PETALING JAYA: The Malaysian Employers Federation (MEF) has urged the government to clarify if employers of foreign workers must contribute to the Employees Provident Fund (EPF) as announced in Budget 2025.
Its president Datuk Dr Syed Hussain Syed Husman told theSun that if such is the case, employers would be saddled with a huge burden of RM8.13 billion in additional EPF contributions to foreign workers and expatriates.
In announcing the budget, Prime Minister Datuk Seri Anwar Ibrahim expressed the government’s commitment to providing fair treatment to all workers regardless of nationality.
He said the government plans to oblige all foreign employees to contribute to the EPF with the proposal implemented in phases.
However, Syed Hussain said what is unclear is whether employers of foreign workers, including expatriates, will also be required to make mandatory EPF contributions for them.
He said currently, foreign workers can contribute to the EPF voluntarily, but employers are also required to contribute RM5 each month to their EPF.
“Assuming that employers are required to contribute to the EPF at the current statutory rate of 13% for employees with wages of RM5,000 and below per month, the additional cost to employers for the 2.5 million foreign workers in the country would come to a whopping RM6.63 billion annually.”
Syed Hussain said based on Immigration Department data, a total of 154,155 expatriate passes were issued last year – the highest since 2018.
“As of 2023, the average salary in Malaysia is RM6,610 per month. The additional mandatory employer EPF contribution for expatriates alone would amount to RM1.5 billion annually.
“So in total, employers would be forced to cough up an additional RM8.13 billion annually.”
He said this is a huge burden which employers cannot absorb under the current economic climate with rising production costs and salary increases.
Syed Hussain said Micro, Small and Medium Enterprises (MSME) would face cash flow problems as a direct result of the higher cost of doing business as announced in Budget 2025.
For instance, the budget calls for a minimum wage increase to RM1,700, which is a 13.3% rise.
He said the current employer’s EPF contribution of RM5 for foreign workers would further increase if companies are forced to make a similar current mandatory contribution of 13% on wages of RM5,000 a month and below and 12% for those earning above that.
“The multi-tier levy system also increases to a higher rate based on the number of foreign workers hired, so the total minimum wage increase is at 13.7%.
“If the levy is increased to 20%, and the employer’s contribution to the EPF is 13% or 12%, then the overall increase will be around 46%, which amplifies the financial burden to employers.”
He stressed that good governance, including such matters that have a significant impact on operating costs should be discussed with relevant stakeholders, especially the corporate sector and employers.
“This was not done, apart from discussions on the minimum wage. MSMEs will close shop if faced with additional burdens as they will suffocate.”
Syed Hussain said other issues that arise as a consequence of the Budget 2025-EPF decision include Malaysia’s competitiveness as a destination for foreign investors.
“Local and foreign investors will examine the cost of doing business when deciding to stay or leave the country.
“Even new investors will reassess their investment plans in Malaysia based on costs, which is one reason Singapore halted foreign workers’ contribution to its Central Provident Fund.”
Syed Hussain said there is an urgent need to discuss the proposals related to mandatory EPF contributions for foreign employees before the scheme is rolled out.
