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KUALA LUMPUR: The two per cent increase in Employees' Provident Fund (EPF) contributions could impose an additional annual cost of RM137 million on employers, particularly impacting small and medium-sized estates in the plantation sector, according to palm oil industry players.

In a statement, 11 associations linked to the palm oil supply chain urged the government to review and reconsider the mandate for EPF contributions for foreign workers.

According to the associations, although the two per cent contribution seems small, it would cost the plantation sector about RM137 million annually, given its 336,500 foreign workers.

They said there is a need to balance the economic viability for plantation companies with fair and practical treatment of foreign workers, who are vital to Malaysia's palm oil sector.

The associations include the Malaysian Palm Oil Association (MPOA), Malaysian Estate Owners' Association (MEOA), East Malaysian Planters Association (EMPA), Sabah Employers Consultative Association (SECA), Sarawak Oil Palm Plantation Owners Association (SOPPOA), Sarawak Dayak Oil Palm Planters Association (DOPPA), Palm Oil Millers Association (POMA), Malayan Edible Oil Manufacturers' Association (MEOMA), Incorporated Society of Planters (ISP), Palm Oil Refiners Association of Malaysia (PORAM) and National Association of Smallholders (NASH).

The response comes after Prime Minister Datuk Seri Anwar Ibrahim announced on Monday the implementation of a two per cent contribution rate for foreign workers, replacing the mandatory statutory rate of 12 or 13 per cent.

With existing financial pressures, the associations urge the government to reconsider the policy to avoid adding further strain on employers or workers.

"The Malaysian palm oil sector relies heavily on foreign labour, particularly for fieldwork, due to the persistent shortage of local workers.

"The introduction of mandatory EPF contributions adds new financial and administrative challenges, particularly for plantation companies already managing fluctuating global markets, sustainability compliance, and rising operational costs," they said.

The associations said the high turnover of foreign workers creates significant administrative burdens.

Since many do not stay long in Malaysia, they said EPF savings may be less relevant to them.

They added that managing these contributions adds costs and could divert focus from productivity and sustainability.

"EPF is primarily designed for long-term retirement savings, which may not align with the financial needs of foreign workers.

"Most foreign workers are here for a short-term employment cycle of two to four years and prioritise sending their earnings home to support their families.

"A mandatory EPF contribution reduces their take-home pay, which could discourage them from choosing Malaysia as a preferred employment destination," they said.

The association said reducing take-home pay may make the country less attractive to foreign workers, hence worsening existing labour shortages.

Employers would also face higher compliance costs and paperwork, as they must manage EPF accounts for short-term workers with high turnover and complex withdrawal processes.

Source: https://www.nst.com.my/business/economy/2025/02/1170607/palm-oil-industry-urges-review-mandatory-epf-contributions-foreign