The Employees Provident Fund (Amendment) Bill 2025 (“EPF Amendment Bill”) was passed by the Dewan Rakyat (House of Representatives) of the Malaysian Parliament on 6 March 2025.
 
Mandatory EPF Contributions for Foreign Employees

The salient change proposed to the Employees Provident Fund Act 1991 (“EPF Act”) through the EPF Amendment Bill is to make EPF contributions for foreign employees (i.e. employees who are not Malaysian citizens: (a) whose country of domicile is outside Malaysia; and (b) who enter and remain temporarily under the authority of any pass issued under immigration laws) mandatory.
 
Currently, EPF contribution for foreign employees is voluntary, and for foreign employees below the age of 60 years who elect to contribute to EPF, the rate of contribution for the employee is 11% and for the employer, is RM 5.00 per month.
 
Rate of Contribution
 
The EPF Amendment Bill proposes that the rate of contribution for foreign employees be 2% of the employee’s monthly wages by the employer, and 2% of the employee’s monthly wages by the employee.  
 
Withdrawal of Funds
 
The EPF Amendment Bill proposes that the Board may authorise the withdrawal of all amounts standing to the credit of the foreign employee upon any terms and conditions as may be prescribed by the Board if the Board is satisfied that: 

Currently, the Board can only authorise the withdrawal of funds by employees who are Malaysian citizens or foreign employees who have opted to contribute to the EPF. The above amendment will align the provisions of the EPF Act with the extended scope of contribution introduced under the EPF Amendment Bill.
 
Transitional Provision
 
For foreign employees who have opted to contribute to the EPF on or after 1 August 1998, the transitional provision in the EPF Amendment Bill proposes that the monthly rate of contribution of the said employee shall automatically transition to a contribution amounting to 2% by the employer and 2% by the employee upon the amendments coming into force.
 
Comments
 
The proposal to introduce mandatory EPF contribution for non-citizen employees was first announced in October 2025 by the Prime Minister and Finance Minister of Malaysia, Dato’ Seri Anwar Ibrahim, during his 2025 Malaysian Budget Speech. According to Dato’ Seri Anwar, the initial cabinet proposal was to fix the contribution rate at 12%, but was reduced to 2% for both employers and employees after taking into consideration the views of the business chambers.¹ The 2% contribution rate is now formalised pursuant to the amendments under the EPF Amendment Act.
 
During his 2025 Malaysian Budget Speech, Dato’ Seri Anwar said the introduction of mandatory contribution for foreign employees is to comply with international labour standards. This was subsequently confirmed by the EPF’s Chief Executive Officer, Encik Ahmad Zulqarnain Onn, who said that the move was to “equalise” labour terms between Malaysian and migrant workers in accordance with the exhortation of the International Labour Organisation.² 
 
On the benefit of the proposed amendment to the EPF Act, Finance Minister II Datuk Seri Amir Hamzah Azizan, said, “Without compulsory EPF contributions, foreign workers’ employment costs are significantly lower than those of local workers. This [new] policy will correct that imbalance and incentivise employers to hire more Malaysians….The move would also help curb undocumented employment, as only legally registered foreign workers would be eligible to contribute”.³
 
He further added that, “With the implementation of this policy, a portion of foreign workers’ earnings will be channelled into EPF savings, which can only be withdrawn upon their return to their home countries. This will reduce capital outflows and support the strength of the ringgit….This initiative aligns with Malaysia’s aspirations to become a high-income nation by fostering a fair labour market and supporting sustainable wage growth.”⁴
 
On the other hand, the imposition of the mandatory 2% contribution to the EPF for foreign employees will certainly increase the expenditure of businesses.
 
The EPF Amendment Bill will now be tabled before the Dewan Negara for debate. If passed, the Bill will be submitted for Royal Assent and gazetted into law. According to Finance Minister II Datuk Seri Amir Hamzah Azizan, the mandatory EPF contribution for foreign workers is expected to take effect in the fourth quarter of this year.⁵
 
Alert by Foo Siew Li (Partner) of the Employment and Immigration Practice of Skrine
 
 

---