EPF & SOCSO 6 December 2011

All payments for wages are subject to EPF deductions

Employers are legally required to contribute EPF for all payments of wages paid to the employees.

Rate of Contributions
The current rates are 11% for the employee and 12% for the employer, but employers are advised to keep abreast with changes which may take place from time to time. 

In accordance with the proposal made in the Budget 2012, the contribution rate for staff earning less than RM5,000 will be 11% for the employee and 13% for the employer, with effective from 1 January 2012.

The amount of contributions must be rounded up to the next Ringgit, and contributions for a particular month must be paid before or on the 15th of that month.

Example:

  • Employee A, whose wages for a month is RM1,000, the rate of contributions is RM110.00 for the employee’s share and RM130 for the employer’s share.
  • Contributions for the month of February which is deduction from the January wages must be received by the EPF together with the Form EPF 6 (Form A) for February before or on 15 February.

Deduction of salary for the employee’s share of EPF contribution can only be made at the time when his/her wage is paid.


Late Contributions
Late contributions are contributions for a certain month which are received by the EPF after the 15th of that month. They include arrears of contributions and contributions for a certain month/period that have been under paid.

For payment of arrears of contributions, employers are required to use the Form EPF 7 (Form E) and Form EPF 8 (Form F) except for contributions in respect of salary revision which are required to be paid together with the current monthly payment by using the same Form EPF 6 (Form A).

Late payment of contributions is subject to penalties.

Making Payments
Payment for EPF contributions can be made at KWSP counters; through Banks that have been appointed as collection agents; through the Internet; or by mail.


Remuneration that subject to EPF Deductions

Generally, all wages paid to the directors/staff/employee/workers are subject to EPF deductions. The payments by the employers subject to deductions are:

  1. Wages
  2. Wages in lieu of notice of termination of employment
  3. Payment for unutilised leaves (including annual & medical leave)
  4. Bonuses
  5. Allowances
  6. Commission
  7. Incentive
  8. Arrears of wages
  9. Wages for maternity leave
  10. Wages for study leave
  11. Wages for half pay leave
  12. Arrears for wages arising from salary revision
  13. Other payments under services contracts or otherwise.

Payments that are not subject to EPF deductions are as follows:

  1. Service charges
  2. Overtime payment
  3. Gratuity
  4. Retirement benefits
  5. Retrenchment, temporary and lay-off
  6. Any travelling allowances or the value of any travelling concession
  7. Director’s fees
  8. Any other remuneration or payment as may be exempted by the Minister
The above list is not exhaustive. If in doubt, please contact any nearest KWSP offices.

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Author:
Ms. Angelina Ariel is the senior executive of NBC Group of Companies.
Angelina Ariel has written 74 articles for NBC Blog.

105 Comments

  • May I know, what type of allowance that will need to include in EPF deduction. As I am from factory base, we have many type of allowance. For example attendance allow., morning allow. etc.
    Can you please more specific ….

    Thank you..

  • Hi Atie, all allowances are in fact subject to EPF deduction. (as all of it are connected to the job performance).

  • Mrs Ng-Seow

    May we know what is the definition of monthly wages to determine
    whether the employee is less than or more than 5,000?

    As the statement mentioned employee <55 years old:
    "monthly wages 5,000, the calculation of ER contribution shall be calculated at the rate of 13% (instead of 12%)

    I am aware that EPFable Wages includes all payment such as monthly salary/monthly fixed allowances/ Bonus/
    Commission/ incentives.

  • Hi Mrs Ng, thanks for your visit and comment, hope the following is useful to you:

    Wage as defined in Section 2, EPF Act 1991 is:
    …all remuneration in money, due to an employee under his contract of service or apprenticeship whether agreed to be paid monthly, weekly, daily or otherwise and includes any bonus, commission or allowance payable by the employer to the employee.

    For more details about this changes, you may visit this link:

    http://www.nbc.com.my/blog/faq-13-employer-epf-contribution-from-1-jan-2012/

  • Mohd Arifin

    Thank you for your post, it is very informative & solve my problems.

  • Peter Kuan

    Does the monthly wages of RM5,000 includes only epfable wages or total gross wages including overtime and travelling allowance?

    Thanks in advance for your clarifications.

  • I am working in a company with a salary of 1500, but i do not get EPF since i am thr only staff can you please advice

    • Preeti, you are entitled for EPF contribution by your employer regardless any number of staff in your company and amount of salary.

      Talk to your company & request them to contribute EPF for you. Failing to do so will result in KWSP taking legal action towards your company.

  • The EFP&SOCSO contribution is a MUST for employer to contracted lorry driver? If we just pay him salary per day when we need him to pick up something. It is on n off…So contribution is a MUST?

    • If the lorry is hired, then no issue.

      If the lorry belong to the company and you hire the driver lorry, technically, whether it is partime or full time, yes, it is a must.

  • If the company is providing benefits such as housing allowance, car allowances, petrol allowances as part of benefits, will these be considered for EPF deduction as well?

  • does company need to contribute epf on travelling allowance pay to employees?
    example.
    basis salary 5000 (company need to pay 12% for example)
    travel allow 700 (company need to pay ???)

    • Chong, travelling allowance is not subject to EPF contribution/deduction. So the 700 will be EPF free.

      However, you need to consider PCB for travelling allowance if this is not for business purposes.

  • Does company need to contribute epf for handphone allowance, traveling allowance and commission as my company does contribution for epf for all above.

    Thank you

  • I agreed to pay a fixed rate of RM400 to my supervisor as car maintenance allowance as he is fetching workers on and off site.
    He is claiming on Fuel Consumption only.

    So, may I know whether this RM400 is subject to EPF deduction?

  • Dear Ms Angelina

    Could you kindly enlighten me the difference between Contract of Service vs Contract for Service and which requires compulsory EPF contribution.

    Thank you

  • My company intend to pay incentive for my sales & engineers.
    Around RM2,000 to Rm4,000 once a year during Sept (Financial year closing).
    Is this Incentive subjected to EPF contribution?

    Thank you.

  • If forigners got the working permit. Do they need to pay EPF?

    as well as, do thay need to return Income tax?

    • Hi Esther, it is subject to terms & conditions of your contract.

      For sure you have to submit Income Tax Return for income you have earned in Malaysia. (Provided you have worked more than 60 days in Malaysia)

  • Is meal allowance (not fix, by claim) subject to EPF contribution?

    • Hi Ms Sam, then don’t call it meal allowance, please classify or itemise it as meal claims. It will have not EPF issue.

  • I am getting my director fees this month and my boss decide to contribute EPF base on the amount i get. Is that a problem ?

    • Hi Chua, it is good to voluntarily contribute EPF. No problem at all if your company contribute EPF for your director’s fee.

  • Company A pay overtime to employees and also pay meal allowance for
    working overtime. Is this meal allowance subject to EPF contribution?

  • Wana ask for wat means as allowance…my boss give transport allw…food allow… N extra ganjaran izzit need pay epf…tq..

  • D working with Company ABC, If D agreed to joined Comp XYZ with short notice given to ABC, D need to pay in lieu of notice payment 1000.00 to ABC. Then D claim 1000.00 from Comp XYZ. This 1000.00 is it subject to EPF to Company XYZ and PCB to D?

  • fixed payment of car allowance, handphone allowance and diesel and maintenance allowance subject to EPF contribution??

  • may i know businessman are not compulsory contribute for EPF?

    • Hi Josh, if you are businessman under Enterprise (sole proprietor/partnership), then you are not required to contribute for EPF for whatever wages/salary/allowances you received from the company.

      If you are a businessman as director under a sdn bhd company, then you will be considered Staff to the company, then you will be subject to EPF contribution for all pay from the company (except for director’s fee).

  • JANIF LOW

    hi,
    would like to check with you, unpaid leave subject to EPF contribution?

    thanks
    Janif low

    • Hi Janif, unpaid leave means no pay on the day that you took leave, so there will be no epf contribution.

      If there is paid leave, then that will be counted as your normal pay day, it is subject to EPF.

      If you get paid for unutilised paid leave, then it is still subject to EPF contribution.

  • Hi, can i check with you , if our worker staff requested the company DONT Contributed EPF for her / his , due to low salary and a lot of commitment.

    Can the company accept it and any letter or form to fill in for the staff who rejected to contribute. Thank you.

    • Michelle, the contribution is statutory requirement, the company must contribute for staff even it is requested by the staff.

      The company will be penalised for failure to contribute even though consent was obtained from staff.

  • If employee ask employer to draft out a contract on indicating they do not required EPF contribution, what should the employer do? Hired the person as contract staff?

    Please advice is there any way that a person does not required for EPF contribution.

    Thank you.

  • Loh Beng Piau

    Hi, i’m a housing agency dealing in sale and rent of property. i did pay EPF to my fulltime staff (CLERK). But my agents are all like self employed, cause they don’t have basic salary, no working hours, no annual leave, no allowance. They only get commission when they closed a sale. So they can choose to work or not to work anytime they want.
    Recently a EPF officer visited me and saying that i need to contribute EPF for my agents. I argued with him how am i going to pay EPF since they are to tight to my company and they can leave anytime without giving notice and there’s no contract for their services. They work like free lance and i don’t have the right to ask them to work. But the officer say that as long as i pay “commission” then i have to contribute EPF? Is this correct? Then how bout when we are selling houses, the owner pay us commission for the deal, that means they have to pay for my EPF as well? it does not make sense right!! What should i do in this case? Samor all my agents don’t want to contribute for EPF, if i force them to do so, they will just leave and work for other company!! The officer say he will visit me again to check my account in 2 months time. Does he have the right to check my account? What should i do? Please help…. really headache for this case. Even my lawyer friend and accountant friend says i don’t have to contribute… but this officer keep on bothering me!!

  • May I know, what type of allowance that will no need to include in EPF deduction. As I am from factory base, we have many type of allowance. For example attendance allow., extra allow, outstation allow etc.
    Can you please more specific ….
    Thank you..

  • Due to our subsidiary company in M’sia.I need to check their EPF payment. May i know if monthly wages including allowance but not including bonus over than RM5,000, so what is contribution amount?

  • Yuki Leong

    Can you tell me if company pay compensation fee for employee of termination, so need to EPF deduction or not ?
    Thank you.

  • Hi,
    I would like to know if i receive less than RM5000 of salary but every month i will have sales commission which after total up is more than RM5000. Am I entitle for the 13% employers contribution?

  • Dear Ms.Angelina,
    Good day! One of my company staff (executive lever) salary above RM 2k resign with shot notice immediately, can company on hold pay his EPF and sosco? At list his can pay back shot notice to company only company pay back his EPF?

  • Yukie Thun

    if you are businessman under Enterprise (sole proprietor/partnership), then you are not required to contribute for EPF for whatever wages/salary/allowances you received from the company

    May i know did you have any prove under Enterprise (sole proprietor/partnership) not required to pay EPF?

    I need to prove where can get it??

    Thank you

  • Hi Morning, may I know can overtime include in EPF & Socso deduction.If not, is it against our labour law?

  • I operated maid agency and I have 4 clerks. Recently they require me not to contribute to EPF and want to use existing contribution to buy insurance. Can I do it for them? Please advise, if they are under contract staff, I need to contribute for EPF?

  • Hi…I just want to know are th angpaw entitled for epf?tq

    • Amy, angpow is always a grey area in EPF. If the amount is small like RM10-RM100 per person, then it is acceptable no EPF contribution. But, how about RM1,000 or more? You will be unable to justify why the angpow is so huge amount and you will be high likely asked to contribute EPF.

  • Kok Chee Kheong

    Dear Expert,

    Just need some clarification from you with regard to the Taxable income on fixed allowance and reimbursement fee.

    Let say I have a basic salary RM 5000(A) + RM 1000 (B) fixed allowance for car depreciation and maintenance + RM 1000 (C) receipt reimbursement fee for petrol and toll.

    Item B + C is not subject to EPF dudection but will be taxed.

    My Employer declare their Taxable income per year based on RM 60,000 (A) + 18,000(B+C)(24,000.00 – 6,000)

    Do you think that the approach is according to EPF act where no EPF contribution/deduction but will fall under the taxable income for item B+C?

    Thanks for revert.

    From Steven – 012-324xxxx

    • Hi Steven, I shall assume your main job function towards marketing, then car & petrol allowances in your case will be travelling allowances. The approach is acceptable.

      Please take note that travelling expenses which are incurred by you in the course of exercising your duties as an employee can claim against travelling allowances that you received. Ultimately, save your tax!

      Travelling expenses are those petrol, parking & tolls. Please exclude car maintenance, LHDN will not accept it.

  • Kok Chee Kheong

    Hi!Angelina,

    Thanks for your clarification.

    Actually I am not in the Marketing line and the reimbursement petrol and toll is purely(90% own used) on to and from my house.

    I have an understanding(verbal Agreement) from the Management that the fixed allowance and reimbursement fee is not subject to tax and contribution to EPF. This arrangement started since 2010 and 2011 and also not subject to income Tax. (no declare)

    But unfortunatly, New HR came in on 2012 and include all my allowance and reimbursement fee into my EA for year 2012 with no contribution to EPF.

    I find very contracdite with the HR’s approach where she imposed all allowance (A+B)into the taxable income which I need to pay additional Tax and at the same time, did not provide the EPF contribution.

    I am in the losing end for both scenario:-

    1) Pay additional tax.
    2) without contribution to EPF.

    Do you think her approach can be challeged? or did she follow the EPF act where no contribution but can be taxed?

    Thanks for revert.

    fr, Steven – 012-xxxxxxx

  • Janson Wong

    our company calculate overtime maximum 100hrs only. if got balance (over 100hr) we put it as an incentive. did we need to contribute EPF for the incentive?

  • Gan Mei Chen

    Hi,

    Our company provide housing loan subsidy to staff. May I know if this subsidy is subject to EPF contribution?

  • Hi,

    is there a difference with monthly Fixed Car Allowance via salary and on off Travelling Allowance through claim?

    May i ask which require to contribute to EPF or both are not require?

    Please help as i always get confused, tqvm.

    • Christy, allowance will subject to EPF but claims do not. Claim is just to get back your money used for the company.

  • My Company distributes part of the profit to all employees as a reward and is reflected in the pay slip. The payment is never paid based on revenue generated but is based on the profit. If profit is low then this payment is not paid out. Is this payment subject to EPF deduction? To make it more relevant can the payment be paid seperately without incorpoarating into the pay slip?

  • Benjamin

    Hi,
    I get my retrenchment package last month and I have doubt if my previous employer is made a fair payment. This is reflected in my last payslip.
    1. Basic salary – subject to income tax deduction and EPF contribution
    2. Leave allowance – subject to income tax deduction and EPF contribution
    3. Payment Notice In Lieu – subject to income tax deduction and no EPF contribution
    4. Retrenchment benefit – no income tax deduction and no EPF contribution
    5. Retention benefit – subject to income tax deduction and no EPF contribution

  • Hi, if my company help staff buy ipad and subsequently deduct it in the staff salary.

    e.g:
    salary RM2000
    purchase ipad RM999.00 (divide to 3mth deduction, RM333/month)

    epf contribution need to follow RM2000 or RM16667 (RM2000 – RM333)?

    • Hi KACY, the EPF contribution will still be based on salary RM2,000. The deduction of advance payment is merely repayment by staff via salary.

  • The company gave a bonus in adavance with term & condition and stated in EA form but at end employer has to pay back.

    So, how to claim the tax refund on the “bonus”?

  • Does company need to contribute epf for handphone allowance. As my company does contribution for epf for above item.

    Thank you

  • Hi, if I sell any product to company,they give me commission got any EPF change?

  • May I know service charge pay by the employer required to contribute for EPF? If No, any ammedment law will kick in to force employer to contribute EPF on service charge received due to the current saving in EPF account was very low.

    • Hi McLaren, service charge is given by the customers to staff, and it is not considered wages paid by the company to staff. Thus, service charge is not subject to EPF deduction.

  • irenelctan

    If terminate a staff and company pay extra 1 month for termination service. Is the termination fee (extra 1 month) need pay EPF?

    • Hi Irene, yes, it is subject to EPF deduction as it is still considered wages paid to staff.

      The best practice is to advice staff to tender the resignation letter and the company will still pay him/her extra one month, this will reduce all possible legal matters or cases subsequently to the forced termination by the company.

  • Hi, is payment to staff for their service points earned in hotel industry subject to EPF?

    • Ann, the service point is the basis of sharing the service charges given by the customers, it merely indicated how the service charges to be shared among the staff of the hotel.

      The service charge received are not income of the Hotel and payment to service charge to staff will not be considered as expenses of the Hotel. It will not be considered as wages, so not subject to EPF deduction.

  • Hi,

    I understand that service charge is not subject to EPF. However, under the current minimum wages requirement, service charge will be included as package to achieve minimum wages. In this case, is the now service charge entitle for EPF contribution?

    Thank you.

    • Shirlee, if the service charge is considered a gift from customers for services performed by the staff, then it is not considered as wages of the staff.

      Then it is not subject to EPF since it is not wages at the first place.

  • Hi,

    My company has employed casual workers. They are not fixed to work and money is paid based on their attendance at per hour rate. Their working hours is normally 8 hours, if exceed we pay them OT. They are being paid twice per month. Shall we pay them EPF?

    Thank you.

    • Hi Shirlee, by referring to EPF ruling, yes, you need to contribute EPF for all staff, regardless full or part time. But, this is not applicable to foreign workers.

  • Does Unpaid leave needw to be dedcuted from gross salary to calculate the EPF contribution?

  • My company has provided hostel for staff and deduction RM200 from their salary. I have checked with EPF officer and they confirmed the EPF must be based after the deduction from basic salary..eg.If staff is earning RM1,500 so their EPF is based from RM1,300.00 is this right?

    • Hi Sheela, if your gross pay is stated as RM1,500, then all is subject to EPF.

      The deduction is purely on the payment mode and it should not affect the basis of calculation on the gross salary received by you.

      Unless it is clearly stated that your pay is RM1,300 + RM200 for accommodation charge, then the deducted portion will not subject to EPF.

  • One of our staff have a salary of Rm6000 & a fixed monthly allowance of RM2000 whereby there has no specify for what kind of allowance is that. Can i classified it as travelling allowance? So that it is not subject to EPF contribution. But for travelling allowance, does it subject to PCB deduction? How about Director Fee? Not subject to epf but for PCB?

  • Im Jh, can you state more clearly like things connected to performance are subject to EPF contribution? How about Overtime Pay (OT) as above stated, it is not subject to EPF?

    And your “Gross Income” will be subjected to EPF? If the payslip wrote
    Basic 2,000 + OT 200 = Gross 2,200. So the company need to contribute base on 2,000 or 2,200?

  • Hi, is it possible for a company to pay EPF every 3 months instead of monthly basis? As my company deducting my EPF every month, however, when I checked on my EPF statement, they did not pay for the past 4 months. I have talked to my finance, and they mentioned they only make the payment every 3 months. Are they allow to do that?

    • No, Nini, the EPF contribution must be on monthly basis. It is an offence not to remit the amount within 15 days of the following month. Please lodge your complaint to KWSP for they will take action to your company.

      Base on my experience, these kinds of companies who do not pay EPF or SOCSO on time are normally those companies having financial problems.

      Those EPF & SOCSO were in fact staff monies, why the company do not remit to KWSP & Perkeso after deducting the monies from the staff’s pay? The only reason is the company need fund to run the business.

  • Hi there, need clarification.
    Is Overtime & transport allowance is subject EPF? Noted, in this blog it stated OT not subject to EPF. In my co, the OT is subjected to EPF, where else transport allowance is not.
    Pls advice.Tks

  • hi angelina, seek for your advice as below questions;

    1. Does employer have the rights to view my current or previous epf statement of contributions?

    2. Is there any way to verify “No Majikan” in kswp system eg. key in no majikan 0123456789 then the system will appear the majikan/company name?

    • No, Remy, an employer has no right to view the staff’s personal epf statement.

      I afraid you can’t check it online. You may get it from KWSP office.

  • Hi, does no pay leave need to contribute to SOCSO?

  • May I know what is the rationale that travelling allowance is not liable to EPF contribution?

    The travelling allowance is payable to employee as fixed cash allowance but not based on reimbursement basis.

  • Hi, I have an query, if the employee basic salary is more than RM5k a month(based on the EPF contribution rate is 11% – Employee ; 12% – Employer), unfortunately, during that month this employee have utilize all his annual leave and taken 1 day unpaid leave, therefore, after minus off the one day unpaid leave, his/her basic salary will become less than RM5k, so what is the contribution rate for that particular month? Are we still maintain at 11%:12% or 11%:13%?

    Thank you.

  • is pcb calculation for resigning employee different from existing employee ?

  • Hi..I want to ask, do the directors need to pay epf fix amount monthly or follow how much salary he/she get in that month?..

  • Hi,
    Let say the staff join on 10/3/2014. His basic is RM1700.00.
    His salary calculation will be: 1700/26*9 = 588.50 (Rm1700 – 588.50) = RM1111.50.

    So, his epf contribution based on RM1111.50?

  • Anna Liza Marie

    If i have a Malaysian who is studying in one of the University in Singapore and will be doing her intern in the company i work for in Malaysia for about 3 months, with a Salary of MYR 1000.00, is it required to deduct EPF & Socso? Please advise.

  • Anna Liza Marie

    What about Socso contribution ? does it required for an intern ? who is salary MYR 1000.00, internship for 3 months. Please advise.

  • I need your kind assistance to advise that if the attendance allowance which are not fix ? example like company provide RM100.00/mth based on their full attendance, if they have MC or unpaid leave, then will deduct RM25.00/day from the allowance, should this need to contribute EPF ?

  • If we hire a staff under 6 months contract (contract of service), does he required to contribute EPF?

  • Hi,

    I have oepned up a business as in partnership business. Do i need to pay EPF on the salary for my employees? My partnership business registered were in the name of 2 partners, however in actual, there are several partners but those partners were not registered as partner because they are only holding small percentage of the business and they agreed not to be disclosed. However, i wished to pay some allowance out to those silence ‘partners’, does that allowances subject to EPF?

    • Daphne, you have the option to contribute epf for partner in partnership. Even you don’t contribute epf for partner’s salary, it’s ok by kwsp act as it is not mandatory.

      But epf contributed to partners are not tax deductible in Income Tax Act, means you can’t claim the epf.

      For allowance to “sleeping partners”, yes, you may have issue with epf. Please term it other name like commission. Commission paid out must be based on certain criteria and basis.

  • Just hopes someones helps answers me this. I tries to applies to pay EPF online, and turns out the amount is higher than my calculation based on the percentage.

    Example: Amount is RM111.11, is supposed to be rounded to next ringgit, which is RM112. However, it is shown to be RM115. Why is that? Is it means round to the next every RM5, and not a single ringgit RM1?

    • @FBM, the epf contribution amount in the table is always higher due to rounding up of small amount. You need to contribute epf for staff according to the table, failing to follow is an offence.

      If you are owner of sole proprietor or partner in a partnership, you do not need to follow the table to contribute.

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