Understanding the EPF Contribution Process

This section discusses:

  • EPF contribution calculation.

  • Gross salary for EPF contributions.

  • Employee EPF contribution limits.

  • Delivered EPF elements.

To calculate EPF contributions, the system:

  1. Defines gross salary for EPF contributions and divides them into different income types.

  2. Rounds EPF salaries.

  3. Determines employee and employer voluntary and statutory EPF contribution limits.

  4. Divides the employee contributions into pretax and post-tax deductions.

Global Payroll for Malaysia uses the accumulator EPF AC GROSS to define the gross salary. View the accumulator's definition to see its members.

It may be necessary to include earnings from previous years. For example, bonus payments are subject to EPF contributions but are often paid retroactively. The reporting requirement is to identify the payment and its EPF contributions. The system uses accumulators to accomplish this.

When defining gross salary for EPF, the system splits the payee's EPF income into three parts: regular EPF income (using EPF AC GROSS), current year bonuses (using ERN AC CYBON), and previous year bonuses (using EPF AC PY INCOME).

Before determining contribution limits, the system rounds the payee's income. For incomes less than 5000 MYR, the system rounds in increments of 20 MYR. For incomes greater than 5000 MYR, the system rounds in increments of 100 MYR.

To determine the contribution limit, the system uses element EPF VR EE RATE to apply a flat contribution rate of 11 percent for employees. For employers, the system uses EPF VR ER RATE to apply a flat contribution rate of 12 percent. The system also applies voluntary contribution percentages to this income.

Twelve EPF deduction elements are delivered for Malaysia:

Delivered EPF Deduction Element Name

Description

EPF DD AN VO

Voluntry EPF Contrb on ANN Inc

EPF DD ANN

EPF Contrb on Annual Income

EPF DD EE PY

Employee EPF PY Contribution

EPF DD EE TO

Total Employee Contribution

EPF DD EE VO

Voluntary EPF Contr Employee

EPF DD EEREG

Regular EPF Employee Deduction

EPF DD ER

EPF Employer Deduction

EPF DD ER VO

Voluntary EPF Cont ER

EPF DD ERANV

EPF Annual Contrb ER Vol

EPF DD POSTX

EPF Post Tax Deduction

EPF DD PRETX

EPF Pre Tax Deduction

EPF EEREG VO

Regular EE EPF Voluntary contr

Global Payroll for Malaysia uses an array, formulas, variables, and deductions to:

  1. Read payee EPF data.

    Array EPF AR EEDATA stores the information that is entered on the Maintain EPF MYS page.

  2. Calculate EPF gross earnings.

    The accumulators EPF AC GROSS, ERN AC CYBON, and EPF AC PY INCOME define the three parts of the EPF gross salary.

  3. Determine whether the payee is eligible for EPF contributions.

    The formula EPF FM CHK checks the effective status to ensure that EPF deductions apply.

  4. Determine whether the payee's income meets the EPF contribution minimum.

    The formula EPF FM BS checks that the EPF accumulated monthly gross, which is the accumulator containing the month's applicable EPF earnings, meets the EPF minimums, and it applies the necessary rounding rules.

  5. Calculate the employee and employer contribution.

    The formula EPF FM CALCULATION uses the payee's EPF earnings, employee and employer voluntary contribution amounts, tax limits, and EPF contribution rates to calculate the employer and employee deductions. This formula stores the deduction amounts in the following variables: EPF VR PRETX (EPF Pre Tax deduction), EPF VR POSTX (EPF Deduction Post Tax), and EPF VR ER GROSS (Employer Contribution Gross). The EPF pretax deduction is also grouped into the three EPF classes, which match the three tax classes.

  6. Create deduction elements based on the calculated contributions.

    The deduction elements EPF DD PRETX (EPF Pre Tax Deduction), EPF DD POSTX (EPF Post Tax Deduction), and EPF DD ER (EPF Employer Deduction) hold the EPF contribution amounts.