You got a new job and everything’s going great. You’re settled in, the pay’s pretty good, and you can finally save up for that new house in Bangsar that you’ve been eyeing. You hear that you can actually use your EPF Akaun 2 to finance the house, so you check how much you’ve accumulated so far and…...
It’s so much lesser than it’s supposed to be.
You check with KWSP and find out that, your company hasn’t been contributing their part into your EPF fund. But you’re not the only one as there are many cases of companies doing this. So, what can you actually do?
Before we get into that, let’s understand what is required of an employer with regard to your KWSP fund.
All companies must pay EPF for their employees
Basically, all employees and employers are required to contribute to their respective EPF funds aka KWSP funds. Section 43(1) of the Employees Provident Fund 1991 (EPF Act 1991) states that:
How do you know if you qualify for EPF contribution?
When we look at the EPF act, the qualification to get EPF is actually broader than we’d expect. Under Section 2 of the EPF Act 1991:
So even a verbal agreement between you and your employer would be a valid employment contract. As long as it is understood to be a contract of service, you would qualify for EPF contribution. At the end of the day, it’s still safer to have a written hard copy of your employment contract.
[READ MORE: Is an unwritten promise legally binding?]
Perhaps it is important to note a small, but major difference in employment contracts. There are two types.
- Contract OF service
- Contract FOR service
They may sound similar, but it makes a big difference to your contract.
In a contract OF service, both parties agree to have an employer-employee relationship. In this arrangement, the employee agrees to be of service to their employer. This applies to our usual full-time contracts and even part-time contracts.
But a contract FOR service is different. This is more of a client-contractor type of relationship where the contractor here would be an independent one who agrees to provide a type of service to the client and would not be considered as an employee. This applies to freelancer / freelance contracts.
To qualify for EPF contribution, your employment contract must be one that is a contract OF service as required by the law stated above.
For part-timers, you have to earn more than RM10 per hour in order to qualify for EPF contribution but do ensure that your contract is a contract of service. So if you’re employed under a contract of service, regardless if you are a full-timer or part-timer, you and your employer are required to contribute to your EPF fund.
What are the mandatory EPF contributions?
While every employer and employee must make EPF contributions, the employer must make the monthly payment on or before the 15th of every month. The mandatory contribution required varies depending on the employee’s salary.
If you’re below the age of 60 and you’re earning above RM5,000.00 per month, you’re required to contribute 11% of your monthly salary while your employer would be required to contribute 12%.
On the other hand, if you’re below the age of 60 and you’re earning RM5,000.00 and below per month, your’re still required to contribute 11% of your monthly salary but your employer would be required to contribute 13% instead.
If you’re an employee who is above the age of 60, you generally don’t have to contribute to your EPF but your employer MUST contribute 4% of your salary regardless of how much your salary is.
What if your employer hasn’t been paying your EPF?
Right of the bat, if you do find out that your employer hasn’t been paying your EPF, your employer can be charged. Under Section 43(2) of the EPF Act 1991:
This essentially means that your employer can either be jailed up to 3 years, fined not more than RM10,000, or both.
However, the punishment is different for larger companies where, instead of one single employer, you may instead have multiple directors, partners, or associates. In this situation, they may face bankruptcy, have their assets confiscated, and have their passport confiscated.
There have been instances where employers would deduct your EPF contributions but not actually make any payments to your account (essentially stealing from you). If this happens, and if they’re found guilty of it, they can be jailed for up to 6 years and/or fined up to RM20,000 under Section 48(3) of the EPF Act .In addition to that, employers would also be liable to pay late payment charges and dividend to the Fund under Section 45 of the EPF Act 1991 for unpaid outstanding contributions. This is like paying a late penalty or a fine.
How do you file a complaint?
If you suspect your company hasn’t actually been contributing to your EPF fund, you should always first check your pay slip and your EPF account if contributions were and have been made on time.
The easiest way is to check your salary slip, where your deductions and your employer’s contributions will be recorded. If your company doesn’t give you a salary slip, that’s an offence as well under Section 42(1) EPF Act 1991!
But as we mentioned, some employers have made deductions without actually depositing anything into your account, so it’s probably best that you check your EPF account balance every once in a while. You can do this by logging on to your i-Akaun on the KWSP website or their mobile app which is available on both the Google Play Store and App Store. You could also walk in to any one of the KWSP branches for assistance with your EPF account.
As you can see, the laws surrounding the contribution of EPF by employers are relatively strict. If you do face such a situation of your employer not contributing to your EPF fund, you can always file a complaint by:
- Filling it on their website itself,
- Calling their hotline at 03-8922 6000
- Walking in to any one of their branches – A list of their branches can be found HERE.
So always remember to keep checking your EPF account to ensure your EPF contribution is being credited every month.