One of the most significant payroll changes for Malaysian employers is the move to make EPF (KWSP) contributions mandatory for non-Malaysian employees. Announced under Budget 2025 and rolled out in phases, this brings foreign workers — who were previously largely excluded from compulsory EPF — into the retirement savings system. If you employ foreign staff, here is what you need to understand and prepare.

What is changing

Historically, EPF contributions for foreign workers were voluntary, while statutory cover focused on SOCSO. Under the new policy, both employer and employee contributions to EPF become compulsory for eligible non-citizen employees, at a reduced rate compared with the standard rate for Malaysian citizens.

Who is affected

  • Employers who hire non-Malaysian employees holding valid work passes.
  • Foreign employees in scope under the policy (certain categories may be treated differently — confirm eligibility).

Domestic helpers and some pass categories have historically been treated separately, so check each worker's status rather than assuming a blanket rule.

Contribution rate

The policy applies a reduced contribution rate for both employer and employee for foreign workers, rather than the full citizen rate.

The exact rate and the precise effective date have been phased and revised more than once. Before you process payroll, confirm the current rate and start date directly with KWSP (the official EPF body) or your payroll provider.

The cost impact for employers

Mandatory EPF adds a new line to your cost of employment for foreign staff. Plan for:

  • The employer portion as an additional monthly cost per foreign worker.
  • The employee portion, which is deducted from the worker's wages — communicate this clearly so it is not a surprise on the first affected payslip.
  • Cash-flow and budgeting adjustments across your full foreign headcount.

How to prepare now

  1. Identify every foreign employee on your payroll and confirm who is in scope.
  2. Register affected workers for EPF and gather their KWSP details.
  3. Update your payroll so the correct foreign-worker EPF rate is applied automatically.
  4. Brief your workers on the deduction and the long-term savings benefit.
  5. Keep records of contributions for audit and statutory reporting.
Disclaimer: This article is general information current as at 2026 and is not legal or tax advice. EPF rules, rates, and effective dates change. Always verify the latest requirements with KWSP (EPF) or a qualified payroll professional before acting.

How GajiHub helps

GajiHub lets you apply the correct EPF rate per employee — including reduced foreign-worker rates — and adjust each payroll line to match your exact KWSP submission, so onboarding foreign staff into mandatory EPF is straightforward and auditable.