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.


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.