Wednesday,26 July,2017

Reduction of Employees’ EPF Statutory Contribution Rate

EPF

Those handling HR & payroll will be busy for the next couple of weeks.

There’s a little adjustment to be made to the employees’ EPF Contribution.

Let’s recap a few things first.

On the 28th January 2016, the YAB Prime Minister announced the revised Budget 2016 and declared among others:

The employees’ EPF monthly statutory contribution rate will be reduced by three per cent from 11% to 8% for employees below the age of 60 and reduced by 1.5 per cent for those aged 60 and above, effective from March 2016 until December 2017.

BM Translation:

  • Kadar caruman berkanun EPF bagi pekerja-pekerja akan dikurangkan sebanyak tiga peratus (3%) dari 11% kepada 8% bagi pekerja-pekerja di bawah umur 60 tahun; dan
  • Bagi pekerja-pekerja yang umurnya 60 tahun dan ke atas, kadar caruman berkanun mereka diturunkan sebanyak 1.5%.
  • Berkuatkuasa dari gaji untuk bulan Mac 2016 sehingga Disember 2017.

Why?

It appears that the move is to help increase members’ disposable income in the context of the current economic situation. Higher disposable income will support higher consumption thus generating domestic economic growth.

[Tindakan ini bagi meningkatkan pendapatan boleh guna dalam konteks ekonomi negara sekarang. Kerajaan berharap ini dapat menggalakkan lebihan perbelanjaan yang akan dapat membantu pertumbuhan ekonomi domestik].

With less contribution, there will be less savings and more cash flow in the economy.

[Dengan penurunan caruman, tabungan akan berkurang dan mengalakkan lebih aliran tunai dalam ekonomi].

Example:

  • Salary: RM2,000; EPF   : RM223.00; Soscso : RM9.75
  • Disposable income: RM1,767.25

After reducing the EPF contribution to 8%, it will become:

  • Salary: RM2,000; EPF   : RM160.00; Soscso : RM9.75
  • Disposable income: RM1,830.25

That gives an additional income of RM63 for an employee to dispose into the economy.

That’s 1 person.

Imagine if all employees in Malaysia have an extra 3% to spend from their income.

That’s the theory and the rationale behind it.

Will it work?

Let’s just wait and see.

wink

Some Food For Thought Before You Decide Anything

First, less contribution means less savings for the future.

Are you ok with that?

[Dengan berkurangnya caruman, bermakna kuranglah juga tabungan untuk simpanan hari tua]

Secondly, individual employees may wish to take note that the higher disposable income may attract higher rate of income tax for certain group of employees.

We leave it to you to make the choice.

Now for the procedure.

Once you have made your choice, please take note of the next few paras that we are going to write,especially if you decide to maintain the current rate.

YES!  You are not forced to reduce your contribution but you must take action.

arrow down

That means, please let your employer know!

[Anda boleh minta kadar caruman sekarang dikekalkan, namun anda perlu bertindak dan memaklumkan majikan anda].

Automatic Reduction

The reduction of the employees’ EPF monthly statutory contribution rate from 11% to 8% for employees below the age of 60 and from 5.5% to 4% for those aged 60 and above will be made automatically with effect from March 2016.

[Pengurangan kadar caruman adalah secara automatik dan berkuatkuasa dari gaji bulan Mac 2016].

The effect of the above move is that the employees’ EPF monthly statutory contribution rate with effect from March 2016 will be 8% for employees below the age of 60 and 4% for employees aged 60 and above.

The employees’ EPF statutory contribution will be in force until December 2017.

[Kadar baru ini akan kekal sehingga gaji Disember 2017].

Maintaining The Current Contribution Rate

Like we said earlier, you have to be pro-active!

Employees below the age of 60 who wishes to maintain the contribution rate at 11% or other rates of contributions higher than the statutory rate of 8% or if employees aged 60 and above wishes to maintain the contribution at 5.5% or other rates of contributions higher than the employee’s statutory rate of contribution of 4%, they may choose to do so by filling up Form KWSP 17A (Khas2016).

[Maklumkan kepada majikan & majikan hendaklah bertindak dengan mengisi nama anda berserta tandatangan di Borang KWSP 17A (Khas2016)].

Completed forms should be submitted to the respective employers for submission to EPF.

KWSP 17A

We would suggest that when employers forward Form KWSP 17A (Khas2016) to the EPF, a list of the names of the employees who have completed Form KWSP 17A (Khas2016) be included with the membership numbers to ensure that no name is omitted by error.
[Pastikan nombor EPF disertakan agar tidak berlaku kesilapan]

New Monthly Statutory Contribution Schedule

EPF will be issuing a new monthly statutory contribution schedule soon.
[Jadual baru caruman bulanan berkanun akan dikeluarkan oleh pihak KWSP untuk rujukan semua].

Members and employers may obtain the new schedule and Form KWSP 17A (Khas2016) from all EPF branches or download the said documents from EPF website.

[Anda boleh mendapatkan jadual baru caruman dan Borang KWSP 17A (Khas2016) dari cawangan-cawangan KWSP berdekatan atau muat turun dari laman web KWSP].

This Article Was Written By

ISMAIL N is the 'de facto' owner and editor-in chief of DuluLainSekarangLain.Com. A Human Resource practitioner in his normal daily life and consummate blogger in his free time. He is addicted to coffee and Manchester United. Most easily accessed via his Twitter account.

Ismail N

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