Two per cent can look small in a policy announcement. Put it through a shop’s monthly payroll, and the questions become much more personal: who pays, what comes out of a worker’s salary, and what should actually reach their EPF account?
The issue is back before Parliament. In a written reply reported on 22 October, the Finance Ministry defended the 2% employer contribution for non-Malaysian workers as a relatively low rate that balances social protection with business costs.
It was answering a question about pressure on SMEs, including whether foreign workers could be made to bear the full contribution instead. The reply did not announce that change. For employers preparing the next payroll, the existing responsibilities still matter.
The employer’s 2% and the worker’s 2% are separate
Under the applicable foreign-worker arrangement, the employer contributes 2% of monthly wages and the employee contributes another 2%. That makes two shares, rather than one 2% amount split between them.
Here is a simple illustration using RM2,000 in contributable monthly wages. The employer share is RM40; the employee share is RM40. A total of RM80 goes to EPF. The employee’s RM40 is deducted from wages, while the employer’s RM40 is an additional payroll cost.
Before other deductions or costs, that leaves RM1,960 for the worker and a combined RM2,040 outflow for the employer: RM1,960 paid to the employee and RM80 remitted to EPF. These are illustrative calculations, not a claim about what any particular worker earns.
For ten employees on that same illustrative wage, the employer’s own EPF share would be RM400 a month. The other RM400 sent to EPF would come from employee deductions. Keeping those columns separate makes a cost discussion much clearer.
This began last year, rather than with this week’s reply
Mandatory coverage started with October 2025 wages. Grant Thornton’s explanation of the expansion says employers must register eligible non-Malaysian staff, deduct their share and remit both portions by the 15th of the following month.
The firm also explains that an employee who previously contributed at a higher rate may continue above the statutory level through the relevant EPF application. A higher employee contribution does not remove the employer’s own obligation.
That timing matters. An October 2026 parliamentary reply should not be mistaken for a new start date or a fresh grace period. Businesses already employing covered workers should be checking their ongoing payroll records.
Nor is the arrangement a blanket description of every person with a foreign passport. EPF’s rate tables keep permanent residents and certain members registered before 1 August 1998 in separate categories. The right starting point is the employee’s actual membership and residency category.
The numbers show how many smaller employers are involved
According to the ministry’s reply, 78,129 employers had contributed for 1,754,460 non-Malaysian workers since implementation. It said 67,194 of those employers, or 86%, were SMEs under the definitions used in its answer.
The ministry presented that as evidence the requirement was being implemented, including by smaller firms. That does not tell us every employer finds the cost easy to absorb. It does show why a supposedly technical payroll rule has become a bread-and-butter business discussion.
The government said it remained open to proposals and would keep engaging SME groups. Until an actual policy revision is announced, a proposal to shift costs and an operative contribution rule are different things.
A few sen can change the amount you remit
Part F of the EPF Third Schedule specifies the 2% employer and employee rates and a rounding requirement where contributions include cents. EPF’s foreign-worker guide shows how that works in practice.
For RM1,751 in wages, 2% is RM35.02. In EPF’s worked example, each share rounds up to RM36, producing RM72 in total. Rounding the combined RM70.04 once would give a different result.
For a business, that is a good reason to use the correct payroll setup instead of manually copying the previous month’s figures. Small differences become harder to untangle when multiplied across employees and months.
The wider contribution tables also distinguish between wage-range calculations for other member categories and the direct-percentage approach for the relevant non-Malaysian category. Applying a familiar Malaysian employee calculation to everyone is not a safe shortcut.
Registration and payment need to match
EPF’s guidance covers legally employed non-Malaysian staff with valid documentation, while excluding domestic workers from this mandatory expansion. Existing employers do not need an entirely new employer number simply because they employ both Malaysian and non-Malaysian staff.
Automatic registration can help, but a business still needs to verify its employees’ records. A registration notice is not the same thing as a contribution being paid and credited correctly.
EPF’s payment guidance says the contribution form and payment must be submitted together for crediting. Names and identification numbers should match the employee’s documents, and the amount paid should match the contribution information submitted.
The fund offers online submission and payment through i-Akaun for employers, with other supported banking channels also listed. The useful task is reconciling the employee, the wage month and the amount, rather than merely confirming that money left the business bank account.
What to check before the next payroll closes
Start with the correct employee category, then check the wages subject to contribution, the two shares, rounding and the payment deadline. Keep the employee deduction distinguishable from the amount the business contributes itself.
If a worker asks why their take-home pay changed, show the deduction and its destination plainly. If an employer is budgeting staffing costs, include its own contribution on top of wages rather than counting the employee’s savings as a business expense twice.
The question in Parliament was about easing pressure on smaller companies. On the shop floor, clarity is useful immediately: the business needs a predictable cost, and the worker needs to know that a salary deduction has actually become savings in their name.
Sources & further reading
Prepared with AI assistance from linked reporting. The cover is an AI-generated editorial illustration. Spotted something we should correct?