The Rules & Calculation of EPF for Indian and Malaysian Employers

October 21, 20193:39 pm3839 views

Employee Provident Fund (EPF) is a mandatory social security savings scheme funded by contributions from employers and employees, providing retirement funds for salaried workers to help with housing and medical expenses.

EPF for Indian employers

EPF in India is stated under Employee Provident Fund Act 1952. EPF program has the option of contributing 12 percent or more of an employee’s salary while the employer contribution is fixed at 12 percent.

See also: How to Calculate an Employee’s Payroll in China? (Part III)

Employees who are covered in this program are those who have Rs.15000 or less salary. If the amount of salary exceeds Rs.15000, it is not mandatory for employees and employers to pay the fund. However, employees with more than Rs.15000 salary can be a member with permission of Assistant PF Commissioner and employer agreement. 

Under the stated Act 1952, here are EPF rules for employers

  • Minimum salary limit to contribute for EPF is less or equal to Rs.15000
  • Minimum monthly pension amount is set at Rs.1000 for the widow of a member of the EPF
  • Insurance coverage amount is Rs.3 lakh per member
  • Employer’s contribution towards EPS (earning per share) is Rs1,250 per month irrespective of the salary
  • Organisation having 10 or more employees are eligible for EPF contribution
  • Withdrawals are made from EPF account for financing an insurance policy, buying or building a house, etc.

To calculate EPF contribution by employee and employer, you can refer to EPF calculator. Using this calculator will require you to input the following data.  

  • employee’s age and the age in which he/she will retire,
  • employee’s basic monthly salary and the expected average annual increase in basic salary,
  • employee’s contribution to EPF and employer’s contribution
  • the interest rate earned on EPF balances as declared by the government each year

The final result of the calculation will show the total EPF balance. To calculate the total balance at the end of every year, you can calculate it as follows:

Balance at the end of 12 months (employee plus the employer contribution) + Sum of the interest earned in each month in the year

EPF for Malaysian employers

In contrast to Indian EPF, Malaysian EPF is covered under the Employees Provident Fund Act 1991 to provide for the law relating to a scheme of savings for employee’s retirement and the management of the savings for retirement purposes and for incidental matters thereto. The contribution of the employer for the EPF is listed as follows:

  • Employer must make a monthly payment on or before the 15th of the month.
  • For a monthly rate of RM5,000 and below, employer should share 13 percent of monthly salary while the employee’s share is 11 percent. Meanwhile, for Permanent resident and Non-Malaysian (register as a member before 1 August 1998) employees, the share would be 6.5 percent for employer and 5.5 percent for employee
  • For a monthly rate of more than RM5,000, employer share is 12 percent of monthly salary and employee share is 11 percent. Meanwhile, for Permanent resident and Non-Malaysian (register as a member before 1 August 1998) employees, the share would be 6 percent for employer and 5.5 percent for employee

Employers are not allowed to calculate employer’s and employee’s share based on exact percentage except for salaries that exceed RM20,000. The total contribution which includes cents shall be rounded to the next ringgit.

To calculate EPF, you can use EPF calculator. Using the calculator, you will need to fill some of the following data:

  • Salary
  • Bonus
  • Tax category
  • Tax resident
  • Allowable deduction
  • Employee EPF rate
  • Employer EPF rate
  • SOCSO category
  • EIS contribution
  • Muslim Zakat Fund 

Read also: Basic Overtime Rules and Calculations for Employers in APAC

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