This article first appeared in The Edge Financial Daily on December 7, 2018

KUALA LUMPUR: About 23% or 1.64 million out of 7.11 million active members of The Employees Provident Fund (EPF) currently contribute less than the minimal commensurating ratio of the current minimum wage of RM1,000 each month, the EPF said in a statement yesterday.

According to its website, for employees who receive wages/salaries of RM5,000 and below a month, the portion of employee’s contribution is 11% of their monthly salary while the employer contributes 13%.

That means a minimum commensurating contribution of 24% of one’s monthly salary/wage, or RM240 for one earning RM1,000.

Low monthly contribution is likely to result in lower retirement savings for members, the fund said. Its statistics show that a total 64% of members who have reached age 54 years have savings below RM50,000, which it said “is a meagre sum when taking into account the rising cost of living and household debt”.

“Low wages, particularly among low-income earners, is one of the primary causes of many Malaysian workers retiring with insufficient funds. Alignment of the minimum wage should help EPF members achieve sufficient savings for their retirement and help strengthen their future financial resilience,” said EPF chief executive officer Tunku Alizakri Alias.

Minimum Wages Order

With the Minimum Wages Order (Amendment) 2018 taking effect next year, the minimum contribution of employees and employers to the EPF will be aligned to the new minimum wage of RM1,100 for both Peninsular Malaysia, Sabah and Sarawak.

“With the new measure in place, the expected monthly contribution to be received by the EPF for every worker who earns monthly wages will be no less than a minimum of RM264, subject to the worker being employed for the full month. Different minimum contributions may also apply to members who are salaried on a weekly, daily or hourly basis,” the EPF said.

Notices have been sent to all employers registered with the EPF on this matter, it added.

“We are confident that employers will benefit from this in the long run as it will help to increase productivity, loyalty as well as incentivise employees to do their best for the organisation,” said Tunku Alizakri.