EPF & SOCSO,Malaysia Budget 2012 11 October 2011

Tax Budget 2012: Higher EPF Contribution from Employers

Budget 2012 has proposed that all employers are required to increase their EPF contribution from 12% to 13% for staff who are earning less than RM5,000 per month with effect from 1 January 2012.

The staff who are receiving more than RM5,000 will be exempted from the above new policy.

The new requirement to increase employers’ contributions to Employees Provident Fund (EPF) is to help those with insufficient savings to bear the cost of living upon their retirement.

This measure is said to benefit 5.3 million EPF contributors.

The recommended increase to 13% will not have any impact to all salaries earners in the short term as this will only result in the increase in their retirement fund, of which they can only withdraw when they reach 55.

However, this has caught a surprise to employers as all employers had in fact hoping for certain tax cut or incentives from Government.

Always, most employers may find it difficult to absorb the additional cost giving the current economic situation.

Crying-boss

Some facts:

This proposal will make no difference for staff who are working in banking industries and TM, as it was told that these companies are indeed contributing higher percentage for their employees, up to 7% above the statutory rate.

5,508 total views, 6 views today

Author:
Mr. Tony Ng B.C. is Managing Partner and Founder of NBC Group of Companies.
Tony Ng BC has written 84 articles for NBC Blog.

41 Comments

  • Lee Hau Loon

    Can I check with you, for the increase of Employer’s contribution for EPF from 12% to 13%, will it affect the employee’s portion , meaning does the employee need to contribute from 11% to 12%?

  • No, the employee’s portion will still be remained as 11%.

    Small note: That’s my boss face when he heard the increase of EPF % from the budget that day, enjoy!

  • 1) Can i check with you, for the increment, is it valid for Year 2012 only or all the following year to come?

    2) The increment shall start from January payment (Dec’11 salary) or January salary (paid in Feb’12)?

  • nbc.angelina

    Good day, Ban Chye, below are our opinions,

    1. The increment will be effective from 1 January 2012, until further notice.

    2. It is applicable for salary earned from 1 January 2012 and not for December 2011 salary but paid in January 2012.

  • Hi
    May i check the RM5000, is basis salary only or basis + the allowance calculation? eg. basis (4600) + travelling and phone allowance (500)= gross pay RM5100.
    The EPF should 12% or 13%?

  • nbc.geoffrey
    nbc.geoffrey

    @Crystal
    To your question, then we need know the definition of payroll/wages under the EPF law.

    This is how is defined under the EPF Act:
    “wages” means 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 whether such bonus, commission or allowance is payable under his contract of service, apprenticeship or otherwise, but does not include-

    (a) service charge;
    (b) overtime payment;
    (c) gratuity;
    (d) retirement benefit;
    (e) retrenchment, lay-off or termination benefits;
    (f) any travelling allowance or the value of any travelling concession; or
    (g) any other remuneration or payment as may be exempted
    by the Minister.

    Looking at the definition, travalling allowance is not scope in for EPF contribution. As in your case, travelling + phone allowance = RM500, then depending on how much portion would be for travelling, then there could be possibly the month “wages” may fall below RM5,000, and then employer’s EPF rate is still at 12%.

    We would suggest you to check with your HR and I believe there will a lot of enquiries made to EPF out there for clarification and guidance.

  • Hi, I would like to check with you. Is there any increase on employer
    contribution for a person above 55 yrs old and what is the contribution
    rate for a salary of RM2,000. Can the employer contribute the same rate 13% (employee 11%).

  • nbc.angelina

    Hi Cindy,

    Yes, you can opt for 13% for any employee if you want to even though the wage rate is more than 5,000.

    However, there are separate ruling for staff who are more than 55 years old:

    EPF contribution rate for workers aged more than 55 are employer’s 6% and employee’s 5.5%.

    Visit here for KWSP official page

  • sudhagar s

    How to arrive out the EPF deduction amount.
    whether straight away we can apply 13 % on EPF salary gross (or) slab will be advised by PCB.

  • @sudhagar s, it is applicable on the gross salary & not after deducting PCB.

  • Josephine

    What is the employer contribution for bonus declared for year 2011 yet paid in January 2012?

  • @ Josephine
    The bonus paid in Jan 2012 is considered as wage earned in Jan 2012 and EPF contribution will be paid to EPF in Feb 2012, thus it is subject to 13% employer EPF rate., provided the monthly wage/salary is RM5,000 or less.

    FYI
    If the employer pays bonus to an employee who receives monthly wages of RM5,000.00 and below and upon receiving the said bonus renders the wages received for that month to exceed RM5,000.00, the calculation of the employer contribution rate shall be calculated at the rate of 13%.

  • Hi,

    I am foreigner, I live and work in Malaysia, i got new job and they registered me for EPF contribution, I signed Local Terms with the company, so bear in mind I dont receive Expat salary, my total salary is RM 3850 net, can you tell me whether my employer will pay 13% or only 5RM?? again keep in mind that I am on Local Terms, contract identical to Malaysian employee with the Company,

    Can you also tell me if I want to opt-out, how to do so, should the Company do it for me upon my request or should I personally request it from KWSP??

    Thanks in advance.

  • @Omar, technically, you & your employer are subject to EPF contribution & your employer is to contribute 13%.

    I may think you can’t opt out but I strongly advise you to consult with KWSP directly.

    Good luck.

  • Hello,

    I am a foreigner and a contract worker in Malaysia. I dont have EPF contribution for now and I plan to request to my company. Does EPF can reduce my tax? Can I get my EPF contribution when my contract end? Please help to advise. Thank You.

    • @Noel, provided it is stated in the appointment letter or employment contract, you may request your employer to do so.

      For withdrawal of EPF, you may contact directly with KWSP office for details.

      Generally, you may withdraw all EPF if you are leaving Malaysia & no longer working in Malaysia.

  • Hi there, as mentioned earlier for earning of RM5000 and below, the employer have to contribute extra 1% from the existing minimum 12%? So for example my basic is less than RM5000 but after monthly incentive payout it exited the range and average of RM6K per month through out the year. So do i entitle for the extra 1%?

  • Hi King, incentive is subject to EPF (refer to the following link for more details), making your total income that subject to EPF more than RM5,000.

    As such, your employer is not required to do so. However, you may personally request that and it will be up to management’s decision.

    http://www.nbc.com.my/blog/all-payments-for-wages-are-subject-to-epf-deductions/

  • My salary is RM4k, I have an phone allowance of RM100. So gross salary is Rm4,100.00
    My EPF (E’yer & E’yee) always calculate from RM4k.
    HR said the calculation is like that.
    Can I get your opinion?!
    Am I under paid for EPF portion?!
    EA form stated Gross and the allowances that I have to calc for personal tax. Only ad-hoc disbursements (not in salary slip) not stated in EA form that no need calc tax.

    • Hi Zeze,

      Based on the technical reading of EPF Act on definition of wages, wages that are subject to EPF do not include:
      (f) any travelling allowance or the value of any travelling concession.
      As such, it appears telephone allowance is not scope out, so it should be subject to EPF. I would suggest you to contact and clarify with EPF if necessary..

      For tax purposes, fixed amount of allowances is subject to tax. Reimbursement of expenses by employee from the employer is not subject to tax.

  • what is the tax implication/benefit to the increase of EPF contribution to 19%.

  • @Chai, if you are referring to the company, the company will have higher expenses to against its income, which will in turn lower its profit, thus ultimately reduce the tax!

    For personal, no tax implication at all!

    It means all employer’s contribution is tax free income (in EPF account) to all individuals.

    This is to encourage company to contribute more than the statutory rate of 12%-13% to staff.

  • is travel allowance subject to EPF deduction? my company has never deducted EPF for me, is that right? if that is not right, what can i do?

    • Hi Chan, it is subject to EPF deduction. You may need to discuss this with your company and see what is their response on the matter.

  • what income we company should deduct epf

  • Hi, referring to your reply to Geoffrey on 4/1/2012 herein you mentioned that wef 1/1/2012, employers are required to increase their portion of the EPF contribution from 12%to 13% for employees earning less than RM5000 per month. However if the employers paid bonus to an employee in Jan 2012 and rendered his/her salary exceeded RM5000 per month, then the contribution rate by the employers shall be 13%. Please clarify this statement. thanks.

  • Hi Mr Goh, if the bonus is paid to an employee who is receiving total monthly wages/salaries of RM5,000 or less, then the bonus is subject to 13% EPF contribution from the employer, even though the total amount after the bonus added to the total salaries exceeded RM5,000.

  • Hi Angelina,

    Thanks for the reply.
    I have called EPF to verify about the phone allowance.
    They said need to contribute for e’yee and e’yer.

    What is the action to be taken or to notify company to contribute?!
    Any penalty or back pay for the allowances?!

    Thanks and regards,
    ZeZe

    • Hi Zeze, first of all, it’s Geoffrey who replied your question, I don’t mind to welcome your thanks on behalf of him. :)

      You won’t have any effect except where you have to pay back your portion of EPF to KWSP via your employer. Your employer will be fined with the interest and penalty for failing to contribute EPF on the allowances.

      You may highlight this matter to your employer for the telephone allowance are subject to EPF deduction. Talk to your employer and find a acceptable solution with them on this situation.

      Good luck to you!

  • My company is paying me a monthly fixed travelling allowance of RM300.00, but they have never deduct EPF contribution for my travelling allowance. Are they doing right ? However, some of my friends told me that the FIXED traveling allowance are subject to EPF deduction. Please advice.

  • Hi, how about salary backpay? Say my pay as below:

    Jan – RM4000
    Feb – RM4000
    Mar – RM4500 (after increment) + RM1000 (backpay for Jan&Feb) = RM5500

    So the employer cpf contribution for Mar should be 12% or 13%? Thanks.

  • Hi,
    I would like to ask about the calculation for epf,
    my salary is RM2500, then i have a bonus this month is RM2788.00. May i know how much is the amount for EPF contribution for employer side this month?

  • Hi,

    My company is responsible for all taxes on the total income from my employment contract; i.e., net monthly salary is after tax has been deducted.

    - Should the EPF contribution be based on the pre-tax amount or the amount received in my case which is after-tax?

    - When making withdrawal from EPF Account I or II – both employer and employee contribution, will there be further tax implication for the individual employee?

    Thanks.

  • Hi,

    I am a foreigner and I woule d like to know how much will be the PF contribution of the employee and employer for a basic salary of RM9000. Thanks

    • Hi BN, if you opt to contribute PF (pension fund => EPF), then your portion will be 13% while your company will be remained as at least 11%.

  • Hi, i would like to ask a few questions here.

    1) The contribution rate for EPF employers is 12%. Is this the maximum that an employer can contribute? can they contribute more? can they contribute less?
    2) The employee rate for an enployee is 11%. can the employee contribute more? can the employee contribute less? is there any circumtances in our history where this rate is changed for a period of time?

    • Hi Sammy, no maximum on the both but the statutory rates of 11%/12%/13% are the minimum.

      Both can tribute more and no need to inform KWSP but both can not contribute less.

      The government will announce if any changes made.

  • I would like to ask why EPF emphasises on investment in bonds?

    • Hi Sammy, because Bond is generally classified as very low risk investment, compared to those equity investment (shares in stock market).

      The return from Bond will normally slightly higher than Fixed deposit, but most are not more than 5%.

      Those offering higher return in % will in fact carry more risk. Bond from Telekom will be higher than Bond issued by some private companies.

Leave a reply

required

required

optional


Notify via Email Only if someone replies to My Comment

Daftar Syarikat Sdn Bhd Baru dengan hanya RM1,460 sahaja!
Register Your New Company (Sdn Bhd) with NBC for just RM1,460 only!Click Here for More Details
Daftar Syarikat Sdn Bhd dengan hanya RM1,460!