What’s Changing for Employers and Employees?

• Effective Date: October 2025
• Contribution Rate: Both employer and foreign employee must contribute 2% of monthly wages each, based on the October salary (payable by 15 November 2025)
• Scope: Covers all foreign workers, including those in professional roles with work permits
• Exemptions: Domestic helpers (e.g., maids, cooks, cleaners) with valid permits are excluded from this requirement

Who Needs to Comply?

• Applies to: All employers with foreign staff, regardless of sector or size
• Employees included: All foreign nationals working legally in Malaysia, up to age 75, with proper permits or work passes
• Does not apply to: Domestic helpers with valid documentation

Who Is Covered?

• ll non-Malaysian citizen employees under the age of 75 with valid employment passes issued by Malaysia’s Immigration Department are included. This includes both blue-collar and professional/expatriate roles.
• Exemptions: Domestic employees (domestic helpers) with valid permits are specifically excluded from the new policy.

Implementation and Employer Responsibilities

• Registration: Employers must ensure that all eligible foreign workers are registered with the EPF, with streamlined online and in-person registration options. The EPF is also working towards systems for automatic registration and compliance notifications for employers.
• Payroll & Systems: Employers are required to update internal payroll processes and revise employment contracts to reflect the new EPF deduction for foreign employees.
• Compliance: The EPF plans to release detailed implementation guidelines on their website. Employers are strongly encouraged to begin preparations and stay current with these updates to ensure smooth adoption and avoid penalties.

• Monitor compliance guidelines: By regularly checking the EPF website for detailed instructions and legislative updates to avoid penalties

Impact on Payroll, Wage Costs, and Compliance

The introduction of mandatory EPF contributions for expatriates signals an increase in labour costs for businesses, particularly in sectors with large numbers of foreign workers. While 2% is substantially lower than the employer rate for Malaysian citizens (12–13%), it still requires payroll adjustments, budgeting for additional expenses, and updates to employment contracts.

Payroll departments and HR professionals must ensure accurate deduction and timely remittance to avoid enforcement action under the updated EPF laws. Non-compliance can lead to financial penalties and reputational risk, making prompt action critical for all companies affected.

Withdrawals

Foreign employees are permitted to withdraw their EPF savings when they permanently leave Malaysia after their employment ends.

This mandate reflects Malaysia’s priority on workforce equality and stronger social nets for all residents, not just its citizens. Employers should review payroll policies, seek guidance from the EPF portal as new resources are published, and communicate transparently with affected employees to prepare for the change.

Employers who fail to comply may face enforcement action under the updated EPF legislation, underscoring the need for immediate operational review and readiness

Policy Objectives: Workforce Equality and Social Security

This change advances Malaysia’s goal of promoting social protection, workforce equality, and employee benefits for all residents. Adopting international standards for retirement savings, the government aims to enhance economic security for both local and foreign employees while strengthening compliance and transparency in payroll management.

For further detailed guidance on payroll, employment law, and compliance in Malaysia, visit the Malaysia Global Insight page on the activpayroll website. You can also explore broader regional updates and expertise in the APAC Global Expertise web section.

Action Checklist for Employers

• Review and update employment contracts to reflect new EPF obligations
• Budget for increased payroll costs and adjust financial planning accordingly
• Educate HR and payroll teams on calculation, deduction, and remittance processes
• Communicate changes clearly to foreign staff prior to implementation
• Track EPF guideline updates to remain compliant

Malaysia – Global Insights

For further detailed guidance on payroll, employment law, and compliance in Malaysia, visit our Malaysia Global Insight page on the activpayroll website. You can also explore broader regional updates and expertise in the APAC Global Expertise web section.

Next Steps

If you have any questions or need tailored advice, we encourage customers and potential clients to get in touch about Mandatory EPF Contributions. Please complete our Contact Us form, and a member of our team will be happy to assist with your queries.