Reduction of Employee Contribution Rate

https://www.kwsp.gov.my/-/reduction-of-empl...ribution-rate-1

KUALA LUMPUR, 27 February 2020: The Employees Provident Fund (EPF) takes note of the Government’s decision on the reduced minimum statutory contribution rate for employees, from 11 per cent to seven (7) per cent as announced today.

The new rate will be effective starting 1 April 2020 until the end of the year and affects members below age 60. For those aged 60 and above, the employees’ share of the contribution rate will remain at zero per cent.

The move to reduce the statutory contribution rate is part of the Government’s economic stimulus package intended to cushion the blow from the economic fallout following the global COVID-19 outbreak.

Employers are required to ensure the correct amount is deducted from their employees’ wage/salaries based on the Third Schedule, Akta KWSP 1991.

Employees may choose to maintain the current contribution rate of 11 per cent by completing Notis Pilihan Mencarum Melebihi Kadar Berkanun KWSP 17A (Khas) which is available on epf.gov.my. This notice must be presented to employers to be submitted to the EPF.

https://www.kwsp.gov.my/member/contribution...-statutory-rate

For more information, members and employers may refer to the EPF website at kwsp.gov.my, call the EPF Contact Management Centre at 03-8922 6000, or visit any EPF branch.


Issued by the EPF Media Desk
Corporate Affairs Department
27 February 2020

I don't pay more than 11%. But my company does. Hope they don't cut it lol

some big company will contribute up to 16%

i've seen up to 19% before and the big Co gains too, up to 19% into EPF instead of paying cash salary, according to HR. i'm unsure details though XD

It is a because anything above 19% employer contribution will appear as taxable in your EA form. That's why normally it is up to 19% only.

i am curious, is there any tax advantage to the company if they pay above 12% minimum epf?

because as an employee in would rather receive the extra in salary instead of epf

some employee, like example, those that has no cash flow constraints, would like their "extra" income as tax free, and can help to increase their retirement fund

advantages for the company....incentives given to try to retain staffs are tax deductable........

This post has been edited by MUM: Feb 29 2020, 12:37 PM

epf only up to 6k is tax free right? that's only 500 per month

What you actually elect is not the absolute % to contribute, but the additional % on top of the statutory % determined by the government. Ie, soon the statutory % will be 7%.
So when you want to change your contribution, you select the additional %. For example, you select 10%, that would mean your contribution will now be 7% + 10% = 17%. That is how the rule works.

The highest technically is all your net/take home salary from employer post (that is after paying tax and other obligations that your firm/HR deduct from your gross salary).

Using simple example, lets say your gross salary is RM 10K. Your take home pay currently is RM 8K. Assume your income tax and socso and statutory epf contribution add up to RM 2K.
that means you can select 80% as your addiditonal % for contribution into EPF, making your total % EPF contribution as 87%.

PH gov changed the tax deduction to 4K rm for 2019 and 2020.

employer's contributions to your EPF is tax free to your income....
employer's cash to you is tax able in your income

as mentioned by Wedchar...6k employee's contribution had been reduced for the tax reduction calculation.

so my next question would be

can i request my employer to raise their epf contributions from 12% to 16? (instead of giving me bonus and increment).

or is this a common 12% rate applied across the board for all staff within the company?

i like your opinion and thinking

Why wud an employer commit to a fix % epf contribution... knowing, the variable increment will spur you to maintain good performance?

You can still opt to 60k annual personal top up into Kwsp. Beyo d that, use borang 17a to increase monthly contribution.

This post has been edited by MUM: Mar 1 2020, 12:18 PM

is there an admin cost for employer to have variable instead of fixed epf contributions for each n every employee?

i mean, the HR will need to submit forms to epf jevery time change the percentage?

Employer just need to submit form for you to change it to 16% or even 19%. It will stay at this higher percentage until another form is submitted to change it again. Just don't keep changing it every year and make life difficult for your employer/hr.

Some companies contribute > 12% for all senior staff above certain level.

There is a small drawback though. If you divert your "increment" into higher employer EPF %, would that affect your future salary in terms of absolute amount? For example when you switch jobs?

Sure bor....?
Where you pluck the 4k thingy?

OT a bit.
I think, when some people reach a certain level in their career, they start talking about total package - monetary and non-monetary compensations. Thus, "monthly/yearly salary" for the next jump may be moot.

--
From my HR - and to re-share (shared earlier):
"U can put in up to 100% from your net salary into EPF" - when i asked how much i can contribute extra from my paycheque.
ie. if i'm doing 11% now and want to hit 66%, "no issues said HR, after checking with EPF, just fill in the form."

Details if i recall correctly:
EPF & life insurance was previously 1 lump sum tax relief
Was split after 2018, into EPF $4k +insurance $3K
https://www.theedgemarkets.com/article/stat...duced-next-year
https://www.theedgemarkets.com/article/high...-assessment-irb


This post has been edited by wongmunkeong: Mar 2 2020, 12:59 PM