KUALA LUMPUR (Feb 4): The Malaysian palm oil industry is urging the government to reconsider its decision to mandate a 2% contribution to the Employees Provident Fund (EPF) for foreign workers due to the potential costs involved.

The proposed 2% contribution rate by foreign workers will be matched by a 2% contribution from employers.

With an estimated 336,500 foreign workers employed in the plantation sector, the industry could be hit by additional costs of about RM274 million each year, according to a statement adopted by 12 Malaysian plantation organisations affiliated with the industry.

"Given the financial pressures already faced by the sector, the Association seeks reconsideration of this policy to ensure that it does not inadvertently burden employers or foreign workers," the organisations coming together to be known as the Association said in the statement.

Malaysia relies heavily on foreign workers, particularly from its neighbour Indonesia and South Asian countries India, Nepal and Bangladesh, to toil on its estates as harvesters, while locals shun the jobs.

The proposed policy calls for 2% contribution rate to the Employees Provident Fund by foreign workers, which will be matched by equivalent contribution from employers. The proposal will be discussed at the Cabinet level this week, with the Ministry of Human Resources set to announce the details.

The introduction of the mandatory EPF contribution will create new financial and administrative challenges for plantation companies, diverting their focus from productivity and sustainability initiatives, the Association said.

“The EPF is primarily designed for long-term retirement savings, which may not align with the financial needs of foreign workers,” the statement read. “Most foreign workers are in Malaysia for a short-term employment cycle of two to four years and prioritise sending their earnings home.”

The potential reduction in foreign workers’ take-home pay may also discourage them from seeking employment in Malaysia, the Association warned.

Another pressing issue is the lack of a clear withdrawal mechanism for foreign workers that want to return home.

“Without a clear withdrawal mechanism, many may struggle to claim their savings, creating potential dissatisfaction among workers and further complicating employer compliance,” the statement warned.

The Association also pointed out that small- and medium-sized plantation companies are particularly vulnerable to the policy’s cost implications, reducing profitability and hampering efforts to remain competitive in the global palm oil market.

While acknowledging the government’s intent to enhance worker welfare, the Association emphasised the importance of implementing policies that are both fair and practical.

“We remain committed to collaborating with the government and relevant stakeholders to develop a balanced approach that ensures the continued growth of Malaysia’s palm oil sector while safeguarding the well-being of its workforce,” the statement concluded.

Organisations in the Association:

• Malaysian Palm Oil Association
• Malaysian Estate Owners’ Association
• East Malaysian Planters Association
• Sabah Employers Consultative Association
• Sarawak Oil Palm Plantation Owners Association
• Sarawak Dayak Oil Palm Planters Association
• Palm Oil Millers Association
• Malayan Edible Oil Manufacturers’ Association
• Incorporated Society of Planters
• Palm Oil Refiners Association of Malaysia
• National Association of Smallholders
• The Malaysian Biodiesel Association

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