Mandatory Contributions for Employees Provident Fund (EPF) / Kumpulan Wang Simpanan Pekerja (KWSP)
Employees Provident Fund (EPF), or also known as Kumpulan Wang Simpanan Pekerja (KWSP) in Malaysia was established according to the Laws of Malaysia.
Employees Provident Fund Act 1991 (Act 452) provides retirement benefits for members through management of their savings in an efficient and reliable manner. On top of that, it also provides a convenient framework for employers to meet their statutory and moral obligations to their employees.
Every company is required to contribute EPF for its staff/workers and to remit the contribution sum to KWSP before the 15th day of the following month. Failure to submit within the stipulated period will result in late penalties charged by KWSP.
A mandatory contribution constitutes the amount of money credited to members’ individual accounts in the EPF. The contribution is calculated based on the monthly wages of an employee.
For employer (company)
- 13% for any wages less than RM5,000
- 12% for any wages more than RM5,000
For employee (staff/workers), is 11%.
Voluntarily to contribute more than the statutory requirement (12-13%) by the company for its employees is encouraged by the Government where a tax deduction will be given for such extra contribution by the company. The employers’ contribution is tax deductible up to 19% of the employee’s pay.
It is always the EPF’s mission to provide the best Retirement Savings Scheme. Therefore, the EPF provides you with reasonable dividend annually. The EPF will ensure that your savings are secured as well. In fact, it guarantees a minimum of 2.5 Percent dividends annually. In order to provide you with good dividends, your monthly contributions are invested in a number of approved financial instruments to generate income, which includes Malaysian Government Securities, Money Market Instruments, Loans & Bonds, equity and property.
Dividends are paid annually into your account. The dividend rate declared by the EPF is subject to the returns from investments made in the approved instruments. Annual dividends are calculated based on the opening balance of your savings as at 1 January of each year. Meanwhile, monthly dividends that are calculated based on the monthly contributions received will be credited into your account.
It is good for you to know that in line with the mission to empower members in managing challenges with regard to insufficiency of retirement savings, the EPF has conducted the Public Consultation exercise and obtained results as followed:
- A total of 4 percents of members agreed with EPF’s proposal to maintain then Full Withdrawal at Age 55, with new contributions from Age 55 to 60 to be locked in until age 60.
- A total of 61 percents agreed with EPF’s proposal to extend dividend payment from age 75 to age 100 to allow members benefit from the compounding effect to their retirement savings.
At 3E Accounting, all your business needs will be taken good care of when you engage with their services. So, please do not hesitate to contact them today to find out more on EPF and their payroll services!