Reducing EPF contributions could ensure business survival among SMEs amid economic downturn: MEF

MEF executive director Datuk Shamsuddin Bardan (left) and MTUC Sarawak secretary Andrew Lo.

By Peter Sibon

KUCHING, May 2: The proposal by the Malaysian Employers Federation (MEF) to reduce employers’ contribution from the current 12 to 13 per cent is to ensure business survival amid the Covid-19 outbreak, said MEF executive director Datuk Shamsuddin Bardan.

He said that MEF was concerned about business survival among SMEs, which contributed about 98.8 per cent of employers in Malaysia and two-thirds of these SMEs consisted of micro-businesses that employed no more than five employees.

“During this hard time, we are proposing to reduce the Employees’ Providence Fund (EPF) contributions so that businesses can stay afloat in the long run. So, we must look at the big picture for the survival of these SMEs,” Shamsuddin told DayakDaily today.

Shamsuddin cited the World Bank’s estimate that about half of the world’s 3.36 billion workers would lose their jobs amid the global economic downturn caused by the Covid-19 pandemic.


“Currently, there are about 7.6 million workers in Malaysia where about 1 million are expected to lose their job due to the economic crisis,” he said.

Shamsuddin was commenting on Malaysian Trades Union Congress (MTUC) Sarawak’s statement today that workers in the country were absolutely disgusted with the latest demand by MEF and SME Association that the employers’ share of EPF contribution be reduced from 12-13 per cent to 5 per cent in order to save their businesses.

MTUC Sarawak secretary Andrew Lo said a reduction of EPF contributions must be coupled with an enhanced wage subsidy programme.

“Can MEF and SME guarantee that the EPF reduction will prevent business closures and retrenchment of workers?” asked Lo.

Lo described MEF’s proposal as irrational, irresponsible and totally unjustifiable.

“It also highlights the fact that Malaysian employers’ business acumen is to reduce staff benefits and demand assistance from the government. They have openly admitted that most of 650,000 businesses do not register with the Income Tax and that 85 per cent of employers employ illegal foreign workers,” said Lo.

Lo explained that typically, staff costs such as salary, medical, training, travel reimbursements constitute 50 to 75 per cent of total operation cost.

“Wages (that attract EPF contribution) will be typically 70 to 80 per cent of total staff costs. Taking the midpoint of each would mean that wages (that attract EPF) constitute 45 – 50 per cent of the total operating costs of the business.

“A reduction of employer EPF share from the current 12-13 per cent to 5 per cent will translate into just 4 per cent of total operation cost of the business. Don’t tell me that businesses in Malaysia are so incompetent, inefficient and uncompetitive with less than 4 per cent profit margin of operation cost.”

Lo added that Malaysia wages only amount to 36 per cent of GDP compared to 50-60 per cent in the UK and Singapore.

“This means that most business revenues go to capital owners, not workers. According to Inland Revenue’s Annual Reports, Malaysian companies pay RM60 to 70 billion corporate tax for each of the past few years. This excludes tax from Petroleum,” added Lo.

He said, at a corporate tax rate of 24-26 per cent, that translated in a profit of RM280 billion a year.

“Where are all these profits? Yet all employers wants are to squeeze employees of their old age savings 2.2 billion a month,” said Lo.

He asserted that it was utterly reprehensible for MEF to suggest lower EPF contributions for employees since EPF annual reports suggested that most Malaysian do not have enough savings to even sustain living at poverty level when they retire.

“Already the government has giving substantial assistance to businesses including, the wages subsidy, loan moratorium bank. We even have a SME bank for the SMEs. It Is never enough for Malaysian Employers.

“Please don’t force workers to go on strike and protests. Perhaps it san opportune time to cull all those unproductive and irresponsible businesses,” added Lo —DayakDaily