The mandatory Employees Provident Fund (EPF) contribution for foreign workers is expected to benefit Malaysia’s economy in the long run, as rising costs may encourage employers to prioritise local talent.

Although operational expenses will increase, the measure is seen as a step towards fostering sustainable business practices within local industries.

Malaysia Employers Federation (MEF) President Datuk Syed Hussain Syed Husman noted that industries heavily reliant on foreign workers, such as manufacturing, construction, and plantations, may seek alternatives, including automation and a stronger emphasis on hiring local workers.

“The additional cost will affect competitiveness, and some businesses may pass the cost on to consumers. Otherwise, they will have to operate with tighter profit margins, which are already slim,” he said in an interview with Bernama.

He reiterated that the government’s decision to implement EPF contributions presents an opportunity for employers to hire more local talent, given the rising costs associated with employing foreign workers.

The private sector has welcomed the introduction of the two per cent EPF contribution by both employers and foreign workers, which took effect in March this year. The measure is expected to improve worker retention and foster greater loyalty.

Sorento Capital executive director Jayden Loo said the regulation would provide foreign workers with long-term savings and financial security, similar to local employees. This, in turn, could lead to higher job satisfaction and lower turnover rates, ultimately reducing hiring and training costs for businesses.

However, he emphasised that the overall impact on productivity would depend on various factors, including working conditions, wages, and broader employee engagement strategies.

“While the contribution is a positive step, other incentives and workplace improvements will still be necessary to drive significant productivity gains,” he said.

FGV Holdings Bhd (FGV) group chief executive officer Fakhrunniam Othman highlighted that the two per cent contribution is an employer’s responsibility in ensuring workforce welfare and upholding fair and ethical treatment for all employees, both local and foreign.

He acknowledged that the move would naturally lead to higher operational costs. However, he stressed that FGV, which employs a significant number of foreign workers, particularly in its plantation sector, remains committed to complying with government regulations and will take proactive steps to ensure a smooth transition.

“We view this as part of our broader commitment to fostering sustainable business practices, reinforcing our dedication to long-term industry resilience,” he said.

Analysts pointed out that Malaysia’s approach aligns with policies in several countries, including Canada, Japan, Singapore, and Hong Kong, where mandatory pension or compulsory savings schemes are in place to support foreign workers’ retirement savings.

Syed Hussain noted that employers would need to update payroll systems and ensure compliance with EPF regulations, which could introduce additional administrative complexity, particularly for companies with a large foreign workforce.

He also stressed the urgent need to address the issue of local workers being unwilling to take up certain jobs, as resolving labour shortages remains a key challenge.

To address this, he suggested that employers enhance and provide training programmes for locals in industries traditionally reliant on foreign labour, thereby increasing their employability and bridging the labour gap.

(Source: Bernama)

• TAGS:
• Contributions
• Datuk Syed Hussain Syed Husman
• Employees Provident Fund
• EPF
• EPF contribution
• Fakhrunniam Othman
• Foreign Workers
• Jayden Loo