Malaysia's New Foreign Worker EPF Rule Expected to Boost Pension Fund

Workers' rights groups raise concerns over adequacy, lack of clarity on withdrawals

- Hazlin Hassan

KUALA LUMPUR - Malaysia wants its 2.5 million foreign workers to contribute 2 per cent of their monthly salaries to the country's pension scheme, known as the Employees Provident Fund (EPF). Employers will also have to contribute a matching 2 per cent of these workers' monthly wages to the pension fund.

The new compulsory contributions, which are likely to be implemented in the fourth quarter of 2025, are expected to inject billions of ringgit into the EPF annually.

Foreign workers will earn dividends from the contributions, and can eventually withdraw their money when returning to their home countries for good.

Malaysia's EPF, which is similar to Singapore's Central Provident Fund, serves as a critical financial safety net, managing retirement savings for more than 16 million members.

EPF contributions are a must for Malaysians and permanent residents working in the country.

On March 6, Parliament passed the Employees Provident Fund (Amendment) Bill, which will make EPF contribution mandatory for foreign workers.

The proposed EPF contribution from foreign workers as well as their employers is lower than the 11 per cent employee contribution and 12 per cent to 13 per cent employer contribution required for Malaysian workers.

Prior to this, foreign workers in Malaysia could contribute voluntarily to the EPF, with rates set at 11 per cent of their monthly salaries, and with employers contributing RM5 (S$1.50) a month.

The main thrust of the change was to level the playing field and make it more attractive for employers to hire locals over foreigners, which would also reduce remittance outflows from Malaysia.