For employees working in Malaysia registered entities, be it locals or foreigners on a work visa, it is a norm to see in their monthly pay slip indications of monthly contribution deducted from their monthly salary as well as their employer’s. This article will explain in detail what these monthly deductions entails to and why they are required by the Employment Act 1955.
Employee Provident Fund (EPF) in Malaysia
The Employee’s Provident Fund (EPF) or otherwise known as “Kumpulan Wang Simpanan Kerja – KWSP” is technically a federal statutory body under the purview of Ministry of Finance (MOF) in Malaysia. It is tasked to manage compulsory savings plan and retirement planning for private sector workers here in Malaysia.
Objectives of EPF in Malaysia
There are three different objectives that EPF strive for. They are:
Accumulation of retirement benefits.
Employee pension scheme (EPS) where the fund will generate pension for employees after the age of 58 years.
Employee Deposit Linked Insurance Scheme (EDLI) where it will cover an employee as a life insurance.
Employer’s responsibilities under EPF monthly contribution
It is mandatory for all SSM registered Companies or registered businesses such as Enterprises or Partnerships to register EPF as an employer within 7 working days upon hiring the first employee
Must register the employees as EPF members (if they are first time workers) and ensure their information is up to date
Provide monthly salary statements or pay slips to each employees indicating the deductions from employers as well as employee’s salary
Collect employee’s and employer’s share of EPF contribution and submit to EPF monthly
How can an employer register for an EPF account?
Employers can register its EPF account by visiting the nearest EPF branch. They are required to bring along:
FormKWSP 1 – retrieved via this link
Certified copy of directors NRIC or Passport
Company business profile [Will be given by Company Secretary]
Section 14 – Superform [Will be given by Company Secretary]
Section 15 – Notice of Registration [Will be given by Company Secretary]
Section 17 – Certificate of Incorporation [Will be given by Company Secretary]
Once registered, these items will be given to the employers as indication the registration is successful:
Employer’s reference number
Notice of employer’s registration
Employer’s registration certificate [To be displayed at business premise]
Why is EPF contribution important in Malaysia?
As stated above, the intention of deducting EPF contribution monthly is to assist employees working in the private sector to save their retirement fund. This way, an employee will no longer need to be stressful about setting up a separate pension scheme with the limited fund they have. It is also useful in the scenario where an employee is temporarily or no longer fit to work.
What is the employer’s and employee’s contribution rate of EPF in year 2023?
The EPF contribution rate table is as below:
|Employer’s EPF contribution rate
||Employee’s EPF contribution rate
Monthly salary rate
|RM5,000 and below
||More than RM5,000
||RM5,000 and below
||More than RM5,000
Malaysian age 60 and above
Malaysian below age 60
|Permanent resident below age 60
|Permanent resident age 60 and above
|Non-Malaysian below age 60
|Non-Malaysian age 60 and above