Members of the Employees Provident Fund (EPF) earning a monthly wage of not exceeding RM5,000 will be receiving a boost in their retirement savings when the revised employers’ statutory contribution rate of 13 percent takes effect from January 2012 wages.

The one per cent increase from the current 12 per cent will benefit 5.3 million working Malaysians, comprising 92 per cent of EPF’s active members. Meanwhile, the employees’ contribution rate remains at 11 percent.

Employees who are 55 years and above and earning wages not exceeding RM5,000 will also benefit from the revised rate as their employers are now required to contribute at 6.5 per cent which is an additional 0.5 per cent from the current 6 per cent, while the employees continue to contribute at 5.5 per cent.

Frequent Asked Questions (FAQ) posted by KWSP:

1. Which employees are affected with the increase in employer’s share contribution rate?

The affected employees are employees who receive monthly wage/salary of RM5,000.00 and below as stated in Part A and Part C in the Third Schedule, EPF Act 1991.

2. What is the new employer’s share contribution rate for employees who receive monthly wage/salary of RM5,000.00 and below?

Generally, the new employer’s share contribution rate is divided into two categories:

i) For employees of not more than 55 years old, the new employer’s share contribution rate is 13% (increase of 1%); subject to the total of wage/salary in Part A, Third Schedule.

ii) For employees of 55 years old and above (up to 75 years old), the new employer’s share contribution rate is 6.5%; subject to the total in Part C, Third Schedule.

For future reference, the new employer’s share rates are 13% and 6.5% stated in para (i) and (ii) will be referred as the new rate for employer’s share contribution.
3. What is meant by ‘wage’?

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.

4. When is the effective date for the new employer’s share contribution rate?

The new employer’s share contribution rate is effective beginning January 2012, that is for wage/salary received by an employee for January 2012 (EPF contribution for February 2012) and thereafter.

5. How long will the new employer’s share contribution rate take effect?
The duration will be until an official announcement be made should there be changes.

6. Does the new contribution rate affect employee’s share?
No, the employee’s statutory contribution rate remains at 11% (Part A, Third Schedule) and 5.5% (Part C, Third Schedule).

7. What is the rationale of the increase in employer’s share contribution rate for employees who receive monthly wage/salary of RM5,000.00 and below?

This is an initiative by the Government to increase employees’ retirement savings for those who receive monthly wage of RM5,000.00 and below to enable them to have sufficient savings upon retirement. This is due to the longer retirement period as the lifespan increases. Therefore, an employee would need more savings to finance their retirement days.

8. How do I obtain the information related to the new employer’s share contribution rate?

The new employer’s share contribution rate can be referred in Part A and Part C, Third Schedule, EPF Act 1991.

9. Where can the reference for the Third Schedule be made?

Please click here to refer to the Third Schedule.

10. Does the new employer’s share contribution rate also applies to the bonus paid to employees who receive monthly wage/salary of RM5,000.00 and below?

Yes, based on the employee’s category as mentioned in question 2.

11. What is the new employer’s share contribution rate for the bonus of more than RM5,000.00 paid to an employee whereas the monthly wage/salary received is RM5,000.00 and below?

Generally, the new employer’s share contribution rate for bonus of more than RM5,000.00 paid to an employee who receives monthly wage/salary of RM5,000.00 and below is divided into two categories as mentioned in question 2. Examples for the new employer’s share contribution rate with bonus payment for the employees in the two categories are as follows:

Example 1:
An employee of not more than 55 years old who receives monthly wage/salary of RM3,000.00 and bonus payment of RM6,000.00 with a total of RM9,000.00, the employer’s share contribution rate for the employee is 13%.

Example 2:
An employee of 55 years old and above (up to 75 years old) who receives monthly wage/salary of RM4,000.00 and bonus payment of RM8,000.00 with a total of RM12,000.00, the employer’s share contribution rate for the employee is 6.5%.

12. If the employer has made an option to contribute more than the statutory rate for employer’s share contribution prior to this, what is the implication due to the implementation of the new employer’s share contribution rate?

This depends on the terms and conditions of the service or service agreement or collective agreement between the employee and employer.

Scenario 1: If the service terms state specifically that the employer’s share contribution is more than the the contribution rate (example: 17.5%), then the rate shall apply. However, the additional employer’s share contribution can be made to the existing rate.

Scenario 2: In a situation whereby the service terms state that the employer’s share contribution rate is a rate that is more than the statutory rate (example: 5% more than the statutory rate), then the new employer’s share contribution rate must be taken into consideration and takes effect (example: 13% + 5% = 18%).

13. Can the employer contribute more than the new statutory rate?
Yes

14. Is the new rate imposed on employers who are making payments for outstanding contributions for employee’s wage/salary before January 2012?

No, the new employer’s share contribution rate does not affect earier months contribution and outstanding (before January 2012).

15. If an employee does not work in full for a certain month and receives monthly wage of less than RM5,000.00, what is the new employer’s share contribution rate imposed?

The employer’s share contribution rate imposed is based on the new rate as mentioned in question 2 (i.e. 13% or 6.5% subject to the Third Schedule).