It is extremely dangerous when we thought we know it all. That is the time when we stop learning and leave a big gap from knowing to understanding it well.
Hey, I thought why not let me bring you back to the basics.
Malaysia EPF and how do we calculate the contribution percentage.
Aiden, are you kidding me, who wouldn’t know and that’s so simple?
Yeah, let’s assume we start from zero and give ourselves an opportunity to re-learn and better understand how EPF is being calculated. You’ll be surprised many new entrepreneurs may find this helpful.
The Employees’ Provident Fund (Kumpulan Wang Simpanan Pekerja), commonly known by the acronym EPF (or KWSP), is a government agency under the Ministry of Finance. It manages the compulsory savings plan and retirement planning for private-sector workers in Malaysia.
- Employee and employer contribution rates depend on the age of the employee. For employees aged 60 to 75, the rate is 4% for employers and employees no longer need to contribute.
- Employee contributions for employees under 60 are normally set at 11%. However, for wages from January 2021 to June 2022, the EPF rate is temporarily reduced to 9%. Employees can opt to maintain their EPF contribution at 11%. In order to do so, the employee must submit Form KWSP 17A (Khas 2021) to their employer who should submit the employee’s application via their Employer i-Akaun.
- Employer contributions for employees under 60 are set at 13% for employees whose salary subject to EPF is RM 5,000 or below, and 12% for employees with salaries above RM 5,000
- Foreigners who opt to contribute to the EPF have minimum employee contributions set at 11%, but their employers are only required to contribute RM 5 monthly, though they may opt to contribute more.
- Contribution rate percentages are approximate and employers must remit contributions based on the Third Schedule of the Employees Provident Fund Act 1991, which provides the contributions according to each salary range.
Generally, all monetary payment is subjected to EPF contribution and you may see the lists below
What about payments that are not considered “wages” by the EPF and ARE NOT subject to EPF deduction? Take note of the below:
Let me give you an example: ⭐️
The calculation of EPF employer and employee contributions – Mr Lee:
Age: 35 – maintained contribution at 11%
Basic salary: RM 3,500
Overtime: RM 300 (exempt)
Travel allowance: RM 500 (exempt)
Commission: RM 1,000
Hope the simple illustration helps you understand which wages are subjected and wages that are exempted from EPF’s monthly deductions.
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