As announced in Budget 2025, Malaysia will make EPF contributions mandatory for non-Malaysian employees starting with Octoberโs salary (contributions made in November 2025). So hereโs a how itโs taking effect and how it will affect employers, businesses.
Effective Date & Legal Requirement
- Starting with October 2025 payroll, EPF contributions become mandatory for all foreign workers (except domestic helpers).
- Contribution rate is 2% from the employer and 2% from the foreign workerโs wages.
- This is under the amended Employees Provident Fund Act 1991, passed in March 2025.
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Employer Requirements
- Must register with EPF if not already done.
- Must enrol all eligible foreign workers with valid work permits with EPF.
- Payroll systems must be updated to automatically deduct and remit contributions.
- Employers must submit Form A monthly (detailing employee contributions) including foreign workers.
- Remittance according to the EPF deadlines every month, just like the current EPF process.
- Contribution must be paid in Ringgit Malaysia.
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Foreign Worker Eligibility Criteria
- Must be non-Malaysian, with a valid passport and active work permit/visa.
- Applies across all sectors: manufacturing, construction, plantation, services, and others.
- Applies to all non-Malaysian workers with valid passports and work passes, except domestic helpers
- Domestic helpers are excluded under this ruling. Taken from the EPF website, โAccording to Section 3 of the Workmen’s Compensation Act 1952, ‘domestic servants’ are individuals who work as, among others: Maids, Cooks, Gardeners, Cleaners, Babysitters, Drivers and others.โ
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What Happens If You Donโt Comply?
- Treated as non-compliance under EPF Act, subject to penalties, fines, or imprisonment.
- Consequences of Non-Payment: Failure to pay EPF contributions on time can lead to further penalties, including potential travel restrictions for company directors or partners according to KWSP Malaysia.
- Potential Risk of future audits or complications.
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Operational Impact to Employers
- Even though itโs 2%, the cost accumulates with large foreign workforces.
- Employers need to revise HR and payroll systems, possibly involving vendor support.
- Added workload for HR/payroll teams during onboarding and monthly submissions.
- Contract terms and payslip formats may need updating.
- For companies with tight margins, this introduces an additional cost pressure.
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Financial Impact
- Example: A company with 100 foreign workers at RM2,000/month salary
- 2% employer EPF per worker = RM40
- Total new cost = RM4,000/month or RM48,000/year
- Not massive, but still meaningful especially in high-volume labour industries.
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Strategic Considerations
- Some companies may consider re-evaluating workforce mix (local vs foreign).
- Others may need to renegotiate contracts or pricing with clients due to increased costs.
- It’s important to engage early with EPF, especially for bulk registration processes.
- Companies should consider briefing sessions for both HR and line managers to ensure understanding and smooth rollout.
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What Employers Should Do Now
- Start checking if your company and foreign workers are already registered with EPF.
- Get in touch with your payroll provider to prepare for the 2% implementation.
- Communicate with foreign staff clearly about the deduction and the benefit.
- Keep track of EPFโs upcoming FAQ, training, and support materials.
- Budget ahead โ donโt wait until October to feel the pinch.
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Final Thought
The earlier businesses prepare, the less disruption theyโll face. While it adds cost, it also adds compliance, legitimacy, protection, and clarity for everyone in the employment chain.
Refer here for the EPF news :
https://www.kwsp.gov.my/en/w/news/epf-expands-mandatory-contribution-to-non-malaysians
