EPF Mandatory Contributions for Foreign Workers: What Employers Need to Know

Starting October 2025, Malaysia will require mandatory Employees Provident Fund (EPF) contributions for non-Malaysian citizen employees. This change, introduced under the EPF Amendment Act 2025, marks a significant shift in payroll compliance, cost structure, and workforce policy. Employers must understand the details to remain compliant, avoid penalties, and adapt their operations. 

What the New EPF Rule Entails

What Employers Need to Do to Get Ready

• Register Eligible Foreign Employees with EPF
  Employers must ensure foreign employees are registered in the EPF system using their valid employment or work passes. The registration process shall start from 1st October 2025 (subject to further announcement by KWSP).
   

• Update Payroll Systems & Employment Contracts
  Payroll must be able to deduct the 2% employee share and add the 2% employer share. Employment contracts should reflect the new EPF obligation for foreign employees. 
   

• Budget for Increased Labour / Payroll Costs
  The additional 2% employer contribution per eligible foreign worker adds to labour cost. Employers should compute this across their foreign worker headcount. 
   

• Engage Employees & Communicate the Change
  Clear communication with foreign employees about their rights, contribution rates, and benefits is essential. Employers should also inform them about withdrawal rights when leaving Malaysia. 
   

• Monitor Official EPF Guidance
  EPF is publishing guidelines, FAQ, and implementation details. Employers should stay updated via the EPF Board’s official site. 

Benefits & Impacts

• Improved Social Protection for Foreign Workers: Becoming part of the EPF scheme boosts retirement security, aligning foreign worker rights with local employees. 

• Administrative Load & Compliance Risk: Employers who don’t comply or misinterpret requirements risk penalties, audit issues, and fines. 

• Talent Retention & Employer Brand: Offering EPF coverage may help foreign workers feel more secure and valued, aiding retention.

Frequently Asked Questions (FAQs)

Summary & Strategic Checklist

To summarise, here is a quick checklist to ensure your company is compliant:

• Identify all foreign employees with valid work passes

• Register them with EPF

• Adjust payroll systems for the 2% employer + 2% employee EPF share

• Update employment contracts and letters

• Plan finances for added costs

• Communicate clearly to staff

• Monitor pass expiry to cease contributions appropriately

Final Thoughts

The mandatory EPF contributions for foreign workers in Malaysia are a landmark reform reflecting evolving labour protections and fairness. Employers who prepare early—updating policies, payroll systems, and contracts—will avoid risks and benefit from having a more inclusive workforce.

Staying current and compliant is not just legal—it strengthens your company’s reputation, ensures fair treatment, and helps build trust among all employees, regardless of nationality.
 

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References:
KWSP – “Contribution For Non-Malaysian Citizen Employees” KWSP
Lockton – “Malaysia introduces mandatory EPF contributions for foreign employees” Lockton
Skrine – “Mandatory 2% EPF Contributions for Foreign Workers …” Skrine - Advocates & Solicitors
InCorp Malaysia – “EPF Contributions for Foreign Employees Malaysia” InCorp Global Malaysia