KUALA LUMPUR – The Malaysian Estate Owners’ Association (MEOA) has voiced concerns to the proposal in Budget 2025 to make full statutory Employees Provident Fund (EPF) contributions mandatory for foreign workers, warning that it would have far-reaching consequences for foreign workers, oil palm estate owners, and the broader Malaysian public.
MEOA, in a statement, also highlighted that the decision was made without consulting key stakeholders and said that the oil palm sector, which employs over 80% of foreign workers in Malaysia, is expected to bear the brunt of this proposal.
Currently, foreign workers may voluntarily contribute to EPF, with employers required to make a nominal RM5 monthly payment. The proposed policy would mandate employers to contribute 13% of foreign workers’ wages, akin to the rate for local employees.
MEOA said that this change ignores the unique circumstances of foreign workers, many of whom are in Malaysia on short-term contracts and intend to return to their home countries upon completing their employment.
“As EPF savings are only accessible post-retirement, its goal is to protect employees financially. However, this blanket implementation has failed to take into account the unique nature of foreign workers who will in no way benefit from a retirement savings scheme in Malaysia,” said the MEOA.
The association noted that foreign workers rely heavily on remittances to support their families back home. With a significant portion of their earnings potentially locked in EPF accounts, the financial strain on these workers and their families could be severe.
MEOA also highlighted the lack of efficient withdrawal mechanisms, raising concerns that foreign workers may face challenges in accessing their contributions once they leave Malaysia.
“This policy mismatch will serve to limit their ability to meet financial obligations, impacting their motivation to work in Malaysia,” it added.
MEOA outlined a host of logistical challenges, including high worker turnover, the issue of abscondments, and limited internet connectivity in rural plantation areas, particularly in Sabah and Sarawak.
“Effective implementation of EPF contributions will require overcoming infrastructure barriers to ensure compliance,” the association said, pointing out that similar policies attempted between 1998 and 2001 were eventually abandoned due to insurmountable logistical difficulties.
The association also highlighted financial implications for employers. With the proposal coming alongside an increase in the minimum wage from RM1,500 to RM1,700, plantation owners face a double burden that could strain already tight margins.
“If the full 13% employer contribution is imposed, plantation owners could face a significant financial strain. Given the high reliance on foreign workers in the oil palm sector, this added cost could undermine the sector’s profitability, particularly during periods of volatile oil palm prices,” MEOA said.
Beyond the immediate impact on employers and workers, MEOA cautioned that the policy could damage Malaysia’s competitiveness as a labour destination.
“Is this part of a bigger government strategy to make Malaysia an attractive working destination to foreign workers? If so, undercutting their immediate salary will only serve to make Malaysia an even less desirable destination,” the association stated.
The association also questioned whether the policy aligns with the government’s broader goals for the Malaysian public. “How will the mandatory EPF do so? If anything, won’t this also encourage further outflow of funds when the workers withdraw their EPF?”
MEOA argued that the proposal would harm the oil palm industry’s long-term sustainability, particularly for small and medium-sized plantations. Rising costs could hinder critical investments in areas such as replanting ageing oil palm trees and improving yields. The association urged policymakers to prioritise policies that enhance the sector’s productivity rather than imposing additional financial burdens.
“We therefore urge the government to reconsider this policy and, as always, remain open to engaging with the government in coming up with solutions to challenges faced by all stakeholders,” it concluded. – December 7, 2024