EPF Contributions – 13%

Spoke to an EPF representative today and was told that the Prime Ministers announcement in Budget 2012 pertaining to the 1% increase in employer’s contribution to the fund will come into operation effective January 2012. This means that by the time an employer pays the employee wages (late Jan or early Feb) the new contribution rates will kick in.

In order to determine the rates of contribution, I was told that EPF will be producing a table as a reference. In preparation, I would like to  look at the definition of ‘wages’ under the EPF Act 1991 to determine what comes into the equation and otherwise.

The EPF Act defines ‘wages’ under s.2 as follows:

“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 benefit;

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

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

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


This is a broad definition which will include anything contracted under the employment relationship. All payments except those that have been specifically excluded will be subjected to contribution. In this regard, I foresee some extra work for every payroll officer especially when it comes to commission based employees whereupon they may be subjected on 12% in one month and 13% in the other month depending on whether their wages exceeds RM5000 in that month.

My advise to employers is to take note of the change in preparation of the new year ahead.

Merry Christmas and a Happy New Year!