How EPF Contributions Work in Malaysia: A Quick Guide for Employers

Employer Provident Fund (EPF) contributions might sound complicated, but they’re actually straightforward once you break them down.

Think of it as a simple way to help employees save for their future, while making sure everything stays compliant.

In this article, we’ll guide you through the basics of EFP, how much to contribute, how to calculate it, and what you need to do to stay on track. Let’s make it easy to understand!

What is EPF Contribution?

The EPF is a retirement savings plan in Malaysia, where both employers and employees contribute a portion of wages every month.

Think of EPF contributions as a way to help your employees save for their future. It’s like setting up a savings account, but with a little extra responsibility on your part.

Legally, the EPF is backed by Malaysia’s EPF Act 1991, which outlines how much both employers and employees must contribute.

As an employer, you need to ensure that both your employees’ contributions and your own portion are deducted from their salaries and paid to the EPF.

If you fail to comply with these requirements, you could face penalties. It’s essential to stay organized and meet the deadlines to avoid any issues with the EPF.

Monthly Contribution Rate (Third Schedule)

As of July 2022, the EPF contribution rates for both employees and employers have been updated.

These rates are outlined in the Third Schedule of the EPF Act 1991, which provides a clear breakdown of how much each party needs to contribute, based on the employee’s monthly salary.

This schedule is essential because it serves as the official reference for calculating EPF contributions.

As an employer, it’s your responsibility to follow these guidelines.

You must ensure that both the employee’s share and your company’s contribution are accurate, according to the rates set in the Third Schedule.

The contribution rates are organized based on salary brackets and age groups.

The rates also differ for Malaysian employees, permanent residents, and non-Malaysians.

The most crucial thing to remember is that employers are legally obligated to remit EPF contributions based on these rates, which should be deducted and paid to the EPF by the 15th every following month.

By sticking to the Third Schedule, employers help ensure that their employees are saving for retirement correctly while complying with the law.

EPF Contribution Rates Updated

EPF contribution rates are set by the government, ensuring that both employers and employees contribute fairly toward retirement savings.

These rates vary depending on the employee’s wage and certain conditions, so it’s important to know the current figures and how they apply to different scenarios.

Here’s a quick look at the current employer contribution rates in Malaysia

Employees Under 60

Employee type	Monthly salary	Employee contribution	Employer contribution
Malaysian, Permanent Residences (PRs), Non-Malaysians (registered as member before Aug 1998)	RM5,000 and below	11% of monthly salary	13% of monthly salary
	More than RM5,000	11% of monthly salary	12% of monthly salary
Non-Malaysians (registered as member before Aug 1998)	No salary limit	11% of monthly salary	RM5

Employees Aged 60 and Above

Employee type	Monthly salary	Employee contribution	Employer contribution
Malaysian	All salary levels	0%	4% of monthly salary
Permanent Residences (PRs) & Non-Malaysians (registered as member before Aug 1998)	RM5,000 or less	5.5% of monthly salary	6.5% of monthly salary
	More than RM5,000	5.5% of monthly salary	6% of monthly salary
Non-Malaysians (registered as member before Aug 1998)	No salary limit	5.5% of monthly salary	RM5

How to Calculate EPF Contributions

Calculating EPF contributions involves applying the specified percentages to your employees’ monthly wages. Here’s how to do it:

1. Identify the Employee’s Category

Determine if the employee is Malaysian, a permanent resident, or a non-Malaysian, and note their age group (below 60 or 60 and above).

2. Determine the Applicable Rates

Refer to the EPF contribution rates based on the employee’s category and salary bracket.

3. Calculate the Contributions

Employee’s contribution: multiply the employee’s monthly salary by their contribution rate.
Employer’s contribution: multiply the employee’s monthly salary by the employer’s contribution rate.

4. Total Contribution

Add both the employee and employer’s contributions to get the total amount to be remitted to the EPF.

Example of Calculating EPF Contributions

Scenario 1. Malaysian Employee Under 60 with Monthly Salary of RM4,500

Employee’s contributions: 11% of RM4,500 = RM495
Employer’s contributions: 13% of RM4,500 = RM585
Total contributions: RM495 + RM585 = RM1,080

Scenario 2. Non-Malaysian Employee (Registered After August 1998) Under 60 with Monthly Salary of RM6,000

Employee’s contributions: 11% of RM6,000 = RM660
Employer’s contributions: Fixed at RM5.00
Total contributions: RM660 + RM5 = RM655

Consequences of Delayed Contributions

If you fail to remit the EPF contribution on time, it becomes an overdue contribution.

Employers are required to pay the contributions by the 15th of the following month.

Missing this deadline can result in penalties, including a late payment charge and potential legal consequences.

To avoid overdue contributions:

Make sure to calculate and deduct the contributions correctly every month.
Remit the payment on or before the 15th to stay compliant.

Frequently Asked Questions (FAQs)

What is the EPF contribution rate in Malaysia?

The EPF contribution rate is the percentage of an employee’s salary that both the employer and employee contribute to EPF each month. The rate varies depending on the employee’s salary and age.

What is 13% and 11% in EPF contribution?

The 11% and 13% rates refer to the mandatory contributions for employees and employers. Employees contribute 11% of their salary, while employers contribute 13%. These rates apply to Malaysian citizens and permanent residents under the age of 60.

Is EPF contribution mandatory in Malaysia?

Yes, EPF contributions are mandatory for both employers and employees in Malaysia. Employers must deduct the employee’s share from their salary and contribute their portion as well, as required by the EPF Act 1991.

How to calculate EPF contribution in Malaysia?

Apply the appropriate contribution rates based on the employee’s salary and age. For example, an employee under 60 with a salary RM5,000 will contribute 11%, and the employer will contribute 13%. The total amount should be remitted to EPF by the 15th of the following month.

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