Industry leaders have contrasting views towards the government’s decision to implement a 2% Employee Provident Fund (EPF) contribution rate for foreign workers.
According to SME Association of Malaysia President Chin Chee Seong, the EPF contribution will add another layer of cost to the already challenging financial landscape faced by small and medium enterprises (SMEs) nationwide.
“Although the 2% contribution might seem like a small amount, it is still an additional cost that will impact the bottom line and cashflow of most SMEs that are already dealing with numerous financial pressures, including rising petrol prices, increased levies on workers, and the upcoming implementation of e-invoicing.
“Furthermore, it becomes a significant cost for most businesses when the number of foreign workers add up, especially in industries like furniture and retail fashion,” he said to BusinessToday.
While Chin acknowledged Prime Minister Datuk Seri Anwar Ibrahim’s view that businesses should pay a bit more if they are profitable, he stressed that this contribution is not about profitability, but a basic cost of doing business.
Hence, he urged the government to consider the timing of the implementation and even suggested that the government reduce the contribution to 1% or delay the rollout as it could help alleviate some of the financial burdens faced by SMEs.
Separately, the Federation of Malaysian Manufacturers (FMM) welcomes the government’s decision to implement the 2% EPF contribution for foreign workers.
FMM President Tan Sri Soh Thian Lai said the decision to reduce the contribution rate to 2% without compounding is a welcome relief and reflects the government’s responsiveness to industry concerns by striking a balance between worker welfare and business sustainability.
“However, given the evolving business landscape and the need to sustain Malaysia’s competitiveness as a manufacturing hub, FMM strongly urges the Government to maintain the 2% contribution rate for a reasonable period to provide businesses with much-needed cost certainty and allow industries to adjust and plan accordingly.
“Additionally, any future policy changes, including potential adjustments to the contribution rate, should be undertaken in close consultation with the private sector, particularly industries reliant on foreign labour,” Soh said in a statement to BusinessToday.
He suggested that clear guidelines should also be provided on the mechanics of the contribution scheme, its integration with existing social security schemes, and the potential for further refinements, ensuring transparency and a smooth transition for all stakeholders.
Earlier today, Anwar announced that the government has decided to set the EPF contribution rate for foreign workers at 2%, lower than the initial proposal of 12%.
Source: https://www.businesstoday.com.my/2025/02/03/industry-leaders-have-mix-views-on-2-epf-contribution-for-foreign-workers/