Understanding EPF: Contribution Rates, Benefits & What It Means for You

A Complete Guide to EPF Contributions, Employer Obligations, and How It Impacts Your Retirement Savings in Malaysia
March 26, 2025 by
Understanding EPF: Contribution Rates, Benefits & What It Means for You
CONZLAB BERHAD 202301040401 (1534320P), Penny Lim


Understanding the Employees Provident Fund (EPF)

The Employees Provident Fund (EPF) is a social security institution established under the Employees Provident Fund Act 1991 (Act 452) in Malaysia. Its primary purpose is to manage employees' retirement savings efficiently and reliably. The EPF also provides a structured system for employers to fulfill their statutory and moral responsibilities toward their employees.

EPF Contributions: How It Works

EPF contributions refer to the amount of money deposited into an employee’s individual EPF account. These contributions are calculated based on the employee’s monthly salary and are shared between the employee and employer.

Current EPF Contribution Rates

The contribution rates vary based on the employee’s monthly salary:

1. Employees earning RM5,000 and below

  • Employee contributes 11%
  • Employer contributes 13%

2. Employees earning above RM5,000

  • Employee contributes 11%
  • Employer contributes 12%

Temporary EPF Contribution Rate Reduction During COVID-19

To ease financial burdens during the COVID-19 pandemic, the EPF temporarily reduced employee contribution rates:

  • 2020: Reduced to 7%
  • 2021: Increased to 9%
  • 2022: 9% (January–June), reverted to 11% from July onwards

Employees who wished to maintain their 11% contribution rate were required to submit an application form.

Who Must Contribute to EPF?

Employers are obligated to make EPF contributions for all individuals engaged in employment under a Contract of Service or Apprenticeship, except those exempted under the EPF Act.

This includes:

Full-time, part-time, temporary, and probationary employees

Company directors receiving wages

Employees up to the age of 75, regardless of whether they have made full or partial withdrawals after reaching 55 or 60 years old

Employees who previously withdrew savings under Pensionable Employees and Optional Retirement Withdrawal, but are now working outside government agencies

Employees who withdrew under Incapacitation Withdrawal, recovered, and are re-employed

Employment Age Requirement:

  • Minimum Age: As per the Children and Young Persons (Employment) Act 1966
  • Maximum Age: 75 years old

Who Is Exempted from EPF Contributions?

Certain groups are not required to contribute to EPF, as stated in the First Schedule of the EPF Act 1991:

  • Nomadic aborigines (unless recommended by the Department of Aborigines)
  • Domestic servants (e.g., maids, cooks, gardeners, personal drivers) unless employed by registered businesses or corporations
  • Out-workers as defined under the Workmen’s Compensation Act 1952
  • Individuals in detention centers, prisons, mental hospitals, or rehabilitation centers
  • Members of administration, as defined under Article 160 of the Federal Constitution
  • Foreign expatriates who elect not to contribute
  • Employees aged 75 years and above

Types of Wages That Require EPF Contributions

EPF contributions are applicable to monetary payments made under an employment contract. These include:

  1. Salary
  2. Unused annual or medical leave payments
  3. Bonus and incentives
  4. Allowances and commissions
  5. Arrears of wages
  6. Maternity leave wages
  7. Study leave wages
  8. Wages for half-day leave
  9. Other contractual payments

Types of Payments Exempted from EPF Contributions

  1. Overtime payments
  2. Service charges
  3. Travel allowances or travel concessions
  4. Payments in lieu of notice for termination
  5. Gratuity
  6. Retirement benefits
  7. Retrenchment or layoff compensation
  8. Director’s fees

Conclusion

The Employees Provident Fund (EPF) is essential for securing your retirement while helping employers fulfill their responsibilities.

If you need guidance or assistance with your EPF application, contact us, and our team will be happy to assist you. 

For more details, visit the official EPF website.

Website

Understanding EPF: Contribution Rates, Benefits & What It Means for You
CONZLAB BERHAD 202301040401 (1534320P), Penny Lim March 26, 2025
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