Employees Provident Fund (EPF) of Malaysia

  • Post category:Malaysia

The Employees’ Provident Fund (EPF) of Malaysia, sometimes referred to as Kumpulan Wang Simpanan Pekerja (KWSP), is a Malaysian social security institution. Established in 1951 under the Employees Provident Fund Ordinance 1951, the Employee Provident Fund (EPF) underwent many revisions before evolving into the EPF Act 1991 (Act 452) in its current form.

employees provident fund of malaysia

Like many compulsory pension plans in several countries, the EPF is intended to help workers in the private sector in saving and conserving a portion of their income through an arrangement. After that, the funds may be utilized as a retirement fund or to support workers who are deemed unsuitable for employment. For Malaysian nationals working in the private sector, EPF membership is required; for non-Malaysians, it is optional.

Members can also decide to keep their EPF account under:

  • Simpanan konvensional, in this case, their savings will be handled and allocated in a traditional manner;
  • Transfer their money to Simpanan Shariah, where they will be invested and managed in accordance with Syariah principles.

THE FOLLOWING THINGS ARE LIABLE FOR THE EPF CONTRIBUTION –

  • Salary
  • Payment for unutilized annual or medical leave
  • Bonus
  • Wages for Study Leave
  • Other payments under contract of service or otherwise
  • Incentive
  • Arrears of Wages
  • Wages for Maternity Leave
  • Allowance
  • Commission
  • Wages for Half-Day Leave

THE FOLLOWING THINGS ARE NOT LIABLE FOR THE EPF CONTRIBUTION

  • Service Charge
  • Retirement Benefit
  • Any other Remuneration or payment as may be exempted by the Minister
  • Retrenchment, Temporary Lay-off or Termination Benefits
  • Any Travelling Allowance or the value of any Travel Concession
  • Overtime Payment
  • Gratuity

MALAYSIA EMPLOYEE PROVIDENT FUND CONTRIBUTION RATES

Monthly salary RM 5,000 and below More than RM 5,000
Employee’s status Employer’s contribution rate Employee’s contribution rate Employer’s contribution rate Employee’s contribution rate
Residents aged below 60 13% 9% 12% 9%
Residents aged 60 and above 4% 0% 4% 0%
Permanent residents aged below 60 13% 9% 12% 9%
Permanent residents aged 60 and above 6.5% 5.5% 6% 5.5%
Non-residents ages below 60 (registered as a member before 1 August 1998) 13% 9% 12% 9%
Non-residents aged 60 and above (registered as a member before 1 August 1998) 6.5% 5.5% 6% 5.5%
Non-residents ages below 60 (registered as a member on or after 1 August 1998) RM 5.00% 9% RM 5.00% 9%
Non-residents aged 60 and above (registered as a member on or after 1 August 1998) RM 5.00% 5.5% RM 5.00% 5.5%

HOW TO CALCULATE EPF CONTRIBUTIONS IN MALAYSIA

It is essential to note that businesses have to pay employee contributions by the 15th of the next salary month. This implies that employers will initially have to make a contribution on behalf of the employees’ shares; however, this can be recovered at the time the employee receives their salary. 

The applicant will need to factor in a variety of things, such as their employees’ age and monthly income rate when calculating contributions for them. The employee’s citizenship and permanent residency status should also be investigated. 

As per the Third Schedule of the EPF Act 1991, contributions must be computed using the Monthly Contribution Rate instead of the precise percentage, as the latter is applicable only to workers whose monthly income is above RM20,000. Furthermore, keep in mind that all EPF contributions should be rounded to the next Ringgit. 

HOW TO MAKE PAYMENTS TO MALAYSIA EPF?

Employers can contribute to the EPF in a number of ways such as:

  • e-Caruman
  • Bank Agents
  • EPF Counter
  • Mobile App
  • Online banking

PROCESS OF REGISTERING FOR AN EMPLOYEE PROVIDENT FUND ACCOUNT IN MALAYSIA

To become a member of the EPF, there are four primary registration methods. The initial method involves immediately becoming a member as soon as the employer makes the first payment to the EPF.

Using the MyKad to register at an EPF counter is the second method. The applicant needs to fill out Form KWSP 3 if their registration attempt fails or if they are not a citizen of Malaysia. Upon successful registration, they will be issued an EPF member number.

The applicant can use i-Akaun (Employer) to have their employer register them as an EPF member. The successful registration will result in the issuance of the EPF member number.

The final option is to use an EPF Smart Kiosk to verify the identity with the fingerprint and use MyKad. The EPF member number will be sent to the applicant as soon as their registration is approved.

HOW TO ACTIVATE I-AKAUN (MEMBER)?

Through the i-Akaun (Member), EPF members can easily apply for withdrawals, manage their EPF balance, and print EPF statements.

Members can use their temporary user ID and passport, which they will get via SMS after registering, to activate their i-Akaun. It needs to be made within 30 days via the i-Akaun website.

These steps need to be completed in order to activate the i-Akaun (Member):

  • Go to the i-Akaun website.
  • Go to I’m a member (i-Akaun) and click login.
  • Click next after entering the temporary user ID.
  • After entering the password, select “Login.”
  • After reading the terms and conditions, choose the checkbox and press the next button.
  • This will direct the applicant to the page for the first-time login. Click “Next” after creating a new user ID and password.
  • They can proceed with the new login details after receiving a successful notification about creating a new i-Akaun (Member) login.

WHAT HAPPENS IF THERE’S AN OVERDUE CONTRIBUTION OR LATE PAYMENT?

It is the employer’s responsibility to pay the employees’ EPF by the next month’s 15th. If they fail to submit the contributions within the designated timeframe, they will still be regarded as exceptional contributions. Form KWSP (Form E) and Form KWSP 8 (Form F) are provided by the Officer overseeing this after the EPF evaluates the contribution. The latter form is then required to be used for the EPF payment. Form A (Online) can be used to make payments for outstanding contributions.

The lower dividend rate between Simpanan Kovensional and Simpanan Shariah for each corresponding year is then used to compute the late payment fee, plus an extra 1%. Any fees that include cents will be rounded up to the closest Ringgit denomination, with a minimum late payment cost of RM10.

PENALTIES FOR FAILING TO COMPLY WITH THE EMPLOYEE PROVIDENT FUND ACT

  • If after employing a worker, an employer is not registered with the EPF within seven days (section 41(1)) or they have not made the EPF contribution payment by the next month’s 15th, at the latest (section 43(2)) – A maximum fine of RM 10,000, or a maximum sentence of three years in jail, or both
  • Fails to pay the EPF payment and deducts the employee’s portion of the contribution from the salary (section 48(3)) or Deducts the employer’s contribution share from the employee’s salary (section 41(1) and 47(2)) – A maximum fine of RM 20,000, or a maximum sentence of six years in jail, or both
  • Failing to inform the EPF (section 41(3)) within 30 days of the decision to stop hiring staff within 30 days, or failure to provide his employees with a salary statement (section 42(1)) – A maximum fine of RM 2,000, or a maximum sentence of six months in jail, or both.

BENEFITS OF EPF IN MALAYSIA

  • Account 1 Savings Top-Up: The applicant can contribute voluntarily to their family’s or spouse’s Employee Provident Fund account 
  • Hajj Registration: The applicant can switch from their original Hajj registration using Lembaga Tabung Haji (LTH) to the current EPF Hajj Registration system without having any impact on the previously specified Hajj rotation date.
  • Incapacitation: If the applicant is incapacitated and unable to work, they can easily access their funds. 
  • Yearly Dividends: The applicant’s and their employers’ EPF contributions may be invested in and produce at least 2.5% in dividends each year, which will be added to their savings. This means that they can contribute more than the initial amount.
  • Death: The member’s dependant or next-of-kin receives RM2,500 after their death.
  • Tax Exemption: Contributions to the Employee Provident Fund (EPF) are tax deductible up to RM4,000.

If you wish to incorporate a new business in Malaysia, refer to our guide on Malaysia business formation for more information. Reach out to us at Relin Consultants – Leading Global Business Set Up Partners for further assistance. 

FAQs

In EPF Malaysia, how long can I retain my money?

At the age of 50 or 55, beneficiaries are permitted by Malaysian legislation to take a partial withdrawal from their EPF account. When they reach sixty, they can withdraw the full amount at any moment.

How long can I keep my money in EPF Malaysia?

According to recent clarification from the EPF authority, beneficiaries who haven’t withdrawn any money from their Provident Fund account would still be eligible to receive dividends until they turn 100.

How can I check the balance on my EPF?

Beneficiaries can use your i-Akaun to check their EPF balance immediately. You may access your account details and balance by downloading the EPF i-Akaun app and logging in.

Is EPF compulsory in Malaysia?

All Malaysians are required to be enrolled in the Malaysian EPF pension plan. Retirement savings, including mandatory payments from all Malaysian nationals and permanent residents employed in Malaysia, are received and managed by the Employee Provident Fund (EPF).

What is the age limit for EPF?

In contrast to the Pension Fund, which prohibits employees over the age of 58 from joining, the Provident Fund does not have an age restriction on membership.