Epf Contribution For Employee And Employer 2022

Any working Malaysian is familiar with the Employee Provident Fund (EPF), which was established in 1951 to build Malaysia's workforce's retirement savings. EPF is, in fact, one of the world's oldest provident funds.

EPF had 14,887,988 registered members (an estimated 45% of the Malaysian population) as of Q4 2020, with 7,591,053 active contributors. The scheme makes both the employer's and the employee's EPF contributions. In Malaysia, at least 534,398 employers have made a contribution to EPF; the annual EPF contribution by employers and employees totals RM 78.41 billion (as of Q4 2020).

EPF in Malaysia

The Employees Provident Fund Act of 1991 governs the Employees Provident Fund (EPF). The EPF aims to protect the workforce's retirement savings and aid national infrastructure development.

In Malaysia, who can open an account for EPF?

In general, any employer or employee could sign up for EPF. Individuals employed, self-employed, or business owners can choose to contribute according to their own needs. After becoming a member, one can enjoy yearly dividends on retirement income and various withdrawal options and advantages.

Even so, there are a few exceptions - a list of circumstances was created to prohibit employer and employee EPF contributions. Employees over the age of 75, for example.

What are the privileges of EPF members?

By contributing to EPF as a member, one can choose from any available benefits (subject to EPF approval and periodic constitutional provisions by the government).

Retirement

The primary goal of EPF savings is to save for retirement; this savings consists of EPF contributions made by both the employer and the employee.
Employer contributions to EPF are typically 12% or 13% of monthly salary, while employee contributions are 11% of monthly salary.
For employees earning more than RM20,000 per month, the contribution rate is 9%, while the employer contribution rate is 12%.
Higher rates of EPF ability to contribute by employer and employee are possible.

Account 1 Savings

A voluntary contribution could be made to the EPF account of a partner or family member (i.e., wife to husband, children to parents, and vice versa)

Registration for Hajj

A member who is less than 55 years old and has at least RM1,300 in Account 1 is qualified to sign up for EPF Hajj Registration. This is an additional savings scheme option.

Incapacitation

This benefit of RM5,000 will be paid to qualified representatives who have tried to apply for Incapacitation Withdrawal within 12 months of termination.
Termination must be based on the inability to work rather than disciplinary measures or voluntary resignation.

Death

This contribution of RM2,500 is paid to the member's dependent or next-of-kin when Death Withdrawal is made.

Exemption from Tax

EPF could be used to get tax breaks.
Employer and employee EPF contributions are tax-deductible up to a maximum of RM4,000.

Employer and employee contributions to EPF

First, we must define "employer" and "employee."

An employer is the individual or individuals with whom an employee has a service or apprenticeship contract.

An employee is someone who is employed under a service or apprenticeship contract. The service or apprenticeship contract can be either written or verbal, expressed or implied.

Employees who earn more than RM10.00 per month or part thereof are eligible to contribute. EPF registration, on the other hand, can be done either by the employer or the employee.

What exactly is an EPF contribution?

According to the EPF, contributions are mandatory salary deductions comprising the employee's and employer's share that must be contributed within a specified period. The contribution for any particular month is a deduction from the previous month's salary. According to Section 43(1) of the EPF Act of 1991, employers must pay monthly rather than bimonthly or combine several months into one month.

There are two types of EPF contributions available:

Mandatory Contribution

When the employer is required to make a payment each month on or before the 15th of the month, the contribution would be taken out of the monthly salary.

A contribution made voluntarily (Voluntary contribution)

Employees may make voluntary contributions that are not limited by the government's contribution rate and are not time-limited.
In other cases, if the employee chooses to contribute more than the stipulated rate to his or her EPF, the employer may deduct the amount from the employee's salary for that purpose. This is subject to the employee opting for Voluntary Excess (VE) Contribution and informing KWSP.
Employers may request through the KWSP to contribute greater than the specified rate for the employer's EPF share.

Meanwhile, we've gathered a few circumstances that raise questions: are these subject to employer and employee EPF contributions?

To give you a general overview, these would be subject to EPF contributions by both the employer and the employee if:

Salaries are paid by the hour - yes, as long as they received wages exceeding RM10, it makes no difference whether it is a daily, hourly, or piece-rated salary.
An annual salary increase; will be compensated as a contribution on the month the increase is applied.
Non-working day salaries (i.e., annual leave, public holidays).
Allowance, such as a travel allowance, is given.
Salaries earned from part-time work

These, on the other hand, are not subject to EPF contributions from both the employer and the employee:

Salary received as an overtime payment
Non-Malaysian employees - unless they choose to contribute voluntarily.

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