Mandatory EPF for Non-Malaysian Employees: the 2% + 2% Rule

The rate: 2% employer, 2% employee

Both sides contribute 2% of the employee's monthly wages — far below the citizen rates, because the scheme is being phased in rather than switched on at full strength. The comparison that matters for payroll:

Who is covered — and who is not

Coverage keys off immigration status, not job title or salary. There is no wage floor and no wage ceiling: a RM25,000-a-month expatriate director and a RM1,700-a-month factory operator are both in, at the same 2%.

• In scope: any non-Malaysian citizen employed in Malaysia who holds a valid passport and a valid pass issued by the Immigration Department — Employment Pass, Temporary Employment Pass, Professional Visit Pass and Residence Pass holders included.
• Out of scope: domestic servants — maids, cooks, gardeners, drivers employed in a private household — remain excluded, as do non-citizens aged 75 and above.
• Not affected: Malaysian permanent residents were never in this category. PRs contribute at the full citizen rates (11% / 12–13%) and always have.
• Legacy members: a non-citizen who registered with EPF before 1 August 1998 stays on the old Part B footing — 11% employee against a flat RM5 employer contribution — and is the only non-citizen group allowed to make a nomination.

Registration, payment and rounding

EPF automatically registered many pass holders using Immigration data, so a large share of employers found their foreign staff already listed under their employer number. Anyone missed still has to be registered by the employer (Form KWSP 1 for the employer, KWSP 3 for the member), and the worker completes thumbprint verification at an EPF branch or kiosk before i-Akaun access is granted.

The payment mechanics are the same as for local staff: contributions are due by the 15th of the month following the wage month, submitted on the same Form A. Two details trip people up. Contributions for non-citizens are computed in whole ringgit with no cents, and the employer may lawfully deduct the employee's 2% from wages — but may not deduct its own 2% share, which is the single most common breach.

Late payment attracts a dividend penalty plus a late payment charge, and persistent arrears expose directors personally, including travel bans until the debt is cleared. Treat the 15th as hard.

What the employee actually gets

The contributions are real savings, not a levy. They are credited to the member's account, split across Akaun Persaraan, Akaun Sejahtera and Akaun Fleksibel in the same 75/15/10 proportions as for citizens, and they earn the annual EPF dividend on the same terms — which has consistently beaten Malaysian fixed deposit rates.

The exit route is the important part for a foreign worker: the Leaving Country Withdrawal lets a non-citizen take out the entire balance — their own contributions, the employer's, and all accumulated dividends — when they permanently leave Malaysia. The pass must have expired or been cancelled, or the employment formally ended. Apply about two months before the pass expires, using Form KWSP 9C (AHL) via i-Akaun or a branch, with the passport, proof of pass cancellation and bank details.

One consequence catches returnees out: once a Leaving Country Withdrawal is paid, the membership account is closed. Come back to work in Malaysia later and you register as a brand-new member with a fresh balance, so the dividend compounding starts over.

Practical points for employers

• Budget the cost, not just the deduction: 2% employer EPF sits on top of the existing foreign-worker levy, SOCSO (foreign workers are covered under the Employment Injury Scheme) and any insurance obligations.
• EIS is different — the Employment Insurance System still applies only to Malaysian citizens and PRs, so do not extend it to foreign staff by analogy with EPF.
• Check the wage definition. EPF wages include salary, bonus, commission, allowances and paid leave, but exclude overtime, travelling allowances, gratuity and retirement benefits — the same definition used for local employees.
• The 2% is widely understood as a starting point rather than a permanent rate. Model your foreign headcount cost at higher rates before signing multi-year contracts.

Important caveats

This is general information current to the position after the Employees Provident Fund (Amendment) Act 2025 came into force, not legal or payroll advice. Rates, covered pass types and exclusions are set by the EPF Board and can be revised — the 2% phase-in in particular was announced as an initial rate.

Confirm your specific case at kwsp.gov.my or with your EPF employer relationship officer before running payroll on it. The calculator below is built on the citizen statutory rates; for non-citizen staff, apply a flat 2% to each side of the same wage figure and round to whole ringgit.