What is the Employee Provident Fund (EPF)?
Also known as the provident fund (PF) or Kumpulan Wang Simpanan Pekerja (KWSP), is a government agency in Malaysia that manages compulsory savings plans for the retirement of all salaried employees. These come as contributions from both employees and their employers.
Much like Australia’s superannuation, the EPF makes it a simple for Malaysian employees to save for their retirement through monthly contributions that go to their retirement fund.
Voluntary (Self contribution)
Self employed individuals can make contributions under the EPF Act 1991:
- Domestic servants
- Sole proprietors or business partners (who don’t receive wages)
- Retired workers
- Malaysian citizens who have left the country with all their savings and returned
Benefits of the EPF
By law, the minimum dividend is of 2.5%, however, on average this has been higher in previous years.
EPF contributions are tax-free up to a threshold of RM4,000 per year.
What is the mandatory monthly contribution towards EPF?
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Employees
11% is the mandatory rate that is deducted from monthly wages (5.5% for employees over 60 years old).
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Employers
For monthly salaries of RM 5,000, 13% is the contribution. For salaries above that, 12% is the rate that stands.
The Malaysian government does encourage employees to contribute more than the minimum requirement with more favourable tax deductions.
When can employees access their savings?
Malaysian citizens and permanent residents can withdraw up to 30% of their savings at the age of 50. In order to withdraw their full savings they need to wait until the age of 55.
There are, however, some exceptions such as becoming disabled or permanently moving overseas.
Can foreigners contribute towards EPF?
Yes, and they are able to withdraw their full savings after their employment is terminated or they leave the country.
Learn about other payroll terms in Malaysia:
- Benefits in Kind
- Employment Insurance System
- Monthly Tax Deduction
- Inland Revenue Board of Malaysia
- SOCSO
Are you an employer and need help with your employees’ EPF contribution?
We know that understanding EPF contributions are no easy task. If you’d like to make your own contribution, you can visit the Malaysian EPF website. However, if you’d like us to help with that and more, do get in touch, we’d love to help.
Book a demo with us to learn more!
Disclaimer: The information in this article is current as at 11-Nov-2022, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related corporate bodies (Employment Hero). The views expressed in this article are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified, and no warranties are given that it is complete, accurate, up-to-date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising directly or indirectly as a result of reliance on, use of or inability to use any information provided in this article. You should undertake your own research and seek professional advice before making any decisions or relying on the information in this article.
