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ACCCIM Press Releases

21 Oct 2024

ACCCIM PRESS STATEMENT ON THE PROPOSED INCLUSION OF ALL NON-CITIZEN WORKERS IN THE EPF CONTRIBUTION

The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) urges the Government to review the 2025 Budget’s proposal to make it compulsory for all non-citizen workers to contribute to the Employees Provident Fund (EPF).

  1. For all non-citizen employees with a new contract, the contribution rate is the same as for the Malaysian citizen employees, which is 11% (employee’s contribution rate), 12% or 13% (employer’s contribution rate), subject to wage level; and
  2. For those who are in the current contract, the rate employer and employee contributions will start with 2% each and will be increased in phases until the contribution rate is the same as in line with the Malaysian citizen employee’s contribution rate within 6 years.

We are deeply concerned that the combined impact of proposed higher minimum wage (+13.3% to RM1,700 per month), the multi-tiered foreign workers’ levy and the proposed EPF contribution for foreign workers as well as other cascading costs due to domestic policy changes on fuel and SST would exert high financial burden on businesses, especially micro, small and medium enterprises (MSMEs).

Assuming a foreign worker earns a new minimum wage of RM1,700 per month; employer’s EPF contribution of 13%; and an annual levy of RM2,200; our calculations indicate that an employer has to fork out additional RM454 per month for a foreign worker working in the manufacturing sector under new contract. This marks an increase of 27.0% compared to 2024. For the existing foreign worker, additional hiring cost is RM267 per month or an increase of 15.9%.

Those companies that are unable to absorb increased costs may force to pass costs onto consumers to preserve their profit margin. Consumer inflation will increase, adding to cost of living pressures and dampening consumers’ spending.

We question what is the rationale of mandating foreign workers contribute to the EPF? One would argue that Malaysia would like to show its commitment to support international standards in meeting the principles of equality detailed in the Conventions of the International Labor Organization. But, foreign workers are covered under SOCSO for social protection and also be given medical coverage under Foreign Worker Hospitalisation and Surgical Scheme.

If the proposal’s consideration is to safeguard their economic welfare, one can consider foreign workers only contribute their EPF portion while the employers are exempted from contributing.

There are possible undue implications arising from the budget proposal as follows.

  1. Foreign workers could demand higher wages to compensate for a reduction in take-home pay due to the EPF contributions, or potentially opting to work illegally to avoid contributing to the EPF.
  2. If the Government’s intention is to make the hiring cost of foreign workers expensive, forcing the employers to hire locals, this may backfire as some locals shun 3D jobs, causing disruptions to some sectors.
  3. The pool of EPF fund contributed by foreign workers would put pressure on the EPF to manage its already huge investible funds to generate better dividend to its contributors. Additionally, foreign workers will eventually withdraw their EPF money and repatriate home.

ACCCIM hopes that the Government would consider this proposal with adequate engagements with the industry and private sector. We were informed that many chambers and industry groups were not consulted for considering this proposal.

We again reiterate that significant rise in operating costs will be detrimental to MSMEs and a sequencing of  policy measures is desirable as measured pace of cost increases are easier to bite and make it possible for the businesses to adapt to the new cost structure over time.

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