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EPF - Labour Law
Labour Law (Multimedia University)
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Topic 9: EMPLOYEES PROVIDENT FUND ACT (EPF)
• The main objective of the Employees Provident Fund Act 1991 (“the Act”) is to provide
financial relief or social security protection for workers through compulsory savings.
• The EPF is Malaysia's national provident fund that aims to provide financial security for
its members' retirement purposes.
• The fund is committed to preserving and growing the savings of its members in a prudent
manner in accordance with best practices in investments and corporate conduct.
• The Employees Provident Fund Board acts as the trustee of the EPF
• The Fund controls very large amounts of money which need to be carefully invested so as
to increase the return to members and yet at the same time remain safe.
• Therefore, an investment panel is appointed, separate from the Board, to formulate
investment policies.
DUTY TO NOTIFY & REGISTER
• Section 41(1) sets out that every employee unless already registered with the EPF Board,
shall before the end of the first week in the first month in which he is paying wages (for
which he is required to pay EPF contributions), register with the Board.
• In other words, every employer must complete and send Form EPF (I) within seven days
of his becoming liable to contribute.
• It must be noted that upon registration, a reference number will be allocated. This
reference number must be quoted in all future communications with the Board.
• Section 41(2) - Any employer who contravenes this shall be guilty of an offence and shall
on conviction, be liable to imprisonment for a term not exceeding three years or to a fine
not exceeding RM10,000 or both.
WHAT IS A CONTRIBUTION?
• A contribution is the amount of money paid to the EPF which is calculated based on the
monthly wages of an employee and then credited into the employee's EPF account. The
EPF contributions for each employee are made up of the employee's and employer's
share.
• The employee's share is deducted from the employee's wages and contributed to the EPF.
The employer's share is the amount of money contributed by the employer to match the
employee's share of contribution for the employee's retirement benefit.
• Contribution Rate
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• The employer's share contribution for employees who receive monthly wage of RM5,000
and below is increased by 1 percent from 12 percent to 13 percent. The employee's share
contribution rate remains at 11 percent.
• The increase in the employer's share contribution rate is effective beginning employee's
January 2012 wage for February 2012 contribution.
• The latest contribution rate for employees and employers can be referred in the Third
Schedule, EPF Act 1991
• The contributions are in respect of the amount of wages at the rate respectively set out in
the Third Schedule (currently employer 13% and employee 11%).
• If the employer fails to pay to EPF the contributions, such employee shall be guilty of an
offence and shall, on conviction, be liable to imprisonment for a term not exceeding six
years or to a fine not exceeding twenty thousand ringgit or to both.
• It is clearly stated in Section 48 of the Act.
WITHDRAWAL OF CONTRIBUTIONS
• In Section 54, the EPF Board may authorise the withdrawal of the sum of money standing
to the credit of a member, if it is satisfied that;
– The member has died;
– The member has attained the age of 55 years;
– The member is physically or mentally incapacitated from engaging in any further
employment;
– The member not being a Malaysian citizen is about to leave Malaysia with no
intention of returning.
• Partial withdrawal (Section 54(6)
– The EPF may also authorize application to withdraw partial amount standing to
the credit of the member, if it is satisfied that the member;
(a)the member of the Fund has attained the age of fifty years;
(b)the member of the Fund has purchased or built a house;
(ba) the member of the Fund has sold the house that was purchased or built using a withdrawal
under paragraph 54(b) and subsequently has purchased or built another house;
• (c) the member of the Fund has purchased or built a house and has taken a loan under
paragraph 26(1)(f) for the purchase or construction of the house;
(d) the member of the Fund has purchased or built a house and has taken a loan and the
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house has been charged as security for the loan;
(da) the member of the Fund has sold the house charged as security for the loan under
paragraph (d) and has subsequently purchased or built another house and has taken
another loan and the new house has been charged as security for the other loan;
• (e) the member of the Fund has not taken a loan to purchase or build a house but the
spouse of the member of the Fund has purchased or built a house and has taken a loan
and the house has been charged as security for the loan;
(f) the member of the Fund or any other person approved by the Board requires medical
financing;
(g) the member of the Fund requires financing for higher learning for himself or for his
child.
(h) (Repealed by Act A1190);
• (i) the member of the Fund has a credit which exceeds one million ringgit in his account;
(j) the member of the Fund takes a health insurance policy, as may be determined by the
Board from an insurance company approved by the Minister subject to any terms and
conditions as he thinks appropriate, for him or any other person approved by the Board
UNCLAIMED CONTRIBUTIONS
• Unclaimed Contribution is the contribution/ savings made by members aged 65 and
above, who have not made any contributions for at least 10 years and have not made
withdrawals from their savings.
• Among the problems faced by the EPF include;
• Unknown address
• EPF does not have the member's 7 or 12-digit identification card number. Instead,
in its record, the EPF only has the member's district identification card number.
• The member's name in the EPF record does not tally with the one in the
Registration Department (JPN) for the same 7-digit IC number.
• If the member's name is listed in the tabulated Unclaimed Contribution list, the members
or their next-of-kin can apply for withdrawal under the Age 55 Years Scheme or the
Death Withdrawal Scheme if the concerned member is deceased. However, if the
members are not listed in the list, their particulars should be forwarded to the Members'
Service Department (at EPF Headquarters) for further action.
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Contributing More Than the Statutory Rate
• You or your employer, or both, may contribute at a rate exceeding the statutory rate
through the following options:
• If only you opt to contribute at a rate exceeding the statutory rate, you may submit a
notice of election to contribute at a rate exceeding the statutory rate using Form KWSP
17A (AHL).
• If only your employer opts to contribute at a rate exceeding the statutory rate, your
employer may submit a notice of election to contribute at a rate exceeding the statutory
rate using Form KWSP 17 (MAJ).
• If both you and your employer opt to contribute at a rate exceeding the statutory rate, you
and your employer may submit a notice of election to contribute at a rate exceeding the
statutory rate using Form KWSP 17A (AHL) and Form KWSP 17 (MAJ) respectively.
• This rate will be the new statutory rate and shall remain so until you and/or your
employer submit a notice of cancellation using Form KWSP 18A (AHL) and Form
KWSP 18 (MAJ) respectively. Upon receipt of the notification, the rate of contribution
will be reverted to the current statutory rate.
• ACCOUNT I - Consists of 70%
• ACCOUNT II - Consists of 30%
INVESTMENT SCHEME
• A member who has savings of at least RM55,000 in Account I could invest a portion of
those sum in management funds approved by Ministry of Finance.
• The sum that could be invested should not be less RM1,000 but not more than 20% of the
saving amount which is more than RM50,000 in Account I.
BENEFITS
RETIREMENT BENEFIT
• EPF savings are for the retirement. When an employee contributes 11 percent of his
income to the EPF, the employer will contribute another 13 percent. The 13 percent
contribution by employer is for retirement benefit that is when he is no longer capable to
work. Therefore, if an employee not contribute, he will lose the retirement benefit that is
provided by his employer.
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DIVIDEND
• The contributions kept in the EPF will accumulate with dividend every year. Thus, the
savings will increase from year to year until the member retires and withdraw all his
savings.
DEATH AND INCAPACITATION BENEFITS
• As an organisation that protects the interests of employees after their retirement, the EPF
also provides compensations to its members in the event of certain contingencies.
• In this regard, the EPF provides Incapacitation Benefit to the member and Death Benefit
payable to the member's dependent.
• These benefits are additional payments for Incapacitation Withdrawal Scheme and Death
Withdrawal Scheme as a compassionate gesture.
INCAPACITATION BENEFIT
An amount of RM5,000.00 is payable to him if he is eligible to withdraw all his savings on being
incapacitated. It aims to lessen the burden. The payment will be made to the employee after he
has received the payment for withdrawal of his savings.
DEATH BENEFIT
This benefit amounting to RM2,500 is payable to his dependent in the event of his death. This
benefit will be paid to his dependent subject to consideration by the EPF.
TAX INCENTIVE
• The member’s share of contributions to the EPF of up to RM5,000 (inclusive of life
insurance premiums) is tax deductible. In addition, the savings that he withdraws under
the various withdrawal schemes are also exempted from income tax. This means that he
does not have to pay income tax on the savings withdrawn under any of the EPF
Withdrawal Schemes.
WHAT ARE THE REGULATION AS REGARD THE MAKING OF NOMINATION?
• An employee on attaining the age of 18 years and upwards may nominate any person to
be his beneficiary in the appropriate form.
• The nomination may be in favour of one or more persons. Where there are several
persons, the nominator may specify the amounts to be paid to each nominee.
• Who Can Be Named as A Nominee?
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• You can nominate any ‘natural person' as a nominee/administrator. Any ‘natural
person' refers to individuals and does not refer to organisations, associations,
societies, welfare bodies and others.
• You are advised to nominate your next-of-kin such as your spouse or children and
parents to receive/administer your savings. The nomination can still be accepted if
you named other than your next-of-kin, however there maybe difficulties in the
future, such as claims from your next-of-kin.
• Nomination for Muslim Members
• When a Muslim member of the Fund dies, the person(s) nominated shall receive
the credit of the deceased member as administrator (Wasi) who will be
responsible to distribute the credit in accordance with the Faraid Law.
• Nomination for Non-Muslim Members
• The nominee is the actual rightful beneficiary who will receive the credits of the
deceased member.
• For non-Muslim members, in the event of a deceased nominee
• Before the death of the member, the eligible applicant is the next-of-kin of the
deceased member.
• After the death of the member, the eligible applicant is the nominee's next-of-kin.
This is because the nominee is the actual rightful beneficiary of the deceased
member's savings.
• In the absence of any such directions, the Board shall pay equal shares to the nominated
persons.
• If there are no nominations or if such nomination(s) is/ are subsequently revoked by the
employee the amount standing to his credit will be paid into the member’s estate.
What will be the penalty imposed on an employee who:
• Fails to complete the return;
• Fails to furnish the required particulars;
• Fails to complete or forward the contributor’s records;
• Fraudulently furnishes any information or particulars;
• Fails or refuse to make any available any form or other documents?
• He shall be guilty of an offence and shall be liable on conviction to a fine not
exceeding RM10,000 or imprisonment or both.
• It is clearly provided in Section 59 of the Employees Provident Fund Act 1991.
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