PETALING JAYA: An economist has proposed that contributions to EPF for foreign workers be set between 13% and 15% to prevent a sudden outflow of cash following the minimum wage increase to RM1,700.
Yesterday, EPF announced mandatory coverage for non-citizen workers as part of efforts to expand social protection, following the 2025 budget announcement that made it compulsory, with a phased implementation plan.
In addition to the higher contribution rate, Ahmed Razman Abdul Latiff from Putra Business School suggested that foreign workers should only be allowed to withdraw their EPF savings at the age of 55.
He said this rate and age condition would benefit the government, as the increased dividends and funds from the retirement savings could be used for future investments.
“If you look at the increase in the minimum wage from RM1,500 to RM1,700, that’s about a 13% rise. If contributions are set at 13%, the net salary will be around RM1,500, the same as before EPF contributions were mandatory.
“To avoid an outflow of cash from the country after the new wage rate is implemented, the government should set the contribution at 13%, but 15% would be even better,” he told FMT.
Tabling the 2025 budget last Friday, Prime Minister Anwar Ibrahim announced that the minimum wage would increase from RM1,500 to RM1,700, starting next February.
The secretariat of the National Wage Consultative Council confirmed in its FAQ that the new wage also applies to foreign workers. However, the government has postponed its implementation for six months for employers with fewer than five workers.
Aimi Zulhazmi from Universiti Kuala Lumpur said that setting a minimum wage policy that applies to foreign workers is expected to impact the outflow of funds from the country, which is currently estimated at RM30 billion a year.
“Indonesia tops the list with RM10.6 billion, followed by Bangladesh (RM6.2 billion) and Nepal (RM5.9 billion).
“After this, employers might change strategies, shifting from manual labour to technology or hiring local workers with higher wages who can perform multiple tasks, thereby boosting productivity,” he said.
