A Guide on Employees Provident Fund (EPF) For Employers
by Chloe Chan
Feb 2, 2023
at 1:18 PM
What is an Employees Provident Fund (EPF)
The Employees Provident Fund (EPF) is a mandatory savings scheme for employees in Malaysia. EPF for employers are designed to provide retirement savings for workers, with contributions from employees and employers. The funds saved in the EPF account can be used for various purposes, including purchasing a home, investing in education, or providing a comfortable retirement. The EPF is governed by the Employees Provident Fund Act 1991 and is managed by the Employees Provident Fund Board.
According to Section 43(1), EPF Act 1991, every employee and every employer of a person who is an employee within the meaning of this Act shall be liable to pay monthly contributions on the amount of wages at the rate respectively set out in the Third Schedule.
Employers are responsible for making EPF contributions for employees hired under a Contract of Service or Apprenticeship. Employers are accountable for ensuring that regular monthly payments are deducted from employees' salaries and sent into EPF.
What is EPF Employer Contribution
In Malaysia, the Employer's contribution to the Employees Provident Fund (EPF) is set at a minimum of 12% or 13% of the employee's basic salary. However, the statutory contribution rate is subject to changes by the government. This amount is deducted from the employee's salary. The Employer must match this contribution and make a similar payment to the EPF on behalf of the employee. The contributions are deposited into the employee's individual EPF account, where they earn interest and accumulate over time to provide retirement savings for the employee.
When, What and How to Contribute
Monthly Contributions: Employers must contribute monthly to their employees' EPF accounts. The minimum contribution rate is 12% or 13% of the employee's basic salary, with half of the contribution being made by the employer and the other half by the employee.
The formula:
Employer contribution = (12% of basic salary) / 2
Example: If the employee's basic salary is MYR 3,000, the employer's contribution would be:
So, the employer must contribute MYR 180 to the employee's EPF account every month.
Due Date: Contributions must be made before the 15th of the following month to avoid late payment charges.
Payment Method: Employers can make contributions to the EPF online via the EPF website, through a bank, or by mail.
It is important to note that an employer has a legal obligation to make these contributions to employees' EPF accounts. Failure to do so can result in fines and penalties.
What Are The Employer's Responsibilities on New Employee
As an employer in Malaysia, you have several responsibilities related to your new employees' Employees Provident Fund (EPF) accounts:
Register Employees: You must register your new employees with the Employees Provident Fund (EPF) within 7 days of their first day of work.
Provide Information: You must provide your new employees with information about their EPF account, including their account number and the benefits of contributing to the fund.
Make Contributions: You are required to make monthly contributions to your employees' EPF accounts, with the minimum contribution rate being 12% of the employee's basic salary. Half of the contribution is made by the employer, while the other half is made by the employee.
Maintain Records: You must keep accurate records of all EPF contributions and provide an EPF statement to each employee at least once a year.
Remit Contributions: You must remit the required contributions to the EPF by the 15th of the following month to avoid late payment charges.
Update Information: You must update the EPF with any changes in your employees' personal or employment information, such as changes in salary or contact details.
Termination: If an employee terminates their employment, you must inform the EPF and ensure that the final contribution is made.
FAQs
Here are some FAQs on the Employees Provident Fund (EPF) employer contribution in Malaysia:
Q: Is the employer contribution tax deductible?
A: Yes, the employer contribution to the EPF is tax deductible.
Q: Can the employer contribute more than the minimum amount?
A: Yes, the employer can contribute more than the minimum amount to the employee's EPF account.
Q: Can the employer make contributions for non-citizens/foreign workers?
A: Yes, the employer must contribute to the EPF for all eligible employees, including non-citizens and foreign workers.
Q: What happens if the employer fails to make contributions?
A: If the employer fails to make the required contributions, they may be subject to fines and penalties. The EPF also has the right to take legal action against the employer.
Q: Is it mandatory for the employer to provide an EPF statement to the employee?
A: Yes, the employer is required to provide an EPF statement to the employee at least once a year. This statement will show the employee's current EPF balance and the contributions made by both the employee and the employer.
Q: Can the employee access their EPF account while still employed?
A: Yes, under certain circumstances, such as buying a home or financing education, the employee may be able to withdraw funds from their EPF account while still employed.
Q: How can the employer keep track of their EPF contributions and payment status?
A: The employer can keep track of their EPF contributions and payment status by logging into the EPF online portal or contacting the EPF directly.
Q: Can the employer dispute the amount of contributions to the EPF?
A: Suppose the employer feels that the required contributions need to be corrected. In that case, they can contact the EPF and request a review of their calculation.
Q: What happens to the EPF contributions when the employee leaves the company?
A: When employees leave a company, their EPF contributions remain in their EPF account and continue earning interest. The employee can later withdraw funds for approved purposes, such as purchasing a home or financing education.
Q: Is the employer required to provide an EPF statement to the employee?
A: Yes, the employer is required to provide an EPF statement to the employee at least once a year. This statement will show the employee's current EPF balance and the contributions made by both the employee and the employer.
