Foreign Workers' EPF Contribution A Game Changer To Retain Workforce And Hire More Local Talent

By Nur Athirah Mohd Shaharuddin & Fatin Umairah Abdul Hamid

KUALA LUMPUR, March 19 (Bernama) -- Foreign workers' mandatory Employees Provident Fund (EPF) contribution will benefit Malaysia’s economy over the long term as employers will favour hiring more local talent as costs increase.

bootstrap slideshow

While operational costs would be higher, the advantage is that it would foster sustainable business practices among local industries.

Malaysia Employers Federation (MEF) President Datuk Syed Hussain Syed Husman said industries such as manufacturing, construction and plantations, which are largely dependent on foreign workers, may explore alternatives like automation and a greater focus on local talent.

"The additional cost will affect competitiveness (and) some businesses will pass the cost on to consumers. Otherwise, they will face tighter profit margins on already thin margins," he told Bernama in an interview today.

bootstrap slideshow

This being the case, he reiterated that the government's imposition of the EPF contribution presents an opportunity for employers to hire more local talent, as the cost of employing foreign workers rises.

The private sector has lauded the two per cent EPF contribution by employers and foreign workers as of March this year as it will, among other things, improve worker retention and build loyalty.

Sorento Capital executive director Jayden Loo Jing Kai said the regulation will provide long-term savings and financial security, similar to local employers and will lead to long-term savings and financial security.

"This may lead to higher job satisfaction and lower turnover rates, reducing hiring and training costs for employers.”

“However, the impact on productivity will depend on various factors, including work conditions, wages and overall employee engagement strategies,” he said.

"While the contribution is a positive step, other incentives and workplace improvements would still be necessary to drive significant productivity gains," said Loo whose company Sorento offers bathroom and kitchen solutions in Malaysia and Italian-designed sanitarywares for home and commercial use.

FGV Holdings Bhd (FGV) chief executive officer Fakhrunniam Othman said the two per cent contribution is the employer’s responsibility to enhance workforce welfare while ensuring fair and ethical treatment for all employees, both local and migrants.

While the move would naturally increase operational costs, he said FGV, which employs a substantial number of foreign workers, especially in its plantation sector, remains committed to complying with government regulations and will take proactive measures to ensure a smooth transition.

“We view this as part of our broader commitment to fostering sustainable business practices, reinforcing our dedication to long-term industry resilience,” he said.

Analysts said Malaysia’s approach was in line with several countries that have mandatory pension and compulsory savings schemes to support foreign workers' retirement savings such as Canada, Japan, Singapore and Hong Kong.

MEF’s Syed Hussain said employers will need to update payroll systems and ensure compliance with EPF regulations, which could add administrative complexity, particularly for companies employing large numbers of foreign workers.

He also said the issue of locals unwilling to take up certain jobs needs to be addressed urgently to resolve labour shortages.

He suggested that employers enhance and provide training programmes for locals in industries that rely heavily on foreign labour and in the process increase their employability.

-- BERNAMA