EPF contribution by sole proprietors and partnership



Some owners/partners under the sole-proprietorship and partnership may drawn salaries and allowances for themselves as well as make contributions to Employees Provident Fund (EPF) for their own accounts.


Is EPF contribution compulsory?

By virtue of the sole proprietors and partners drawing salaries and allowances for themselves, are they require to contribute the employer’s 12% contribution and deduct 11% from the salaries and allowances and remit this 23% (12% + 11%) contributions to EPF?

Let’s see the definitions of employer and employee under the EPF rules:-

Who is an employer? An employer is a Partner/Sole Proprietor or a person responsible for the payments of employees’ salaries and operating in Malaysia.

Who is defined as employee under EPF? A person who is employed by an employer under a contract of service or apprenticeship either in writing or verbal form and may be stated or implied.

Based on the definitions above, sole proprietor or partner is considered as self-employed and is not an employee, hence it is not mandatory to make EPF contributions. However, they are encouraged to make EPF contributions voluntarily.

What is the contribution amount that needs to be paid for a self-employed?

A self-employed can choose to contribute at a minimum rate of RM50 or a maximum rate of RM5,000. [We would have understand this as every payment is limited to RM5,000]

What is the penalty for a self-employed who make late contributions?

No fine is imposed for a self-employed who make late contributions.