KUALA LUMPUR (Oct 21): The Federation of Malaysian Manufacturers (FMM) has urged the government to delay by two years its plan to implement mandatory Employees Provident Fund (EPF) coverage for foreign workers in the country, to allow sufficient time for stakeholder consultations.

FMM president Tan Sri Soh Thian Lai said EPF should engage with stakeholders to clarify critical aspects such as coverage, contribution rates, and phased timelines, allowing businesses ample time to plan and adapt.

In a statement on Monday, Soh said mandatory contributions for foreign workers would put pressure on businesses, by affecting cash flow, operating costs, and overall operations.

This is a modal window.

Beginning of dialog window. Escape will cancel and close the window.

End of dialog window.

"This new financial burden comes at a challenging time, as the industry already anticipates further cost increases in 2025, with the minimum wage hike set for Feb 1 and the expected implementation of the multi-tier levy mechanism in early 2025 for which details have yet to be made available but is anticipated to lead to a significant cost increase.

"Together, these escalating labour and foreign worker-related expenses could place businesses, especially SMEs (small and medium enterprises), under severe financial strain, complicating efforts to maintain competitiveness and sustainability in an already challenging economic environment," he added.

The plan to make it compulsory for non-Malaysian workers to contribute to the EPF was announced by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim when tabling Budget 2025 in Parliament last Friday. Anwar said the proposal would be implemented in phases.

EPF chief executive officer Ahmad Zulqarnain Onn, in a statement on Monday, said compulsory coverage for non-Malaysian workers is in line with the fund's efforts to ensure that all workers have access to social protection.
 
He said the initiative would provide greater fairness in the labour market by ensuring social protection for all workers, regardless of nationality, in line with international standards.

"Currently, non-Malaysian workers can opt to contribute to the EPF voluntarily. The new policy is expected to benefit over two million non-Malaysian workers in Malaysia,” he said.

However, Soh claimed that the existing social safety net for foreign workers — provided through full Social Security Organisation (Socso) coverage — already offers sufficient protection, while EPF is intended as a long-term retirement fund for workers, which may not align with the short-term employment tenure of foreign workers in Malaysia.

“FMM is deeply concerned that imposing EPF contributions at the same rates as for citizens, at 12%–13%, would place an enormous financial burden on employers,” he said.

According to Soh, mandatory EPF contributions for about 2.5 million foreign workers could add RM6.6 billion annually to payroll costs, while the upcoming minimum wage increase could add another RM10.8 billion annually.

“When combined, the impact is substantial, i.e. RM17.4 billion annually, which could significantly threaten business sustainability, especially in industries that heavily depend on foreign labour,” he said.

Mandatory EPF contributions for foreign workers will also reduce their take-home pay, potentially impacting their ability to support their families back home, he added. 

https://www.theedgemarkets.com/node/730990