Payroll Guide: What do employers need to know about EPF?
Updated: Jan 12, 2022
We have covered important things in Payroll in Malaysia and our dear Monthly Tax deduction. And now, let's take a look at another statutory requirement - Employee Provident Fund.
In Malaysia, there are four (4) compulsory deductions and contributions included in payroll processing. They are Monthly Tax Deduction, Employee Provident Fund, Social Security Organization, and Employee Insurance System.
What is Employee Provident Fund?
Employee Provident Fund (EPF), also known as Kumpulan Wang Simpanan Pekerja (KWSP) is a series of monthly deductions that go towards individual retirement funds. It is fully managed by the government and is targeted towards employees who are working in private and non-pensionable public employees.
Now, you or your employees might be thinking: "Well, I can manage my own retirement savings." And the answer is yes, you can. But, EPF provides multiple benefits such as death benefit, incapacitation benefit, and guaranteed dividends earnings that are also tax-free!
Check out this article by Ringgit Plus on what you need to understand about EPF as an individual. But if you want to know more about the obligations of employers, read on.
What are Employer's Responsibilities?
As an employer, there are a few things that you are responsible for. If you are a new business, here are some of the key items and steps that you need to complete:-
o Register as an employer with EPF
o Submit Form EPF 1 and Registration Form
o Collect and keep the following:
o Employer Reference Number
o Notice of Employer Registration
o Employer's Registration Certificate (to be displayed at the premises)
Registration can be done by Form Submission to the nearest KWSP counter or you can submit it online here.
How do We Process it?
Similar to Monthly Tax Deduction, EPF contributions are calculated and retained by employers from an employee's salary. The employers then have to make the payment over to the KWSP. The EPF contribution rates vary according to the employee's age and residency.
As of 2021, the current contribution rate is as follows:
I just hired a foreigner, am I also obliged to contribute to their EPF?
No, you are not obliged to contribute. But if your expatriate brings it up, you might consider it as part of the employee benefits or retention strategy. Check out this short video summary to learn more about employers' mandatory responsibilities.
If you have more questions, check out this FAQ by EPF. But if you want a shortcut, book a chat with us to learn more.
What if I do not Comply?
There are a few things that you need to remember when it comes to EPF: make sure that keep KWSP informed of employees' movement and make sure that you make the deduction on time!
As usual, we compiled the common mistakes and errors that employers make when it comes to EPF.
What if my submission is late?
The deadline for EPF contribution is the 15th of the following month. If an employer fails to remit payment on or before the due date, it will be considered as an outstanding contribution. Here is the process to submit outstanding contributions:f
What if I missed registering or reporting my employee movements?
Employers are liable for all of their employee's EPF deductions and submissions. Most importantly, employers are responsible for keeping KWSP informed about any employees' movement. Here is a quick summary of the consequences based on different common offenses:
Note that this is not an exhaustive list of offenses and punishments, but covers the common overlooks made by employers.
Want to be sure about what you are doing with EPF? Check how we can help you or just book a chat with us.