Payments Liable For EPF Contribution
Generally, all remuneration due to an employee is wages and shall be subject to the EPF contributions. Examples of such payments include:
• Salary
• Payment for unutilised leave;
• Bonuses;
• Allowances;
• Commission;
• Arrears of wages;
• Wages for maternity leave;
• Wages for study leave;
• Wages for half pay leave; and
• Directors' salary (as an employee).
Payments Not Liable For EPF Contribution
List of Payments which do not form part of the definition of "Wages" and shall not subject to the EPF contributions include:
• Service charges;
• Overtime payment;
• Gratuity;
• Directors' fee;
• Retirement benefits;
• Payment in lieu of notice of termination of employment;
• Retrenchment, temporary and lay-off termination benefits; and
• Any travelling allowance or the value of any travelling concession.
Any employer who fails to contribute for his/her workers can be convicted under the following sections:
Section 43 (2): Any employer who fails to contribute to the EPF Board on behalf of any employee in respect of any month within 15 days of the contribution month due has committed an offence and if convicted can be jailed up to three years or fined up to RM10,000 or both.
Section 48 (3): Any employer who deducts an employee's contributions from the employee's wages and then fails to remit the said deductions or any part thereof to the EPF has committed an offence and if convicted can be jailed up to six years and fined up to RM20,000 or both.
Penalties and Late Payments
Late payments of EPF contributions are subject to penalties in the form of:
(i) Interest
A fine in the form of penalty interest will be imposed on late contributions. Subject to a minimum of RM10, interests are calculated and rounded up to the next multiple of RM10 for each month or part thereof.
(ii) Dividend
The employers will also be required to pay the dividend that is accrued on contributions received late for each month according to the rate approved by the EPF Board for the relevant year.
An employer can be prosecuted and charged up to RM10,000 or jailed up to 2 years or both for not to register/contribute.
Contribution rates are based on employee's wages including overtime, commission, service charge, paid annual leave, sickness, maternity, rest day, public holiday, incentive, subsistence, housing and others. All payments calculated either hourly, daily, weekly, monthly or by task are considered wage.
An employer is liable to pay monthly contributions not later than the last day of the following month. For example, for the month of January, contributions must be paid by 28th of February. If payment is made after that date interest shall be charged and the rate is 6 % per annum in respect of each day of default. If the interest is less than RM5, then the amount to be paid for that month is RM5.