EPF Contributions as per Budget 2012

This is a re-print of Meca’s Circular dated 20th October 2011

RE: EPF Contributions under Budget 2012

In light of the escalating cost of living, the Government announced in Budget 2012 an increased contribution rate by employers to the Employees Provident Fund. We would like to inform members that although it was announced at the Budget, this change is not yet in operation and employers are not bound by it at the moment. The change will be effective after a gazette notification or the amendment of the Schedule to the Employees Provident Fund Act 1991. (“EPF Act”)

The EPF Act under Schedule 3 requires a minimum statutory contribution of 12% from the employer to the employee’s fund. The Budget 2012 had announced that the prevailing statutory rate for an employer’s contribution shall be increased by 1%. However, this increase will only be applicable to employees whose wages are RM5,000 and below in a month.

In determining the wages of an employee under this Act, reference is made to s.2 of the EPF Act:

“wages” means all remuneration in money, due to an employee under his contract of service or apprenticeship whether agreed to be paid monthly, weekly, daily or otherwise and includes any bonus, commission or allowance payable by the employer to the employee whether such bonus, commission or allowance is payable under his contract of service, apprenticeship or otherwise, but does not include –

            (a) service charge;

            (b) overtime payment;

            (c) gratuity;

            (d) retirement benefits;

            (e) retrenchment, lay-off or termination benefits;

            (f)  any travelling allowance or value of any travelling concession; or

            (g) any other remuneration or payment as may be exempted by the Minister.

It is therefore advised that the company should only take into account the items considered as wages in determining whether the employee is entitled to receive the new prevailing statutory rate of 13%.

We will be keeping you updated on the effective date of operation.