Malaysia’s EPF compulsory retirement savings scheme has been in operation since 1991. Although mainly a social security system, it permits employees to make withdrawals for housing and essential needs. The SOCSO social insurance scheme provides medical and family services.
Employers pay 12% of employees' monthly base salaries to the EPF, and employees contribute 11%. Employers also contribute 1.75% to SOCSO, and employees 0.75%. These percentages must now be paid pro-rata for part-time workers based on their weekly hours of employment, which will clearly affect employers’ costs.
The government of Malaysia expects the new regulations to affect over 12 million part-time employees who are not covered at present by the social insurance schemes. Part-time employees are also now entitled to other benefits, including paid leave. The government hopes that the new regulations will encourage more of Malaysia’s 6.5 million economically inactive adults to return to paid work. At the same time, however, the changes will impose additional expense on employers.
Companies should be aware that greater focus on compliance is expected, particularly following a campaign in 2010 to check EPF contributions for full-time workers that led to heavy fines for almost 200 companies.