INCREASING employers’ Employees Provident Fund (EPF) contribution could negatively impact businesses and the economy, industry players said.

They said the proposal for the increase, which came from the Union Network International-Malaysia Labour Centre (Uni-MLC), would lead to substantial burdens for employers, especially those of small and medium enterprises (SMEs).

Uni-MLC recently urged the government to increase employers’ EPF contribution to 20% from the current 13% for those earning RM4,000 and below. Prime Minister Anwar Ibrahim said the proposal will be brought to the cabinet soon.

SME Association of Malaysia secretary-general Chin Chee Seong said businesses will suffer with any increase in the EPF contribution.

“The proposal to implement a 20% EPF contribution would be burdensome for SMEs, particularly given that employees earning up to RM4,000 are now entitled to claim overtime pay,” Chin told The Malaysian Insight.

“As a result, our production or operating expenses will inevitably rise. We strongly oppose this, especially when many SMEs are still in the process of recovering,” he said.

Chin said the move could bring economical repercussions.

“Negative consequences could arise if SMEs, which employ over 40% of the country’s workforce, are not doing well and face extra costs.

“This ultimately could lead to further harm to the economy,” he said.

Should the government stand firm with the proposal to increase employers’ EPF contributions, Chin said it should start slow.

“If the government insists on increasing contribution rates, they should begin with a maximum of 1 or 2%.

“The government should also contemplate reducing corporate taxes to offset the impact of this measure,” he added.

The Federation of Malaysian Manufacturers (FMM) said it is not in favour of the proposal to increase employers’ EPF contribution as a means to boost employees’ retirement savings.

Its president Soh Thian Lai in a statement said the government should prioritise keeping costs and standards of living manageable and ensuring positive economic growth, which would provide an environment conducive for businesses to increase profits and improve cash flow.

Only with that, he said, businesses will be able to provide better wages and benefits for their employees.

Employers are currently required to contribute 13% for employees earning RM5,000 and below, and 12% for those earning above RM5,000. Employees contribute 11%. – May 3, 2023.