Penalties for Employers Who Don’t Pay EPF in Malaysia

EPF (Employees Provident Fund) contributions are a legal responsibility for employers in Malaysia. Failure to contribute can result in fines, imprisonment, business restrictions, and damage to employer reputation.

EPF enforcement today includes monthly monitoring, audits, and immediate legal action for missed contributions. Today, enforcement has become even stronger with regular audits, scheduled inspections, and automated compliance tracking.

This guide explains your responsibilities as an employer and what happens if contributions are not made.

Understanding Employer Responsibility Under EPF Act 1991

EPF contributions are governed under the EPF Act 1991. Section 43(1) clearly states that employers must contribute monthly according to the prescribed rates.

This applies when a person is employed under a contract of service, whether:

Written or verbal
Expressed or implied
Full-time, part-time, or probation

As long as there is an employer–employee relationship, EPF contributions are mandatory.

Who Must Contribute to EPF?

Employees qualify for EPF if they are hired under a contract of service. Examples include:

Permanent employees
Contract staff
Part-timers earning more than RM10/hour
Probationary employees
Apprentices

Even a verbal employment agreement is sufficient to establish contribution eligibility.

However, employers should still maintain written employment contracts for documentation and compliance.

Contract of Service vs. Contract for Service

EPF contribution depends on the type of contract.

Type of Contract	EPF Contribution Required?	Relationship Type
Contract of Service	Yes	Employee–Employer
Contract for Service	No	Independent Contractor

Contract of Service Examples:

Administrative staff
Junior Executives
Sales staff
Customer Service agents
Part-timers paid hourly (> RM10/hour)

Contract for Service Examples:

Freelancers
Grab drivers
External consultants
Outsourced designers

If you control working hours, deliverables, tools, reporting structure, and salary — it is likely a contract of service, therefore EPF is required.

Mandatory EPF Contribution Rates for Employers

Contribution rates differ based on age and salary brackets.

Employees Below Age 60

Employee Salary	Employee Contribution	Employer Contribution
RM5,000 & below	11%	13%
More than RM5,000	11%	12%

Employees Aged 60 and Above

Employee Contribution: 0% required
Employer Contribution: 4% mandatory

Payment Deadline:

On or before the 15th of every month

Failure to pay by the due date results in late charges.

What Happens If Employers Fail to Contribute to EPF?

Employers who fail to make timely contributions can be charged under Section 43(2) of the EPF Act.

Penalties include:

Imprisonment up to 3 years
Fine up to RM10,000
Or both

This applies even to small or newly established businesses.

More Serious Offences

Some employers deduct contributions from employees’ salaries but do not remit them to EPF.

This is considered misappropriation.

Under Section 48(3):

Imprisonment up to 6 years
Fine up to RM20,000
Or both

Additionally, employers will be required to pay:

Late payment charges
Dividend losses
Outstanding contributions

This amount will be credited directly into affected employees' EPF accounts.

Penalties for Companies with Multiple Directors or Partners

For larger organisations, penalties may apply directly to directors or shareholders.

Consequences may include:

Business winding-up
Bankruptcy declaration
Asset seizure
Travel restrictions

EPF is empowered to take legal action against:

Active Directors
Former Directors (if responsible during the overdue period)
Business Owners/partners

How EPF Detects Non-Compliance

EPF monitors employers through:

Bank payroll checks
Employee complaint channels
Company registration data
Random inspections and audits
Contribution history records
Employer contribution statements

Employees can also check their contributions online, making non-compliance easily detectable.

What Employers Should Do to Stay Compliant

Register with EPF immediately upon hiring employees
Submit employee data through i-Akaun (Employer)
Deduct contributions accurately each month
Pay by or before the 15th every month
Keep accurate payroll records
Avoid delaying payments even during business downturns

FAQs

What should employers do if they missed the EPF payment deadline?

If you missed the 15th deadline, pay immediately through i-Akaun (Employer). Late charges will apply automatically. Also check whether all contributions were recorded correctly.

Can an employer delay EPF payments due to cash flow issues?

No. Cash flow problems are not a valid reason to delay contributions. Employers may face fines, imprisonment, or business penalties.

How can employees check if their EPF has been contributed?

Employees can log in to the KWSP i-Akaun app or website to check monthly contributions. Any issues can be reported directly to EPF.

Are expatriates or foreign workers required to contribute to EPF?

Yes, if they work under a contract of service. However, registration is voluntary unless specified in company policy or employment terms.

What happens if an employer deducts EPF but does not remit it?

It is considered misuse of employee funds. Employers may face fines, jail time, or both, and must still repay outstanding contributions, late charges, and dividends to employees.

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