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:
- Wages
- Wages in lieu of notice of termination of employment
- Payment for unutilised leaves (including annual & medical leave)
- Bonuses
- Allowances
- Commission
- Incentive
- Arrears of wages
- Wages for maternity leave
- Wages for study leave
- Wages for half pay leave
- Arrears for wages arising from salary revision
- Other payments under services contracts or otherwise.
Payments that are not subject to EPF deductions are as follows:
- Service charges
- Overtime payment
- Gratuity
- Retirement benefits
- Retrenchment, temporary and lay-off
- Any travelling allowances or the value of any travelling concession
- Director’s fees
- Any other remuneration or payment as may be exempted by the Minister
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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).
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/
Thank you for your post, it is very informative & solve my problems.
Welcome, Encik Arifin. Free to visit us again.
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.
@Peter Kuan, total wages that subject to EPF. Overtime is not counted.
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?
Karen, all allowances are subject to EPF deductions except for travelling allowance.
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.
Yes, incentive in relation to the work performance is subject to EPF contribution.
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??
Yes, giant. All allowances except for travelling allowance are 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).
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.
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?
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?
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.
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.
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
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?