The Employees' Provident Fund (EPF) or commonly known as Kumpulan Wang Simpanan Pekerja (KWSP) is a social security institution formed according to the Laws of Malaysia, Employees Provident Fund Act 1991 (Act 452) which manages the compulsory savings plan and retirement planning for private sector workers in Malaysia. Membership of the EPF is mandatory for Malaysian citizens employed in the private sector, and voluntary for non-Malaysian citizens.
Wages Liable for EPF Contribution
All remuneration in money due to an employee under his/her contract of service or apprenticeship whether it was agreed to be paid monthly, weekly, daily or otherwise.
Among the payments that are liable for EPF contribution:
Salary
Payment for un-utilised annual or medical leave
Bonus
Allowance
Commission
Incentive
Arrears of wages
Wages for maternity leave
Wages for study leave
Wages for half day leave
Other payments under services contract or otherwise
Among the payments not liable for EPF contribution:
Service charges
Overtime payment
Gratuity
Retirement benefits
Retrenchment, temporary and lay-off termination benefits
Any travelling allowance or the value of any travelling concession
Payment in lieu of notice of termination of employment
Director's fee
Who Are Obligated to Contribute?
An employer shall be liable to pay EPF contributions in respect of any person whom he has engaged to work under a Contract Of Service or Apprenticeship and includes:
Part time, temporary and probationary employees
Directors who receive wages from company;
Employees until the age of 75 years old if they are still working regardless whether they have or have not made the full withdrawal/part of it after attaining the age 55 or 60 years old;
Employees who have withdrawn their savings under the Pensionable Employees and Optional Retirement Withdrawal, and work with employers other than the Federal or State Governments, or any statutory bodies or local authorities;
Employees who have previously made full withdrawal under the Incapacitation Withdrawal and have since recovered and are re-employed in any service.
Contribution Payment Period
EPF contributions payable for any month must be paid to EPF, no later than the 15th day of each succeeding month (For example: Contributions for July 2017 must be paid latest by 15 August 2017).
Interest on Late Payment of Contributions
Late contribution payment refers to the payment received by EPF for a certain contribution month after the 15th of that month. Defaulting employers, regardless of whether their employees opted for Simpanan Shariah or not, will be imposed with the following:
1. Late Payment Charge
The lower dividend rate between Simpanan Konvensional and Simpanan Shariah for each respective year with an additional one (1) percent.
The minimum late payment charge imposed is RM10. The late payment charge will be rounded up to the nearest Ringgit denomination.
For example: The late payment charge imposed is RM13.21 and this must be rounded up to RM14.
2. Dividend
The dividend rate to be paid will be based on the lower between that of Simpanan Konvensional and Simpanan Shariah. For the years prior to the introduction of Simpanan Shariah, the calculation of late payment charges and dividend will be based on the EPF dividend rate declared for the respective years.
Late payment of contribution includes:
• Overdue contribution
• Under-paid contribution