Founded with the goal of helping employees accumulate savings for a future where they are either unfit to work or at retirement, the EPF is an essential right for all Malaysian employees. Companies are mandated to a certain percentage of EPF contribution for each employee.
For a better understanding of the EPF and to avoid the risk of penalty, browse through the article below.
What is EPF?
EPF stands for Employees Provident Fund, and is also widely known as the KWSP or Kumpulan Wang Simpanan Pekerja. This governmental body manages compulsory retirement funds and planning for private and non-pensionable public sector employees.
As previously mentioned, it is a mandated fund governed under the Employee Provident Fund Act 1991, falling into Simpanan Konvensional or Simpanan Shariah section. The legal supervision of this fund is evidence of its importance.
The Benefits of EPF Malaysia
The fund provides numerous benefits to society, acting as a form of financial security, be it for the future or other necessary withdrawals. Meant to support and sustain retirement, below are a few benefits of EPF:
· Tax exemption
The fund provides tax relief and tax exemption for EPF savings withdrawals.
· Long-term financial security
Savings are gathered automatically over time to prepare for future retirement.
The fund can be used as support in case of unexpected medical emergencies or loss of working conditions.
Who Can Contribute?
The Employee Provident Fund Act 1991 outlines who is able and mandated to contribute to the fund. Individuals who are employed, self-employed or business owners can opt to contribute based on their own requirements.
Those liable for the fund are employees employed under a contract of service or apprenticeship not covered in the First Schedule, Second Section of the EPF Act 1991.
Not liable individuals
The individuals or groups listed below are not liable for contribution:
· Nomadic aborigines (unless recommended by the Director General of the Department of Aborigines)
· Domestic servants
· Persons detained in any prison, Henry Gurney School, detention centre, mental hospital or rehabilitation centre
· Members of administration
· Expatriates whose country of domicile is outside Malaysia and who opt not to contribute
· Employees above 75 years old
What About Those Who Choose to Continue Working After the Age of 55?
For those who continue to work after the outlined retirement age, further contributions will be credited to a new account (Account Emas). The fund in Account Emas can only be withdrawn upon reaching age 60.
Employee’s Obligation on EPF Contribution
It is imperative that companies are aware of what they must do with regard to the EPF. The regular procedure is as follows:
1. Register with EPF as an employer within 7 days of hiring your first employee
2. Register your employees as EPF members
3. Provide salary statements
4. Collect employees’ EPF contributions and submit them together with your share of EPF contribution
Keeping in line with local labour laws is crucial for any employer, which is why questions such as ‘What is EPF?’ are essential. To learn more about the EPF and its benefits, visit Kakitangan.com’s main blog or email us at email@example.com.