Last updated : 24 Jul 2019    

As an employer, your responsibilities include paying EPF contributions in respect of any person you have engaged to work under a Contract of Service or Apprenticeship. You have to ensure accurate monthly contributions are deducted from your employees’ salary and remitted to EPF. Access to internet banking makes EPF contribution payments much easier now.

Subject to the provisions of section 52, every employee and every employer of a person who is an employee within the meaning of this Act shall be liable to pay monthly contributions on the amount of wages at the rate respectively set out in the Third Schedule.
Section 43(1), EPF Act 1991

Determining Obligation To Contribute

These are the three main elements which determine the obligation to contribute to EPF.

  • Employer
  • Employee, Contract of Service or Apprenticeship
  • Wages

You need to register with the EPF if you fulfill the following elements.

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Employer

An employer is defined as a person(s) with whom an employee has a contract of service or apprenticeship with.

Employers are:

Manager, agent or person

Manager, agent or person

responsible for the payment of wages to an 'employee'

Group of persons

Group of persons

whether statutory or non-statutory or incorporated

Government, government department, statutory body, local authority or other bodies

Government, government department, statutory body, local authority or other bodies

as specified in the Second Schedule to the EPF Act 1991

An employee is defined as a person who is employed under a contract of service or apprenticeship. The contract of service or apprenticeship can be written or oral, expressed or implied.

"Contract of Service" is an agreement in which a person agrees to employ another person as an employee and the other person agrees to serve his employer as an employee.

"Contract of Apprentice" means a written contract made by a person with an employer who pledge to employ the person and train or cause him to be systematically trained for a work during a specified period of time approved by the employer who in the course of the exercise the apprentice is bound to working in the service of the employer.

(Apprenticeship definition reference – Employment Act 1955)

Minimum age: Employment age is subject to Children and Young Persons (Employment) Act 1966.

Maximum Age: 75 years

Persons Not Obligated To Contribute

Persons stipulated in the First Schedule of the EPF Act 1991 who are exempted from making a contribution are as follows:

  • All nomadic aborigines unless in any particular case the Director-General of the Department of Aborigines otherwise recommends
  • Domestic servants as defined in section 3 of the Workmen's Compensation Act 1952 [Act273], except when employed-
    1. by any employer specified in the Second Schedule to this Act;
    2. by any society registered or required to be registered under any written law for the time being in force relating to the registration of societies or co-operative societies;
    3. in any business registered or licensed or required to be registered or licensed under the Registration of Businesses Act 1956 [Act 197], the Trades Licensing Ordinance of Sabah [Sabah Cap. 144], the Businesses, Professions and Trades Licensing Ordinance of Sarawak [Sarawak Cap. 33] or the Businesses Names Ordinance of Sarawak [Sarawak Cap. 64], as the case may be; or
    4. by any corporation incorporated under any written law.
  • Out-workers as defined in section 3 of the Workmen's Compensation Act 1952, except when employed by any employer specified in the Second Schedule
  • Any person detained in any prison, Henry Gurney School, approved school, place of detention, mental hospital, rehabilitation centre having the same meaning in the Drug Dependants (Treatment and Rehabilitation) Act 1983 [Act 283] or leper settlement.

    Any person who is a Member of the Administration as defined under Article 160 of the Federal Constitution.
  • Any person who is employed and whose country of domicile is outside Malaysia and who is in accordance with his terms and conditions of service participates in a provident fund or other similar scheme established or administered outside Malaysia.

    Any person who is employed and whose country of domicile is outside Malaysia and who has obtained prior written approval from the Board to participate in accordance with his terms and conditions of service in a provident fund or other scheme established or administered in Malaysia
  • Any person who has attained the age of seventy-five (75) years

Persons Obligated To Contribute

Except for the persons mentioned in the first Schedule of the EPF Act 1991, you are liable to pay EPF contributions in respect of any person whom you have engaged to work under a Contract of Service or Apprenticeship.

Wages are all remuneration in money due to your employee under his contract of service or apprenticeship whether it was agreed to be paid monthly, weekly, daily or otherwise.

 

Payments Liable for EPF Contribution, Such As

Salary

Salary

Payment for unutilised annual or medical leave

Payment for unutilised annual or medical leave

Bonus

Bonus

Allowance

Allowance

Commission

Commission

Wages for half day leave

Wages for half day leave

Incentive

Incentive

Arrears of wages

Arrears of wages

Wages for maternity leave

Wages for maternity leave

Wages for study leave

Wages for study leave

Other payments under services contract or otherwise

Other payments under contract of service or otherwise

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Payments Not Liable for Contribution

Service charge

Service charge

Overtime payment

Gratuity

Gratuity

Retirement benefit

Retrenchment, temporary lay-off or termination benefits

Retrenchment, temporary lay-off or termination benefits

Traveling allowance or the value of any travel concession

Any traveling allowance or the value of any travel concession

Director's fe

Any other remuneration or payment as may be exempted by the Minister

For further information, refer to EPF Act 1991.

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EXPLANATION ABOUT PAYMENTS THAT ARE EXEMPTED

There are seven types of payments that are exempted from EPF contribution.

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  • Service Charge
    1. Any money or payment either in the form of a service charge, a service fee, a tip or other payments which has been paid by, charged on, collected from or voluntarily given by a customer or any other person (who is not the employer) with respect to the employer's business.
    2. This payment is payable to an employee either in whole or in part, directly or indirectly, and whether under a contract of service between the employer and the employee or otherwise.
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  • Overtime Payment

    Any payment due from an employer to an employee for work carried out in excess of the normal working hours of such employee and includes any payment paid to an employee for work carried out on public holidays and rest days.

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  • Gratuity

    Any payment paid by an employer to an employee upon completion of service or voluntary resignation as a recognition of such employee's service.

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  • Retirement Benefits & Transfer Of Retirement Benefits

    Any payment that has been made to the employee for when they voluntarily retire or have reached retirement age.

    1. In addition to section 43, an employer or any other person may at any time, with the consent of the employee, remit to the Board
      1. any funds being retirement benefits of the employee; or
      2. any funds from any other retirement scheme or plan relating to the employee, in any manner as may be prescribed by the Board.
    2. An employee or any other person may at any time remit to the Board any funds from any retirement scheme or plan relating to the employee or person in any manner as may be prescribed by the Board.
    3. Upon the Board receiving the funds as remitted under subsection (1) or (2), the Board shall cause the funds to be paid into the Fund in accordance with section 50.

    Section 44, EPF Act 1991

    "Retirement Benefits" means any payment paid to an employee for retirement whether compulsory or optional or for health reasons as specified under the contract of employment of the employee.

    An employer may, with the approval of an employee, transfer to the employee's EPF account any funds being the retirement benefits of the employee or any funds from any other retirement scheme or plan relating to the employee. Such a transfer can be made through Form KWSP 16F by individual or group.

    The general terms for remittance of Retirement Benefits to the EPF are: -

    • Employers need to obtain consent from employees in accordance with the provisions of Section 44 of the EPF Act before the transfer of Retirement Benefits.
    • If the employer fails to contact the employee and have applied for retirement benefits to be credited to employee’s account at EPF, employers are required to complete and sign the Undertaking And Indemnity Letter of Transfer of Employee Retirement Benefit to EPF.
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  • Any Other Remuneration Or Payment As May Be Exempted By The Minister
     
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