EPF and Wage Hike Could Add RM454 to Foreign Worker Costs: ACCCIM

(Kuala Lumpur, October 21) – The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) has urged the government to reconsider the proposal in the 2025 Budget to mandate EPF (Employees Provident Fund) contributions for all foreign workers. ACCCIM estimates that if this proposal is implemented along with the increased minimum wage, employers in the manufacturing sector could face an additional wage burden of 27%.

ACCCIM expressed concern that the increase in the minimum wage to RM1,700 per month, combined with tiered foreign worker levies, EPF contributions, and additional costs from fuel subsidies and the Sales and Service Tax (SST) adjustments, will lead to significant financial strain for businesses, particularly micro, small, and medium enterprises (MSMEs).

“For example, if a foreign worker in the manufacturing sector is on a new contract with a salary of RM1,700, the employer would need to contribute 13% to EPF, and the annual levy is RM2,200. This means the employer would incur an additional cost of RM454 per month for each foreign worker, which represents a 27% increase compared to 2024.”

The statement highlighted that current additional employment costs for foreign workers amount to RM267 per month, which equates to a 15.9% increase.

ACCCIM warns that companies unable to absorb these additional costs may be forced to pass them on to consumers to maintain profit margins. This could lead to higher inflation, increased living costs, and potentially reduced consumer spending.

Concerns on EPF Contributions for Foreign Workers

ACCCIM has called on the government to clarify the rationale behind mandating EPF contributions for foreign workers.

“There is talk that Malaysia aims to demonstrate its commitment to international standards and align with the International Labour Organization’s (ILO) principles of equality. However, foreign workers are already provided social protection under SOCSO and health insurance for hospitalization and surgeries.”

The statement suggested that if this proposal is genuinely intended to safeguard the economic welfare of foreign workers, they could be asked to contribute their share to EPF, while employers could be exempted from contributing on their behalf.

Increased Foreign Worker Costs May Backfire

ACCCIM expressed concerns that if the government raises the cost of hiring foreign workers to encourage employers to hire local workers, the result might be counterproductive. Many locals avoid “3D jobs” (Dirty, Dangerous, and Difficult), which could lead to disruptions in certain industries.

“Foreign workers may demand higher salaries to offset their reduced net pay after EPF contributions, or they may opt for illegal employment to avoid EPF deductions.”

ACCCIM also pointed out that the increased contributions from foreign workers would add pressure on the EPF, as the organization is already managing a large investment fund to generate returns for its members.

“Additionally, foreign workers will ultimately withdraw all EPF savings and return to their home countries.”

ACCCIM hopes that the government will reconsider the proposal after thorough consultation with business and private sector representatives.

“We are aware that many chambers and business organizations were not consulted on this proposal.”

ACCCIM reiterated that a sharp rise in operating costs would be detrimental to MSMEs, and that careful consideration of the timing and gradual cost increases would allow businesses to adapt more effectively to the new cost structure.

2025 Budget Highlights:Minimum Wage Increase to RM1,700 for All Workers from February 1, 2025