In late 2020, the Malaysian government announced that employees’ statutory contributions to the Employees Provident Fund would be reduced from 11% to 9% in 2021.

The Employees Provident Fund (EPF) is the compulsory retirement fund to which all Malaysian employers and employees must contribute. The EPF is in place to ensure that employees in Malaysia’s private sector save a portion of their salaries on a regular basis.

Money that is accumulated in the EPF can be withdrawn when contributing employees reach certain age thresholds - if the employee so chooses. At 50 years of age, employees may withdraw up to 30% of their EPF savings, while employees who are 55 years of age and older may withdraw the entirety of their EPF savings.

Similarly, employees who become disabled or require essential medical treatment prior to those thresholds may also make withdrawals to cover those costs. Withdrawals are also permitted when an employee emigrates.

Contribution Rate Reductions

The government’s reduction of EPF contribution rates for employees was originally introduced at the height of the Covid-19 pandemic to help ease economic uncertainty. It will now be extended into 2021 to provide further support for Malaysia’s workforce.

The reduced rate is applicable to all EPF-contributing employees under 60 years of age and will be in effect from January to December 2021. In terms of contribution rates, that means that the first reduced contribution for January 2021 remuneration will be paid in February 2021, and the final contribution for December 2021 remuneration will be paid in January 2022.

If employees wish to continue to make EPF contributions at 11%, they may do so. In a statement accompanying the announcement, the EPF explained how employees could continue at 11%: “Members who wish to maintain the contribution rate for employees at 11% may fill in the Borang KWSP 17A (Khas 2021) form, which will be made available on the EPF website starting Dec 1, 2020.

The completed form must then be submitted to their respective employers for online registration via i-Akaun (Employer), which will begin from Dec 14, 2020. Employers are also required to keep the form received for their record,”

The Borang KWSP 17A (Khas 2021) form is available at:

For more information on Covid-19 support measures for employers and employees, browse activpayroll’s latest new page. For insight into Malaysia’s tax and payroll process, explore our Malaysia Global Insight Guide.

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