP), employers are required to register and contribute EPF for eligible non-Malaysian employees.

For HR teams, this means:

Updating payroll systems
Adjusting manpower budgets
Ensuring ongoing monthly compliance

Here is what you need to know.

Who Must Contribute?

You must register and contribute EPF if the employee:

Is not a Malaysian citizen
Has a valid passport
Has a valid work pass
Is below 75 years old

Who Is Excluded?

Domestic workers are excluded.

Under the Workmen's Compensation Act 1952, domestic servants include:

Maids
Cooks
Gardeners
Cleaners
Babysitters
Drivers
Similar household workers

If your worker falls under this category, EPF contribution is not required.

When Does It Start?

Effective Date: 1 October 2025

Contributions are required for wages paid from this date onwards.

Contribution Rate for Foreign Workers

The rate is lower compared to Malaysian employees.

Contribution Type	Rate
Employer Share	2%
Employee Share	2%

Employers must pay both portions to EPF. The employee’s 2% can be deducted from their salary.

Not Sure How Much EPF to Deduct?

Use our free EPF Calculator to quickly check employer and employee contributions. Simple, accurate, and built for Malaysian employers.

Payroll Example (For Budget Planning)

Let’s say a foreign worker earns RM2,000 per month.

Employer 2% = RM40
Employee 2% = RM40
Total EPF contribution = RM80

If you have 100 foreign workers earning RM2,000:

Employer cost per month = RM4,000
Employer cost per year = RM48,000

This directly affects manpower cost planning and yearly budget forecasts.

When Must HR Make Payment?

EPF must be paid on or before the 15th of the following month.

Example:

October 2025 salary
Contribution month: November 2025
Payment deadline: Before or on 15 November 2025

Late payment may result in:

Dividend charges
Penalties
Compliance investigation

Important Payment Rules

Payment must be in Ringgit Malaysia (RM)
No cent value allowed (round to whole number)
Employer must ensure correct EPF registration
Both employer and employee portions must be paid together

HR Compliance Checklist

To stay compliant and avoid audit risk:

Verify Work Pass Validity

Keep updated copies of passport and work permit.

Register Early

Do not wait until payroll closing date.

Update Payroll System

Set 2% auto-calculation to reduce manual errors.

Communicate Clearly

Inform foreign workers about the 2% salary deduction to prevent confusion or disputes.

Set Monthly Reminder

Payment deadline is the 15th of every month.

Keep Proper Documentation

Maintain:

Work pass copy
EPF registration proof
Monthly contribution records

This documentation is important during inspections or audits.

Why Employers Should Take This Seriously

Even though the rate is only 2%, non-compliance can lead to:

Financial penalties
Legal enforcement action
Backdated contributions
Reputation risk

For industries such as manufacturing, construction, F&B, plantation, and logistics, the financial impact can be significant due to large foreign workforce numbers.

FAQS

Is EPF mandatory for all foreign workers in Malaysia?

Yes. Since 1 October 2025, employers must register and contribute EPF for eligible non-Malaysian employees who have a valid passport and valid work pass, and are below 75 years old.

However, domestic workers are excluded under the Workmen's Compensation Act 1952.

How much is the EPF contribution rate for foreign workers?

The contribution rate is:

Employer: 2%
Employee: 2%

Employers must pay both portions to the Employees Provident Fund (EPF / KWSP). The employee’s 2% can be deducted from their salary.

What happens if an employer fails to contribute EPF for foreign workers?

Failure to contribute may result in:

Dividend charges
Late payment penalties
Legal enforcement action
Backdated contribution payments

Employers may also face compliance inspections and audits.

Do employers need to contribute EPF if the foreign worker resigns mid-month?

Yes. EPF contributions must still be paid based on wages earned for that month, even if the employee resigns or their contract ends during the month.

How can HR ensure smooth compliance?

HR teams should:

Verify valid work passes before payroll processing
Update payroll systems to include the 2% contribution
Set reminders for the 15th monthly deadline
Maintain proper documentation for audit purposes

Early system setup and clear communication with employees help prevent payroll errors and compliance risks.

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