Ensuring employees’ financial security is a fundamental responsibility for employers in Malaysia. One of the most critical aspects of payroll management is making the correct contributions to the Employees Provident Fund (EPF).

But do you fully understand how EPF works, how much you need to contribute, and what happens if you don’t?

This guide covers everything employers and employees need to know about EPF contribution rates, eligibility, calculation methods, and legal obligations in 2025.

What is EPF Contribution?

EPF, managed by the Kumpulan Wang Simpanan Pekerja (KWSP), is a mandatory retirement savings scheme for private-sector employees in Malaysia. Both employers and employees contribute a portion of the employee’s salary to EPF, which is then invested to provide long-term financial security upon retirement.

Key Functions of EPF Contributions:

✅ Retirement savings – Ensures financial stability for employees post-retirement.
✅ Dividend earnings – Contributions grow with annual EPF dividends.
✅ Flexible withdrawals – Employees can access savings for housing, education, or medical expenses under specific conditions.

EPF Contribution Rates for 2025

EPF contribution rates depend on the employee’s age and salary bracket. Below is a detailed breakdown of the rates:

1. For Employees Below 60 Years Old

2. For Employees Aged 60 and Above

 

3. For Foreign Workers (Including Expatriates) – New Mandatory Contribution

Effective February 3, 2025, foreign workers and their employers are now required to contribute to EPF.

Note: Foreign workers previously had the option to contribute voluntarily. This change ensures retirement savings protection for all employees in Malaysia.

4. Voluntary Contributions

• Employers can contribute more than the mandatory requirement if they wish to enhance employee benefits.

• Employees can also top up their EPF savings voluntarily through self-contribution.

Who Must Contribute to EPF?

EPF contributions are mandatory for:
✔️ Malaysian citizens and permanent residents working in the private sector.
✔️ Employees aged 18 to 60 years old, earning wages under a contract of service or apprenticeship.
✔️ Foreign workers and expatriates (starting February 3, 2025).

Exceptions (Not Required to Contribute to EPF):

❌ Government employees under the pension scheme.
❌ Domestic workers and self-employed individuals (unless they voluntarily register).

How to Calculate EPF Contributions?

EPF contributions are calculated based on an employee’s gross monthly salary, which includes:

✅ Basic salary
✅ Fixed allowances (e.g., transport, housing, meal allowances)
✅ Bonuses and commissions

Excluded from EPF Calculation:
❌ Overtime payments
❌ Reimbursement claims
❌ Gratuities or severance payments

EPF Contribution Calculation Formula

• Employee Contribution: Gross Salary × Employee’s Contribution Rate

• Employer Contribution: Gross Salary × Employer’s Contribution Rate

• Total Contribution: Employee Contribution + Employer Contribution

Example Calculation:

If an employee earns RM4,500 per month:

• Employee’s Contribution (11%) = RM4,500 × 11% = RM495

• Employer’s Contribution (13%) = RM4,500 × 13% = RM585

• Total Contribution to EPF = RM495 + RM585 = RM1,080

Employers must deduct the employee’s share from their salary and remit both portions to EPF by the 15th of the following month.

When and How to Make EPF Payments?

Payment Deadlines

⏳ Due Date: 15th of the following month.
❌ Late payments will result in penalties and additional interest charges.

Payment Methods

Employers can submit EPF contributions through:
✅ KWSP i-Akaun (Employer Portal) – Online submission via https://www.kwsp.gov.my
✅ Online banking (FPX payment)
✅ EPF counters and kiosks
✅ Authorized bank counters (Maybank, CIMB, RHB, Public Bank, etc.)
✅ Cheque or bank draft (Online payments are encouraged for efficiency).

Penalties for Non-Compliance

Failure to comply with EPF regulations can result in severe penalties:

🚨 Fines up to RM10,000 per employee.
🚨 Imprisonment for up to 3 years.
🚨 Additional late payment interest charges, calculated based on EPF regulations.

To avoid legal risks, employers must ensure timely and accurate EPF payments.

Additional Employer Obligations

Apart from EPF, employers must contribute to other statutory funds:

How to Register for EPF as an Employer?

New businesses must register with EPF before hiring employees. Here’s how:

📌 Step 1: Visit the KWSP website – www.kwsp.gov.my
📌 Step 2: Register through i-Akaun (Employer) or visit an EPF branch.
📌 Step 3: Submit the required documents:

• Business registration certificate (SSM Form 9, 24, 49 for companies)

• Employer’s identity document (IC or passport for foreigners)

Once registered, employers must start remitting EPF contributions from the first month of employment.

Conclusion

EPF contributions are a crucial part of payroll compliance in Malaysia. Employers must ensure accurate and timely EPF payments to avoid penalties, while employees should monitor their contributions for long-term financial security.

Manually calculating EPF deductions can be time-consuming and error-prone. With Pandahrms, our all-in-one payroll system, you can automate EPF calculations, ensure accurate deductions, and stay compliant with the latest regulations. The system:

✔ Auto-calculates EPF contributions based on the latest KWSP rates for both employees and employers.
✔ Integrates with payroll processing, ensuring EPF deductions are accurately applied in each salary cycle.
✔ Handles EPF-eligible salary components, distinguishing between taxable and non-taxable earnings.
✔ Provides real-time contribution tracking for verification before payroll submission.
✔ Generates EPF reports for easy submission to i-Akaun (Employer).

Staying informed about EPF updates, including the 2025 foreign worker contribution changes, is essential for compliance and protecting employee benefits.

For the latest updates and guidelines, visit the EPF website (www.kwsp.gov.my) or consult a payroll expert.