KUALA LUMPUR, March 6 — The Dewan Rakyat has passed the Employees Provident Fund (EPF) (Amendment) Bill 2025, aimed at enhancing social protection for both Malaysian and non-citizen workers in the labour market.
The bill was passed with a majority of votes in favour after being debated by eight MPs from both the government and Opposition blocs.
It involves amendments to 11 clauses to include provisions on the liability to pay contributions and the applicable contribution rate for non-citizen workers.
When winding up the debate on the bill, Finance Minister II Datuk Seri Amir Hamzah Azizan said making contributions compulsory for non-citizen workers would help increase the national salary structure, benefiting the people and the country.
“With this salary increase, households will have greater spending power, which will help drive national economic growth. Therefore, making social protection mandatory for non-citizen workers is in line with international best practices,” he said.
Amir added that it could also indirectly reduce reliance on non-citizen workers in the long run, enhancing the competitiveness of local businesses and encouraging a shift towards automation.
He cited the Low-Skilled Foreign Workers' Distortion to the Economy (2018) Working Paper by Bank Negara Malaysia, which found that industry reliance on non-citizen workers was highly correlated with productivity levels.
“If there are no EPF contributions for non-citizen workers, hiring them would be cheaper than employing locals...that is why this effort is important to prevent the imbalance and encourage local employment.
“In addition, this measure can help the government reduce the number of undocumented non-citizen workers, as only those legally registered with employers are eligible to contribute to the EPF,” he said.
For non-citizen workers, mandatory contributions served as incentives that could be withdrawn upon returning to their country of origin after their work permit expired, with proof of employment termination.
Amir said non-citizen workers currently had the option to join the EPF scheme under the ‘once in, always in’ concept. The contribution rate for employees is 11 percent of their monthly wage, and for employers, it is RM5.
“As of December 2024, only 22,635 non-citizen workers, or 0.9 per cent of the 2.5 million, have opted to actively contribute to the EPF.
“The difference in the employer’s share of contributions also results in a lower wage cost for non-citizen workers compared to local workers,” he said.
The proposal to make EPF contributions mandatory for non-citizen workers was expected to be implemented in the fourth quarter of 2025.
On February 3, the government announced that the contribution rate for foreign workers would be set at two per cent for both employees and employers, lower than the mandatory rate for Malaysian workers and permanent residents, which stands at 11 per cent for employees and 12 or 13 per cent for employers.
— Bernama
