Employees Provident Fund (Malaysia) Guide for Employees and Employers

The Employees Provident Fund (EPF) in Malaysia is a retirement savings plan that's mandatory for most employees. It's a great way to save for your future, but it can be a bit confusing if you're new to it.

As an employee, you're required to contribute a certain percentage of your salary to the EPF. This contribution is usually deducted from your salary before it's paid out. The employer also makes a matching contribution.

In Malaysia, the EPF is managed by the Employees Provident Fund Board (EPF), which is a government agency. The EPF has a range of investment options for its members, including a fixed income option and an equity option.

The Employees Provident Fund (EPF) in Malaysia has a rich history that dates back to 1 October 1951 when it was established under the Employees Provident Fund Ordinance 1951.

The EPF Act 1951 was later replaced by the EPF Act 1991, which requires both employees and their employers to contribute towards their retirement savings. As of 31 December 2012, EPF had 13.6 million members, with 6.4 million being active contributing members.

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The EPF is a retirement planning scheme for employees in Malaysia, where both the employer and employee must make contributions to the fund every month. Employers need to register with the EPF within seven days from the date an employee is employed.

The EPF functions through monthly contributions from employees and their employers towards saving accounts, with a minimum contribution requirement of at least 11% of each member's monthly salary. This contribution is matched by the employer, who is obligated to fund at least 12% of the employee's salary, or 13% if the salary is below RM5,000.

As of 31 December 2020, the size of the EPF asset size stood at RM998 billion (US$238 billion), making it the fourth largest pension fund in Asia and seventh largest in the world.

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The Employees Provident Fund (EPF) of Malaysia has a rich history that dates back to October 1, 1951.

It was established pursuant to the Employees Provident Fund Ordinance 1951, under the National Director of Posts.

This law became the EPF Act 1951, which laid the foundation for the EPF's role in helping employees save for their retirement.

The EPF Act 1991 was enacted in 1991, requiring employees and their employers to contribute towards their retirement savings.

This marked a significant shift in the EPF's focus, allowing workers to withdraw their savings at retirement or for special purposes before then.

As of December 2012, the EPF had 13.6 million members, with 6.4 million being active contributing members.

The EPF is intended to help employees from the private sector save a fraction of their salary in a lifetime banking scheme.

This scheme is designed to be used primarily as a retirement fund, but also in the event that the employee is temporarily or no longer fit to work.

By 2020, the EPF's asset size had grown to RM998 billion (US$238 billion), making it the fourth largest pension fund in Asia and seventh largest in the world.

The EPF requires a contribution of at least 11% of each member's monthly salary, with the employer obligated to fund at least 12% of the employee's salary.

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The EPF is a Malaysian government agency that manages a compulsory savings plan and retirement planning for private and non-pensionable public sector employees.

It functions through monthly contributions from employees and their employers towards saving accounts.

Employers must register with the EPF within seven days from the date an employee is employed, as per the EPF Act 1991.

The EPF requires employees and their employers to contribute towards their retirement savings, with employers obligated to fund at least 12% of employee's salary to the savings.

As of 2012, a member's EPF savings may be used as investments for companies deemed profitable and permissible by the organisation, from which dividends are banked to respective members' accounts.

The EPF also allows members to withdraw their savings at retirement or for special purposes before then, as stated in the EPF Act 1991.

As of 31 December 2020, the size of the EPF asset size stood at RM998 billion (US$238 billion), making it the fourth largest pension fund in Asia and seventh largest in the world.

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The EPF is intended to help employees from the private sector save a fraction of their salary in a lifetime banking scheme, to be used primarily as a retirement fund but also in the event that the employee is temporarily or no longer fit to work.

The EPF had 13.6 million members, of which 6.4 million were active contributing members, as of 31 December 2012.

In Malaysia, the Employees Provident Fund (EPF) contribution is mandatory for eligible employees. Payments subject to EPF contribution include allowances, bonuses, commission, incentives, payment in arrears, payments for unused annual or sick leave, wages for half day leave, wages for maternity leave, and wages for study leave.

Allowances, bonuses, and commission are all subject to EPF contribution, which means the employer and employee must contribute a portion of these payments to the EPF.

The EPF contribution rates in Malaysia are determined by the employee's monthly salary and status. For employees with a monthly salary of RM 5,000 and below, the employer's contribution rate is 13%, and the employee's contribution rate is 9%.

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Here is a breakdown of the EPF contribution rates in Malaysia:

Employers must calculate the EPF contribution amount based on the contribution rate in the Third Schedule of the EPF Act 1991. However, for wages that exceed RM 20,000, the exact contribution rate percentage is used instead of the rate specified in the Third Schedule.

To calculate the EPF contribution, employers must refer to the Third Schedule, which consists of five parts that specify the monthly contribution rate for each type of employee status.

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You can manage your EPF account in various ways. As of 11 May 2024, there are three accounts to keep track of: Account I, Account II, and Account III.

Each account has its own purpose. Account I stores 70% of your monthly contribution and restricts withdrawals until you reach 50 years old, are incapacitated, leave the country, or pass away.

Account II stores 30% of your monthly contribution and allows withdrawals for various purposes, including down payments or loan settlements for your first house, education, medical expenses, investments, and at 55 years old.

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Account III, also known as Akaun Fleksibel, was introduced in 2024 and stores 10% of your contributions. You can withdraw from this account at any time for any purpose, with a minimum withdrawal amount of RM50.

To register for an EPF account, you can choose from four main methods. The first method is automatic registration once your employer sends the first contribution to the EPF.

You can also register at an EPF counter using your MyKad. If the registration fails or you're not a Malaysian citizen, you'll need to complete Form KWSP 3.

Another option is for your employer to register you through i-Akaun (Employer), and you'll receive your EPF member number upon successful registration.

Lastly, you can register at an EPF Smart Kiosk using your MyKad and verifying with your thumbprint, and you'll receive your EPF member number once the registration is successful.

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The Employees Provident Fund (EPF) offers several benefits to its contributors. The EPF has a minimum dividend rate of 2.5%, but historically has had a much higher rate, such as 6.75% in 2014.

Your EPF contributions are tax-free up to a maximum of RM4,000 per annum, which is deducted from your chargeable income for income tax calculation. This means you get to keep more of your hard-earned money.

At the age of 50, Malaysian citizens and permanent residents can withdraw up to 30% of their savings, and at the age of 55 they can withdraw their full savings.

The EPF offers several benefits to its contributors, including tax exemption for withdrawals and long-term financial security through automatic savings over time.

The fund provides tax relief and tax exemption for EPF savings withdrawals, making it a great way to save for the future without worrying about taxes.

Historically, the EPF has offered a dividend rate of 6.75%, which is much higher than its minimum rate of 2.5%.

Your EPF contributions are tax-free up to a maximum of RM4,000 per annum, which is a significant advantage for contributors.

The EPF can also be used as support in case of unexpected medical emergencies or loss of working conditions, providing a safety net for its contributors.

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At the age of 50, Malaysian citizens and permanent residents can withdraw up to 30% of their savings from the EPF.

You can also make a full withdrawal if you're 55 years old or older.

Malaysian citizens and permanent residents can withdraw their full savings at the age of 55.

Foreign employees have the option to withdraw their funds partially or fully.

A full withdrawal is possible for foreign employees at age 60.

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Employee Provident Fund (EPF) contributions are subject to various payments, including allowances, bonuses, and commission, in addition to the employee's salary.

Payments subject to EPF contribution are numerous, but some examples include wages for half day leave, wages for maternity leave, and wages for study leave.

You can submit EPF contributions through various channels, such as i-Akaun, e-Caruman application, and EPF counters nationwide.

Here are some ways employers can submit EPF contributions:

Payments that are exempt from EPF contribution include service charge, overtime payment, and gratuity.

To submit your employee provident fund contributions, you have several options. There are various ways employers can submit the EPF contribution.

You can use i-Akaun or e-Caruman application to submit your contributions online. These platforms are convenient and efficient, allowing you to manage your contributions remotely.

Alternatively, you can visit EPF counters nationwide to submit your contributions in person. This option is ideal for those who prefer face-to-face interaction or need assistance with the process.

If you're not near an EPF counter, you can also use internet banking to submit your contributions. This option is available through various banks, including Bank Simpanan Nasional, Maybank, Public Bank, and RHB Bank.

Additionally, you can use bank agents of these banks to submit your contributions. This option is convenient for those who prefer to submit their contributions through a physical channel.

Here are the options for submitting EPF contributions in one place:

Payments with Contribution are a crucial aspect of employee provident fund contribution. The employer and employee must contribute a percentage of the employee's salary.

Allowances, bonuses, and commission are all subject to EPF contribution. This means that a portion of these payments will go towards the employee's provident fund.

In addition to these payments, wages for maternity leave, study leave, and half-day leave are also subject to EPF contribution. This is to ensure that employees are financially secure and able to plan for their future.

Here's a breakdown of some payments that are subject to EPF contribution:

On the other hand, some payments are exempt from EPF contribution. These include service charge, overtime payment, gratuity, and retirement benefit.

Failing to comply with the Employee Provident Fund Act can lead to severe penalties.

Employers must register with the EPF within seven days of hiring an employee, but failing to do so can result in imprisonment of not exceeding three years or a fine of not more than RM 10,000 or both.

Late payment of EPF contributions is also a serious offense. Contributions must be paid on or before the 15th of the following month, but failure to do so is not explicitly stated in the article section.

Deducting employee contributions and failing to pay the EPF contribution can lead to imprisonment of not exceeding six years or a fine of not more than RM 20,000 or both.

Employers must also notify the EPF within 30 days of ceasing to have any employees, but failure to do so can result in imprisonment not exceeding six months or a fine not exceeding RM 2,000 or both.

Here are the penalties for non-compliance:

The Employees Provident Fund (EPF) offers a dividend on funds on deposit, which has varied over time due to investment results. The EPF is legally obligated to provide at least 2.5% dividends, but the actual dividend rate is influenced by the full distribution of net EPF revenue and return on investments.

In 2007, a proposed amendment to the EPF guidelines sparked criticism, as it would have cut monthly contributions for members above 55 years by 50%. This change was met with concerns that it would disadvantage senior members compared to those under the pension scheme.

The EPF declares an annual dividend, which has ranged from 4.75% to 6.90% for Shariah savings and 5.20% to 6.90% for conventional savings. Here is a breakdown of the dividend rates for both savings types over the past few years:

The EPF has introduced a new account, Account III, which stores 10% of the member's contributions and allows for withdrawals at any time for any purpose. This new account reflects a shift toward accommodating the short-term financial needs of EPF members while still safeguarding their retirement savings in Accounts I and II.