Do Expatriates Need to Make Payments to the EPF in Malaysia?

Recently, we’ve been covering the end-to-end of EPF contributions — including a warning on what the consequences are for employers who refuse to pay, as well as advice on what to do if you’ve made a mistake with your EPF calculations. All of that is part of our payroll series, which covers everything employers and HR professionals need to know about handling payroll in Malaysia.  

But what about foreign employees working in Malaysia? Do expatriates/foreign employees need to contribute to the EPF in Malaysia? 

The Employees’ Provident Fund, for expatriates

The Employees’ Provident Fund (EPF) is governed by the EPF Act 1991, and functions as a mandatory pension scheme for Malaysian employees and Permanent Residents working in the private sector in Malaysia. If you’re looking for contribution rates for local employees, click here for our guide on how to make payments for your employees. 

However, the rules are markedly different for expatriates and foreigners employed in Malaysia. EPF contributions are not mandatory for foreigners working in Malaysia — but these workers can still opt-in to the EPF, if they prefer. This is because any employer or employee may choose to contribute more than the required minimum rates, which you’ll find in the Third Schedule of the Act.

So, why would a foreign employee in Malaysia choose to contribute to the EPF? Well, the scheme comes with a  number of benefits, namely a guaranteed minimum dividend rate of 2.5% p.a., which is a significantly higher rate than you’d expect to get with savings accounts, or even fixed deposits in Malaysia. 

If you opt to contribute to the EPF as a foreigner, there is a caveat: employers are only required to make a simple monthly contribution of RM5 — regardless of your monthly salary. ‍

How to contribute to the EPF for foreign employees

The first thing you’ll need to do is to download Form KWSP 16B and Form KWSP 3, and to fill in the relevant details. However, unlike Malaysian employees or Permanent Residents, foreign employees cannot be registered via i-Akaun by employers.  

Instead, you should submit the completed forms, along with copies of your passport, work permit, or work via to an EPF counter, or make the submission via mail. Do note that due to the current pandemic, procedures may differ slightly.

The following table details mandatory contribution rates for registered EPF members, including Malaysian nationals, Permanent Residents, and non Malaysian employees. 

As you can see, the contribution for foreign employees below the age of 60 stands at 9% — which mirrors that of Malaysians and PRs below the age of 60. However, as mentioned above, employers are only required to contribute RM5, regardless of how much (or little) the foreign employee earns.  

There’s one final thing to remember: once an employee — foreign or otherwise — has opted to contribute to the EPF, both employer and employee will not be able to revoke the option. In simple terms: you won’t be able to change your mind. 

What happens to your money if/when you leave Malaysia?

The natural question for foreign employees is usually what happens to EPF savings if/when they decide to leave Malaysia. In this case, EPF members who choose to migrate or return to their home country can choose to withdraw all savings deposited in the fund. 

To do so, prepare the following documents: 

• Form KWSP 9K (AHL) and Checklist
• Copy of valid passport
• Form KWSP 3 (Pindaan) - for mail submissions/failed thumbprint verification
• Bank passbook/Savings account statement/Current account statement/Joint account statement for an active account with an EPF panel bank

Again, you’ll be able to submit the relevant documentation at EPF counters nationwide, or you can choose to post it to the EPF. For more information on withdrawing your EPF savings, click here for the official EPF website.

Automate payroll for expatriates — and locals — with altHR

In order to survive — and thrive — in the “new normal”, it’s crucial for Malaysian businesses of all sizes to digitalise their HR processes. Having to separate EPF contributions for both Malaysian and foreign employees can be an arduous, tedious task for even the most experienced of HR professionals — but it doesn’t have to be, with Digi’s super app, altHR.

Besides the automation of various other HR processes, altHR comes with a Payroll module that helps employers keep track of all forms of employee remuneration, while automatically calculating monthly salary deductions. This doesn’t just cover EPF contributions, with SOCSO, EIS, and monthly income tax (MTD/PCB) deductions also included. 

These deductions are also automatically adjusted based on employee categories, which can be set based on nationality. This automation frees up time for HR professionals to focus on other important matters to the business, while ensuring that monthly payroll is calculated accurately for all employees. 

The best bit? Everything is seamlessly integrated with the other modules within altHR, such as Documents, and Expenses. For example, once payroll has run for the month, admins have the option to send payslips to the Documents module — all within altHR. 

Additionally, the account can also be set to send automated emails, so employees are notified the moment payslips are available. And finally, digital copies of payslips are always available — to employees via the Documents module, and admins via the Payroll admin panel. 

HR professionals are often faced with daunting, often tedious tasks on a daily basis — tasks that have become even more difficult to handle in light of the ongoing COVID-19 situation. 

But help is available, if you know where to look. Let us streamline your HR processes by managing and automating day-to-day tasks, so you won’t have to worry about things like paperwork, privacy concerns, time-tracking, or onboarding challenges.

Sign up for altHR, the all-in-one digital solution that covers everything from payroll and onboarding, to staff management and providing employees with information kits. You’ve done it the old way long enough.