We outline the practical steps employers in Malaysia must take ahead of a major change. Beginning October 2025, the Employees Provident Fund expands coverage and will require Mandatory EPF contributions for non-Malaysian citizen employees. This shifts status from voluntary to compulsory and affects payroll, cash flow, and compliance controls.
We explain who falls in scope, the headline rate structure, and how employers must register eligible foreign employees. You will see clear duties on registration, payroll deduction, and timely remittance using Form A, with payments due by the 15th of the following month.
Our aim is to make the steps actionable so you can align HR, Finance, and Payroll before the October 2025 start date. We also flag key operational checks such as monitoring pass expiry and stopping contributions in the final two months before departure.
Key Takeaways
➤ Oct 2025 change moves EPF coverage to compulsory for many foreign workers.
➤ Employers must register eligible workers and remit via Form A on time.
➤ Most affected workers will follow a 2% employer and 2% employee rate.
➤ Stop deductions near work-pass expiry to avoid overpayment and refunds.
➤ Coordinate HR, Payroll, and Finance to update systems and communications.
What’s Changing in October 2025: Mandatory EPF for Foreign Employees
The change taking effect in October 2025 moves the pension scheme for many foreign staff from voluntary participation into a statutory arrangement.
We note the Employees Provident Fund confirmed on 25 June 2025 that covered non-Malaysian citizen employees with valid passports and eligible passes must join. Covered passes include Work Permits (workers except foreign domestic helpers), Employment Pass, Professional Visitor Pass, Student Pass (if work permitted), Residence Pass and Long-Term Social Visit Pass.
Wages for October 2025 will be the first period subject to deductions, with payment due by the 15th of the following month (for example, 15 November 2025). The baseline contribution rate effective starting October is 2% by the employer and 2% by the employee for most categories.
“This policy aligns with the MADANI agenda to expand social protection and fairness across the workforce.”
https://www.youtube.com/watch?v=j9mzNeQjM4w
| Effective Month | Scope | Exclusions | Baseline Rate |
|---|---|---|---|
| October 2025 | Valid passport + covered passes (see list) | Foreign domestic helpers except foreign domestic | Employer 2% / Employee 2% |
| First Payment Date | October 2025 wages | Pass not work-permitted | Contribute statutory rate |
| Remit By | 15th of following month | Expired pass — stop deductions | Adjust where special categories apply |
➤ Applies to new hires and existing employees; update payroll and HR now.
➤ Book calendar reminders and lock submission cutoffs to avoid late payment penalties.
Who Is Covered and Who Is Excluded under the Employees Provident Fund
To avoid errors at onboarding, we list which pass types and work permissions require immediate registration and which are excluded.
Covered passes
➤ Employment Pass
➤ Work Permit / Visitor’s Pass (workers except foreign domestic helpers)
➤ Professional Visitor Pass
➤ Student Pass (only with immigration work permission)
➤ Residence Pass
➤ Long-Term Social Visit Pass
Important: the obligation applies only when wages are paid in money. Verify payroll forms and any non-cash arrangements before you act.
Exclusions and checks
Foreign domestic roles — such as maids, cooks, gardeners, cleaners, babysitters, and drivers — are explicitly excluded. Do not deduct from these staff.
For Student, Professional Visitor, Residence and Long-Term Social Visit passes, secure documented work permission from Immigration before you start registration. Create pass-type fields and a work-permission flag in your HRIS to match payroll cycles with pass validity.
“Accurate verification at hire prevents misclassification and costly corrections.”
Mandatory EPF contributions for non-Malaysian citizen employees
This section clarifies the new statutory rate model and the special cases that keep legacy rates.
Standard statutory rate: starting october 2025 most foreign employees will have a contribution rate of employer 2% and employee 2% of monthly wages.
Special categories: permanent residents and those who joined EPF before 1 August 1998 retain existing bands. For those under 60 the employer rate remains 12% or 13% and the employee rate 11%. At attained 60 and above, employer rates are 6% or 6.5% and employee 5.5%.
Operational controls are critical. Stop deductions in the last two months of an employee pass validity to avoid over-remittances and reconciliation work.
Foreign staff leaving permanently may apply for full withdrawal with dividends; start the process two months before pass expiry, resignation, or termination.
| Category | Under 60 | 60 and above |
|---|---|---|
| Standard (post‑1 Aug 1998) | Employer 2% / Employee 2% | Employer 2% / Employee 2% |
| Permanent resident / Pre‑1 Aug 1998 | Employer 12% or 13% / Employee 11% | Employer 6% or 6.5% / Employee 5.5% |
| Operational note | Tag payroll by category and age; maintain evidence of status; set compliance calendar tied to months employee pass. | |
Practical advice: tag each foreign employee with contribution category and age bracket, keep proof of status, and update forecasts to reflect added employer expense starting october 2025.
Four Key Employer Actions to Comply and De-Risk Before Go-Live
Create a clear roadmap that aligns registration, payroll setup, and record updates ahead of the October 2025 go‑live. We set out four practical steps you can apply now to reduce risk and meet regulatory requirements.
Register eligible staff
Registration must be completed via Employer i‑Akaun or at an EPF office. Gather passports, pass details, start dates, and wage records so files are ready before october 2025.
Configure payroll and remit
Update payroll systems to deduct the employee 2% and record the employer 2% share. Align files with Form A and schedule remittance by the 15th of the following month to stay in compliance.
Audit records and controls
We audit nationality, pass validity, EPF numbers, and contribution history. Implement maker‑checker controls, reconciliation reports, and stop payments two months before pass expiry to avoid retro corrections.
Communicate and handle elections
Show both amounts on payslips and brief staff. If an employee wishes to keep a higher employee rate, process KWSP 17A/18A via i‑Akaun. Test a dry run payroll cycle before go‑live.
Contribution Rates, Deadlines, and Edge Cases Employers Must Know
Here we list rate bands by category and age, plus the monthly deadlines that finance teams must follow.
Rates by category and age; due dates
Standard rate: most workers move to employer 2% and employee 2% beginning october 2025.
Legacy bands: permanent residents and staff who joined before 1 August 1998 keep existing bands (under 60: employer 12%/13% and employee 11%; 60+: employer 6%/6.5% and employee 5.5%).
Timing: october 2025 wages are the first period subject to the change. Remit by 15 November 2025 and thereafter by the 15th of each month.
Stopping contributions two months before pass expiry
Stop deductions in the final two months of the months employee pass validity to avoid over-remittances. Set automated alerts in HRIS and payroll to block deductions when expiry is within 60 days.
“Discipline on stop‑dates and clear payslip disclosure cut reconciliation work and staff queries.”
| Category | Under 60 | 60 and above |
|---|---|---|
| Standard | Employer 2% / Employee 2% | Employer 2% / Employee 2% |
| Legacy (pre‑1 Aug 1998) | Employer 12%/13% / Employee 11% | Employer 6%/6.5% / Employee 5.5% |
| Operational controls | Pass-expiry alerts, rate matrix in payroll, maker‑checker approvals, and documented evidence of category and pass details. | |
Practical edge cases: handle mid‑month hires, unpaid leave, variable pay and final month payroll with clear notes to staff. Keep records ready to support any adjustment or arrear.
Payroll Systems, Contracts, and Tax: Practical Implementation Steps
We recommend a phased plan that links systems, documents, and tax treatment ahead of the 1 October 2025 start.
Configure payroll systems and deadlines
Update payroll systems to calculate and display the 2% / 2% split, generate Form A files, and schedule remittance by the 15th of each month starting october 2025.
Update contracts, handbooks and agreements
We amend offer letters, employment contracts, and staff handbooks to reflect the provident fund change and the applicable contribution rate. Apply these updates to collective agreements and HR templates.
Tax treatment and employer-paid shares
If the employer bears the employee 2%, treat that amount as a taxable perquisite. This raises Monthly Tax Deduction (MTD) and reporting obligations; coordinate with employment tax advisors.
Open questions and governance
- Document overseas payroll funding positions and any home-country pension overlaps.
- Maintain monthly reconciliations, audit-ready evidence, and a process to handle arrears or off-cycle runs.
- Monitor the EPF guidance page for updates and registration FAQs.
Conclusion
Act now to align payroll, records and controls so your organisation meets the October 2025 timetable without surprises. The mandatory epf rules will take effect October 2025 and apply to most foreign employees with valid work permits, except foreign domestic roles.
We advise you to prioritise registration, verify the correct contribution rate per category, and schedule remittance tied to October 2025 wages. Disclose amounts clearly on payslips and stop deductions two months before pass expiry to avoid overpayment.
We recommend assigning owners in HR, Payroll, Finance and Tax, running a post-go‑live review after two remittances, and monitoring EPF guidance closely. We stand ready to help with registration, payroll execution and compliance checks.
FAQ
What key actions should employers take before the October 2025 change?
We recommend four steps: register eligible foreign workers with the provident fund, configure payroll to deduct and remit the statutory shares, audit worker records (passport, pass validity, fund numbers, and wages), and communicate changes to staff while offering options to contribute above the statutory rate via Form KWSP 17A/18A.
What exactly changes in October 2025 regarding coverage?
From October 2025, participation moves from voluntary to compulsory for eligible foreign workers. Employers must begin deducting and remitting the set employer and employee shares for wages paid in October. Payments must reach the fund by the due date specified for that pay period.
Which work passes make a person eligible under the Employees Provident Fund rules?
Covered passes include Employment Pass, Work Permit, Professional Visit Pass, Student Pass (where work is authorised), Residence Pass, and Long-Term Social Visit Pass when work permission exists. Each case requires verification of work permission before enrolment.
Are foreign domestic workers covered?
No. The rule excludes foreign domestic workers. Coverage also requires wages to be paid in monetary form; in-kind arrangements do not meet the wage-in-money condition.
What are the standard contribution rates employers must apply?
The standard statutory split is 2% from the employer and 2% from the employee on qualifying wages. Special categories, such as permanent residents and those who were fund members before August 1, 1998, may follow different rules—verify individual status before applying rates.
When must employers stop contributing if a worker’s pass is expiring?
Contributions cease two months before the pass expiry if the pass will not be renewed. Employers should track pass expiries and suspend deductions accordingly to remain compliant and avoid overpayment.
How should payroll systems be updated for the October 2025 start?
Configure payroll to calculate both employer and employee shares, timestamp deductions to October wages, and schedule remittances by the 15th of the following month (or the fund’s specified deadline). Test runs and reconciliations before go-live help prevent errors.
What contractual or handbook updates are needed?
Update employment contracts, staff handbooks, and collective agreements to reflect statutory deduction, employer matching obligations, and any employer-paid options. Ensure language on pay slips clearly shows the fund deductions and employer contributions.
If an employer agrees to pay the employee’s 2% share, are there tax implications?
Yes. If the employer bears the employee’s portion, that amount may be treated as a taxable fringe benefit or perquisite. Employers must assess withholding and MTD reporting implications with their tax advisor to avoid unexpected liabilities.
How should employers handle employees who already contribute to a home-country pension?
Employers should document existing home-country pension coverage and seek guidance on overlap and double contributions. Fund rules in Malaysia typically require local participation when eligible, so employers must determine whether exemptions or bilateral agreements apply.
What registration options exist for enrolling eligible workers?
Employers can register employees via the provident fund’s online i-Akaun portal or at a local fund office. Accurate details—passport numbers, pass types, fund membership numbers, and wage data—are essential to complete registration quickly.
How should employers present deductions on payslips?
Payslips should itemize the employee deduction, the employer share, and the total remitted. Clear presentation improves transparency and reduces disputes. Keep supporting records for audits and reconciliations.
What should employers do about employees who wish to contribute above the statutory rate?
Employees may elect higher voluntary contributions using the prescribed forms (KWSP 17A/18A). Employers must implement the additional payroll deductions and ensure correct remittance and documentation.
Are there special rules for permanent residents or long-standing fund members?
Yes. Permanent residents and persons who were fund members prior to August 1, 1998, may have different entitlements or contribution obligations. Confirm each worker’s status with the fund before applying standard rates.
What are common edge cases employers should review now?
Review short-term professional visitors, student workers with restricted hours, employees on overseas payrolls, and those with imminent pass expiries. Clarify funding sources for cross-border payroll and potential home-country pension overlap.
Where can employers get authoritative guidance or submit questions?
Contact the Employees Provident Fund via their official website or local office for definitive rulings. We also advise consulting payroll and tax specialists to align your systems and compliance processes with the new requirements.
Disclaimer:
The information shared in this post is for general educational and reference purposes only. It does not constitute professional advice. Regulations and requirements may change from time to time. For guidance specific to your situation, please consult with our firm or a qualified professional.
