By 2025, Malaysia is set to join the growing number of countries that require mandatory pension contributions from legal foreign workers residing in the country. This change aims to ensure that foreign workers, like their Malaysian counterparts, benefit from social protection through employment-based pension savings schemes.
Currently, foreign workers in Malaysia are only encouraged to contribute to the Employees’ Provident Fund (EPF) on a voluntary basis. However, this is expected to change following the announcement of Budget 2025, where Putrajaya outlined its plan to make contributions to the EPF compulsory for all non
Malaysian employees. For Malaysian citizens working in the private sector, contributing to the EPF is already mandatory, ensuring retirement security for workers. This new policy seeks to extend similar protections to foreign workers, offering them a structured pension scheme.
The chief executive of EPF, Ahmad Zulqarnain Onn, praised the decision, emphasizing that it promotes fairness in the labor market. He noted that this initiative is in line with international standards, ensuring that all workers, regardless of nationality, are afforded the same level of social protection.
This move also places Malaysia among several other nations that have implemented mandatory pension schemes for foreign workers. To provide context, let’s examine similar schemes in other countries.
In Japan, all registered residents, both Japanese and foreign nationals aged 20 to 59, are required to participate in the Japanese National Pension (JNP), managed by the Japan Pension Service. The monthly premium for the JNP is currently ¥16,980 (about RM485). Additionally, full-time employees are typically enrolled in the Employee’s Pension Insurance (EPI) System, where contributions are determined based on the employee’s salary, split equally between the employer and employee. The EPI provides additional benefits alongside the JNP.
Singapore operates the Central Provident Fund (CPF), which is overseen by the Ministry of Manpower. The CPF is mandatory for both citizens and permanent residents. The contribution rate for employees under 55 years old stands at 37 percent of their monthly wage, with 20 percent coming from the employee and 17 percent from their employer. This system ensures that employees have access to retirement savings, healthcare, and housing funds.
In Hong Kong, the Mandatory Provident Fund (MPF) is compulsory for employed and self-employed individuals aged 18 to 64. Both employees and employers contribute five percent of the employee’s income to the fund. However, employees earning less than HK$7,100 per month are exempt from contributing, although their employers must still contribute. Exemptions also apply to those employed in Hong Kong for less than 13 months.
Canada’s pension system, the Canada Pension Plan (CPP), covers all workers aged 18 to 64, including migrant workers and permanent residents who earn more than CA$3,500 annually. Both employers and employees contribute 5.95 percent of the employee’s earnings. For those earning above CA$68,500, a second-tier contribution rate applies, ensuring additional benefits.
By following the path of countries like Japan, Singapore, Hong Kong, and Canada, Malaysia’s decision to implement compulsory EPF contributions for foreign workers signifies a step toward greater social protection and fairness in the labor market. This initiative aligns with global standards, aiming to provide foreign workers with the same opportunities for retirement security as their Malaysian peers.
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