EPF contribution rates in Malaysia, explained for employers

What EPF is and who has to contribute

The Employees Provident Fund, known locally as KWSP, is a compulsory retirement savings scheme. Money goes into the employee's own EPF account, part from the employer and part deducted from the employee's pay, and it is credited against that employee's EPF membership number.

As a general rule, if you employ someone under a contract of service in Malaysia, both you and that employee are liable to contribute. A few specific categories sit outside the mandatory scope or are treated differently, and non-Malaysian employees have their own treatment, so check an unusual case against KWSP's own guidance rather than assuming.

Contribution is the employer's legal duty, not the employee's. If you fail to deduct the employee's share you still owe the full amount, and late payment attracts a dividend-based late payment charge.

The Third Schedule (Jadual Ketiga), not a raw percentage

This is the single biggest source of payroll disputes over EPF. KWSP publishes contribution amounts in the Third Schedule of the EPF Act. The schedule works in wage bands, usually steps of RM20 at the lower end, and each band has a fixed ringgit amount for the employer and for the employee.

So the correct method is: find the band that the employee's wages for the month fall into, then read off the two amounts. The percentages are how the schedule was built, not how you apply it.

Two consequences follow. First, an employee earning RM3,010 and one earning RM3,015 may contribute exactly the same ringgit amount, because they land in the same band. Second, a spreadsheet that simply multiplies by 13% and 11% will drift from the schedule by a few sen, which quietly compounds into a reconciliation problem at year end.

Above the top of the tabled bands, the schedule switches to a percentage applied to the wage and rounded up to the next ringgit. Read the schedule's own notes for the exact rounding rule that applies.

The employer share: 13% below and 12% above RM5,000

For employees who are Malaysian citizens under the age of 60, the employer's statutory minimum share is set at two levels, split at a monthly wage threshold of RM5,000:

• Monthly wages of RM5,000 and below: employer 13%
• Monthly wages above RM5,000: employer 12%

The threshold is tested on the wages for that month, not on the annual salary. An employee on RM4,800 basic who receives a commission that pushes total EPF wages to RM5,400 in one month moves into the 12% band for that month only.

These are statutory minimums. Nothing stops you contributing more as a benefit, and some employers do. If you do, record the voluntary excess deliberately, because it affects the employee's tax position and your own deduction.

The employee share

The standard employee share for members under 60 is 11% of monthly wages, again read from the schedule rather than multiplied out.

Employees may elect to contribute more than the statutory rate by submitting the relevant KWSP form. Once that election is in force you are obliged to deduct at the higher rate until it is revoked, so it belongs in the employee's payroll record and not in someone's memory.

Note that the employee rate has been temporarily reduced by government announcement in the past. If you are reading an older payroll file, do not assume the rate in it is the rate today.

Employees aged 60 and above

Once a member reaches 60, the standard adult rates stop applying. KWSP publishes separate parts of the Third Schedule for members aged 60 and above, with reduced rates on both sides, and the treatment differs depending on whether the member is a Malaysian citizen, a permanent resident, or a non-citizen.

In broad terms, the employee's own share is reduced or removed for citizens in this group, and the employer continues to contribute at a reduced rate. Contribution can also become voluntary at higher ages.

The practical rule for payroll: age is an input, not a footnote. Your system needs each employee's date of birth and citizenship status so it can select the correct part of the schedule automatically in the month they cross the threshold. Verify which part applies against KWSP's current schedule before you rely on a rate.

What counts as wages for EPF

EPF has its own definition of wages, and it is not the same as the definition used by PERKESO or by LHDN. Getting this wrong changes every figure downstream.

Commonly included: basic salary, fixed allowances, payment for unutilised annual leave, commissions, bonuses, incentives, and arrears of wages.

Commonly excluded: overtime payments, service charges, gratuity, retirement benefits, retrenchment and termination benefits, travelling allowances, and benefits in kind.

The borderline items are where audits find problems, particularly allowances that are described as reimbursements but paid at a flat rate every month regardless of spend. Classify each pay element once, document why, and apply it consistently.

Paying and submitting

Contributions for a wage month are due by the fifteenth day of the following month. Employers submit a contribution listing, historically Form A and now normally through KWSP's online channel, and pay the total for the month.

The listing has to reconcile to the payment. A mismatch between what you declared per employee and what you transferred is the most common reason a member's account ends up short, and it usually surfaces months later when the employee checks their statement.

What this means for your payroll

• Calculate from the current Third Schedule, not from a percentage formula, or your figures will drift by sen every month.
• Store date of birth and citizenship status for every employee, because both change which part of the schedule applies.
• Test the RM5,000 threshold monthly, on that month's EPF wages, so commission and bonus months are handled correctly.
• Classify every pay element as EPF-wages or not, once, and keep that mapping visible to whoever runs payroll.
• Reconcile the monthly listing to the payment before you file, not at year end.