EPF Calculation

EPF Calculation

The contribution rate of EPF in the Third Schedule is determined based on the total EPF wages of the employee for the payroll month.

EPF Wages is the total remuneration in the form of money paid by an employer to an employee that is subject to EPF contribution. 

Generally, all payments which are considered wages under the Employment Act 1955 shall be included as EPF wages. However, some types of payments to employees are exempted from EPF deduction. The table below shows the list of payments that are EPF deductible and non-deductible.

EPF Deductible
EPF non-deductible
  1. Salary
  2. Payment for unutilized annual leave or medical leave 
  3. Bonus
  4. Allowance
  5. Commission
  6. Incentive
  7. Arrears of wages
  8. Wages for maternity leave
  9. Wages for study leave
  10. Half-day leave
  11. Other payment under the contract of employment
  1. Service charge
  2. Overtime pay
  3. Gratuity
  4. Retirement benefits
  5. Retrenchment, temporary, and lay-offs
  6. Travelling allowances or the value of any travelling concession
  7. Director's fees
  8. Payment in Lieu
  9. Reimbursement
  10. Any other remuneration as may be exempted by KWSP
Note: The above information is obtained from KWSP website. iWoWSoft is not in the position to advise readers on this matter. For further clarification on this, kindly contact the KWSP officer. 

Example 1 - EPF calculation for EPF wages below RM 5,000. 
Basic wage: RM 2,000.0 0
Mobile allowance: RM 50.00

EPF wages is RM 2,000.00 + RM 50.00 = RM 2,050.00
Based on the latest EPF Third Schedule (effective March 2020 payroll month), the EPF contribution of the employer and the employee are RM 268.00 and RM 145.00 as shown in the image below.

            

Example 2 - EPF calculation for EPF wages exceeding RM 5,000.00 upon addition of Bonus pay.

Basic wage: RM 2,000.00
Mobile allowance: RM 50.00
Bonus: RM 3,500.00

EPF wages is RM 2,000.00 + RM 50.00 + RM 3,500.00 = RM 5,550.00

According to the Third Schedule, if an employee's EPF wages exceed RM 5,000.00 upon the addition of Bonus, the employer's contribution shall be calculated at the rate 13% of the EPF wages for the month instead of following the Third Schedule. The total contribution which includes cents shall be rounded to the next ringgit. 

Hence,
Employee EPF contribution : Refer to KWSP Third Schedule
Employer EPF contribution : EPF rate (%) x EPF wages
                                                13% x RM 5,5550.0 = RM 721.50
                                                RM 722.00 upon rounding to the next ringgit. 



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