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EPF stands for Employees Provident Fund. It is also commonly known as Kumpulan Wang Simpanan Pekerja (KWSP) in Malaysia. EPF is a social security institution that is formed according to the Laws of Malaysia, Employees Provident Fund Act 1991 (Act 452).
It aims to provide retirement benefits for members through efficient and reliable management of their savings. EPF is intended to help employees from the private sector save a fraction of their salary in a lifetime banking scheme, to be used primarily as a retirement fund but also in the event that the employee is temporarily or no longer fit to work. EPF also offers a convenient framework for employers to meet their statutory and moral obligations to their employees.
EPF contribution constitutes the amount of money credited to members’ individual accounts in EPF. The EPF contribution amount for each employee is calculated based on his monthly wages. The current contribution rate is in accordance with the wage received.
For monthly salary of RM 5,000 and below, the current employee’s contribution is 11% of their monthly salary while the employer’s contribution is 13%. For employees who receive monthly salary exceeding RM 5,000, the employee’s contribution of 11% remains, while the employer’s contribution is 12%.
It is compulsory for employers to contribute within the stipulated period, which is on or before the 15th of the month following the wage month. Interest and dividend will be imposed for late payment of contribution.
The employer has the responsibility to pay to the EPF both his and the employee's shares first. Then, the employer may recover the employee's share of the contribution by deducting it from the employee's wage when the wage is paid to the employee.
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