FMM group not in favour of proposed increase in EPF contributions

Of great help: Social security institutions, such as Socso and the Employees Provident Fund, have demonstrated great agility and speed in providing relief during the current crisis. Photo: REUTERS

PETALING JAYA: Mandating all employers to provide a higher Employees Provident Fund (EPF) contribution rate will be detrimental, especially for small and medium enterprises (SMEs) that make up 97% of businesses, say business owners.

The Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said the group was not in favour of the proposal to increase employers’ EPF contribution to boost workers’ retirement savings, especially during the current challenging economic period where the outlook was uncertain as global growth remained fragile.

In a statement yesterday, Soh said an FMM survey conducted earlier this year which polled 745 respondents found that there was an overall expectation for sales to slow down in the first six months of 2023 on both local and external fronts, nationwide.

“The industry is of the view that the focus of the government at this point should be on short-term and immediate initiatives for workers to have more money in their pockets and to improve purchasing power.

“The government’s focus should be on keeping the cost and standard of living of the rakyat manageable as well as ensuring a positive economic growth trajectory which would provide a conducive environment for businesses to increase their profits and improve their cash flow, which would then be able to support better wages and benefits for their employees,” he said.

Under the current EPF schedule of contribution, the employer’s contribution is at 13% for those earning RM5,000 and below, and 12% for those earning above RM5,000.

Soh said in addition to the above measures, the monetary value of the employer’s contribution would not remain stagnant, but increased yearly based on wage adjustments in tandem with changes to the Consumer Price Index.

“While the statutory contribution rates for employers are fixed, employers also have the discretion to contribute a higher percentage based on their respective human resource and talent retention strategies, where their contribution is tax-deductible up to 19% of the employee’s pay,” said Soh.

“Hence, mandating all employers pay a higher contribution rate would be detrimental, especially for the SMEs that make up 97% of businesses.

“In addition, we believe that with EPF’s strong governance structure and continued prudent and good investment practices that have produced enhanced returns, it will continue to strengthen the retirement savings of its members,” he added.

Source: The Star


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