What would happen if Malaysian employers refused to pay the Employees Provident Fund (EPF)?
If you are an employee, you may have found the amount difference when using the official EPF/KWSP portal to view your i-Akaun. It’s also critical for businesses to comprehend the legal requirements surrounding EPF contributions and the consequences of breaking the law.
The Employees Provident Fund Act 1991
The Employees Provident Fund Act 1991 is the law that contains all of the rules and regulations regarding EPF contributions. First and foremost, you should be aware that all employers and employees, as specified by the Act, must contribute to the EPF.
Section 43(1) of the Act states:
“Subject to the provisions of section 52, every employee and every employer of a person who is an employee within the meaning of this Act shall be liable to pay monthly contributions on the amount of wages at the rate respectively set out in the Third Schedule.”
Most employers and employees in the private sector are obliged to make EPF contributions, while a few exceptions exist.
While both employers and employees must make EPF payments, the employer must make the monthly payment by the 15th of each month at the latest. The needed mandatory contribution varies according to the employee’s pay.
If you are under 60 years old and your monthly income is more than RM5,000.00, you must contribute 11% of your wage, and your employer must contribute 12%.
On the contrary, if you’re under 60 and your monthly income is RM5,000.00 or less, you must still contribute 11% of your salary; however, your employer must make a 13% contribution.
Generally speaking, if you are an employee over 60, you do not have to contribute to your Employee Provident Fund (EPF). However, regardless of your salary, your company is required to contribute 4% of it.
What happens if your employer fails to make EPF payments?
Your employer may be charged immediately if you discover they have not been paying your EPF. Following EPF Act of 1991 Section 43(2):
“Any employer who fails to make contribution on or before the 15th of every month shall, on conviction, be liable to imprisonment for a term not exceeding three years or to a fine not exceeding ten thousand ringgit or to both.”
This indicates that your employer may face a maximum 3-year jail sentence, a maximum RM10,000 fine, or both.
The penalty differs for larger organizations, though, where you could have several directors, partners, or associates instead of just one employer. In this case, they might file for bankruptcy, and their passport and possessions seized.
There have been cases where employers have taken money out of your EPF account without really crediting it to your account—this is practically theft from you. Following Section 48(3) of the EPF Act, if this occurs and they are found guilty, they may get a fine of up to RM20,000 in addition to a maximum 6-year jail sentence.
Furthermore, under Section 45 of the EPF Act of 1991, employers would also be responsible for paying dividends to the Fund and late payment penalties for unpaid outstanding payments. This is comparable to paying a fine or a late penalty.
How do you file a complaint?
It is important that you regularly check your EPF account and pay slip to make sure that the payments are in your account on time. Especially if you suspect your employer hasn’t contributed to your EPF fund.
The simplest method is to review your pay slip, which will list all of your deductions and your employer’s contributions. Under Section 42(1) of the EPF Act 1991, it is also illegal for your employer to fail to provide you with a pay slip.
However, some companies have deducted money from your account without really depositing it, so it’s generally wise to check the balance of your EPF account periodically. You can do this by signing into your i-Akaun on the KWSP website or using their mobile app, which is accessible through the App Store and Google Play Store. If you need help with your EPF account, you can also stop by any KWSP branch.
As you can see, there are a lot of regulations governing employers’ EPF contributions. Suppose your company fails to make contributions to your Employee Provident Fund. In that case, you have the option to register a complaint by:
