PETALING JAYA: In addition to being a burden for employers, the 2% mandatory Employees Provident Fund (EPF) contribution for foreign workers will not benefit them as most will not retire in Malaysia, say industry players.
Malayan Agricultural Producers Association director Mohamad Audong said the government should reconsider the decision to provide EPF contribution for foreign workers.
“The 2% mandatory EPF contribution for foreign workers is expected to incur an additional cost of about RM275mil per year for the plantation sector alone. It will affect about 336,000 foreign workers in Malaysia,” he said.
Mohamad added that the increased financial burden is likely to exacerbate the remittance outflow from Malaysia, further straining the local economy.
He said most foreign workers come to Malaysia for short-term employment of about two to five years.
Since they are not expected to retire in the country, this contradicts the primary purpose of the EPF, which is to ensure that Malaysians are financially supported in their retirement at the age of 60, he said.
“Upon reviewing the EPF Act 1991, it becomes clear that the main objective of the fund is to serve the retirement needs of Malaysian citizens, with non-citizens being excluded from its core provisions,” he added.
Federation of Vegetable Farmers Associations president Lim Ser Kwee said small-scale farmers would be adversely affected by this rule as many will face challenges registering their foreign workers for EPF.
“Many small-scale farmers are illiterate, have few workers and are not registered as a company,” he said.
Lim said most farmers are more agreeable to a levy on foreign workers, as it is more straightforward compared with the EPF contribution.
He is also concerned that the EPF contribution may increase to 4% or 10% in the future.
“We definitely have to fork out money for the contribution since our workers will be displeased if we deduct from their wages,” Lim added.
Meanwhile, Malaysian Muslim Restaurant Owners Association president Datuk Jawahar Ali Taib Khan said its members are willing to contribute 2%.
“The 2% rate is much better than the 12% proposed previously and we really appreciate that,” he said.
However, Jawahar Ali said employers may end up bearing the entire contribution cost if employees are unwilling to agree to salary deductions.
He also highlighted several aspects that need clarification, such as how the EPF can be paid since many foreign workers do not work until retirement age.
“It is unclear how contributions will benefit them or how refunds would be processed if they return to their home countries,” Jawahar Ali said.
There is no clarification on how to return the contributions if workers leave permanently or fail medical exams, he noted.
Jawahar Ali also raised the issue of administrative burdens if employers stop contributions when a worker leaves and would need to respond to EPF’s queries.
He said the decision to provide EPF contribution for foreign workers should have been made with adequate consultation with industries to understand the practical implications.
On the other hand, Labour Solidarity and Learning Resource Association deputy president Andrew Lo said the 2% contribution rate is too little.
“Employers will forever complain about the cost impact. They should be holistic and not be seen to engage in discriminatory practices between local and foreign workers,” he said.
Lo said without EPF contribution for foreign workers, Malaysia may go against global labour standards and put exports at risk of sanctions.
Recently, Prime Minister Datuk Seri Anwar Ibrahim said employers will pay 2% and not 12% as proposed after obtaining feedback from stakeholders.
