The government maintains the mandatory 2% employer EPF contribution for foreign workers, balancing retirement protection with rising business costs for SMEs.
PETALING JAYA: The government has maintained the mandatory 2% Employees Provident Fund (EPF) contribution rate for employers hiring foreign workers, saying it is relatively low while balancing workers’ social protection needs with rising business costs.
In a written parliamentary reply, the Finance Ministry (MOF) said mandatory EPF contributions for non-Malaysian workers had been in effect since October 2025 under the Employees Provident Fund Act 1991.
“The government acknowledges the challenges faced by employers in relation to rising business costs, particularly among small and medium enterprises (SMEs).
“In this regard, the employer contribution rate of 2% is relatively low, taking into account the need to balance workers’ social protection objectives with the costs borne by employers,” it said.
The ministry was responding to Jimmy Puah Wee Tse (Tebrau-PH), who asked what measures the MOF was taking to ease rising business costs for SMEs, including whether foreign workers should bear the full cost of their EPF contributions.
The MOF said the mandatory contributions were part of efforts to extend social protection to all workers in Malaysia, regardless of nationality, in line with international practices.
It added that the policy aimed to provide basic retirement savings for foreign workers, narrow the social protection gap between local and foreign workers, and promote fairness and inclusivity in the country’s retirement savings system.
“Since the scheme was introduced, 78,129 employers have contributed to the EPF for 1.75 million foreign workers, with SMEs accounting for 86%, or 67,194, of the employers involved,” it said.
The ministry said the figures indicated that the mandatory contribution scheme had begun to gain acceptance among employers, including SMEs.
Separately, the government outlined several measures to ease business costs, including raising the e-Invoice implementation threshold from RM1 million to RM3 million in annual income or sales from Sept 1, 2026.
“Micro, small and medium enterprises (MSMEs) with annual income or sales below RM3 million are therefore not required to implement e-Invoicing.
“Newly established MSMEs are also exempted from service tax on rental or leasing services for one year from registration, while the annual sales threshold for MSME tenants exempted from service tax on rental services was raised from RM1 million to RM1.5 million, effective Jan 1, 2026.”
The MOF said that under Budget 2027, the government had also announced a one-percentage-point reduction in MSME income tax rates, lowering the rate on the first RM150,000 of chargeable income to 14% and the rate on income between RM150,001 and RM600,000 to 16%.
“The government has also allocated an additional RM5 billion for the SME Stabilisation Relief Facility, which will remain available until June 30, 2027, or until the funds are fully utilised,” it added.
The ministry said it would continue monitoring the effectiveness of the initiatives and engaging with SME associations and communities to ensure assistance reached businesses in need.