EMPLOYERS were generally surprised by the proposal to raise their contributions by 1% to 13% for those earning less than RM5,000, saying it would result in additional costs amid a challenging economy.
The move to increase employers' contributions to the Employees Provident Fund (EPF) is to help those with insufficient savings to bear the cost of living upon retirement. This measure is expected to benefit 5.3 million EPF contributors.
A study shows that nearly 70% of retirees used up all their savings within 10 years of retirement.
Malaysian Employers Federation executive director Shamsuddin Bardan said the federation was caught by surprise and hoped the Government would study the effective date or reconsider the implementation of the new proposal.
“Many of our members have indicated that business is not as good as it ought to be. Many are facing cancellation of orders especially from the United States, Europe and Japan,” he said.
Shamsuddin said most employers may find it difficult to absorb the additional cost if the move was implemented, and that they might reduce their manpower.
Meanwhile, Telekom Malaysia Bhd (TM) group chief executive officer Datuk Seri Zamzamzairani Mohd Isa said TM had always been making additional EPF contributions for its employees, up to 7% above the statutory rate.
“Thus, the recommended increase to 13% will not have any impact at all on our current financials,” he said.
Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said that from an employee's point of view the impact would only be felt in the long term, while it would enhance the attractiveness of the employer.
Besides additional EPF contributions, three tax deductions and exemptions were also proposed to ensure the welfare of retirees upon reaching retirement age. The three proposals are a new tax relief of up to RM3,000 on contribution to a private retirement scheme and insurance annuity for 10 years; tax deduction on employers' contributions to a private retirement scheme for their employees; and tax exemption on income from the private retirement fund.
In the previous budget, a tax relief of up to RM6,000 for EPF and life insurance was extended to the private pension fund, which is now known as private retirement scheme.