Finance Ministry defends 2% EPF contribution rate for foreign workers

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2% EPF contributions for foreign workers

Highlights

The Ministry of Finance defends the 2% EPF contribution rate for non-citizen workers as a measure to balance employer costs and social protection.
Since October 2025, 78,129 employers have contributed to the EPF for 1,754,460 foreign workers, with 86%, or 67,194, being SMEs.
The government says mandatory EPF contributions aim to expand social protection in line with international practice, while monitoring the impact on SMEs.

This article was translated from the original. Read the original version by our correspondent here.

Policy details and implementation since October 2025

According to The Edge Malaysia, as reported in a written parliamentary reply published on the Parliament website, the Ministry of Finance said the 2% EPF contribution rate for non-citizen workers is relatively low and takes into account the need to balance social protection with the costs borne by employers.

The Ministry said that under the Employees Provident Fund Act 1991, all employers have been required to contribute to the EPF for non-citizen workers employed in Malaysia since October 2025. The reply was given in response to a question from Jimmy Puah Wee Tse, Pakatan Harapan-Tebrau, about measures to ease the burden on SMEs amid rising business costs, including whether the government would consider requiring foreign workers to bear the full cost of these contributions.

Since mandatory contributions were introduced in October 2025, 78,129 employers have contributed to the EPF for 1,754,460 non-citizen workers. Of these, 86%, or 67,194 employers, are SMEs, defined as businesses with no more than 200 employees in the manufacturing sector and no more than 75 employees in the services and other sectors.

Implications for SMEs and workers’ social protection

The Ministry of Finance said these participation figures show that employers, including SMEs, are beginning to accept and implement the mandatory contribution requirement. At the same time, the government acknowledges the challenges employers face following the rise in business costs, especially small and medium-sized enterprises.

The Ministry stressed that mandatory EPF contributions are part of the government’s efforts to extend social protection coverage to all workers in Malaysia, in line with international practice. The government also remains open to proposals from all parties to improve the policy over time, while continuing to monitor the effectiveness of the initiative and engage with SME associations and communities to ensure support reaches businesses in need.

SME Corp Malaysia’s Sinar Programme was previously reported by us as one of the support channels for micro, small and medium-sized enterprises affected by supply chain disruptions and rising operating costs. The article also outlined the distribution of financing under several schemes and how Budget 2027 allocated substantial funds to strengthen MSME development through financing, automation, market access and human capital.

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