According to the law: Under the current EPF schedule of contribution, the employer’s contribution is at 13% for those earning RM5,000 and below and 12% for those earning above RM5,000. — IZZRAFIQ ALIAS/The Star
PETALING JAYA: With the weakened ringgit having an impact on the cost of business, employers are not ready to incur more costs and that includes considering calls to increase their share of Employees Provident Fund (EPF) contribution to 20%.
Federation of Malaysian Manufacturers (FMM) president Tan Sri Soh Thian Lai said global inflation had already impacted the cost of imported inputs for manufacturers.
Additionally, they would also have to face other rising costs, such as energy, he said.
“It will most certainly add to the cost burden of manufacturers if they have to factor in further weakening of the ringgit.
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“It will have a direct impact on margins as not all manufacturers are in a position to transfer the rise in cost to their customers immediately, due to supply chain contracts and stiff market competition,” he told The Star.
He said that while exports would become more competitive with the weaker ringgit, local manufacturers would also incur a higher cost for their imports, in turn negating the advantages of a stronger local note.
“As raw materials make up a bulk of total production cost, the impact will be significant for those that rely heavily on imported inputs. In addition, exporters and manufacturers that are part of the global supply chains are facing weak external demand in view of the global economic slowdown,” he said.
Soh said the manufacturing industry was not in favour of the call to increase employers’ EPF contribution as a means to boost employees’ retirement nest, in a challenging economic period filled with uncertainties and a fragile global growth.
“Under the current EPF schedule of contribution, the employer’s contribution is at 13% for those earning RM5,000 and below and 12% for those earning above RM5,000.
“In addition, the monetary value of the employer’s contribution does not remain stagnant but increases yearly based on wage adjustments in tandem with the changes to the Consumer Price Index,” he said.
Despite the fixed statutory contribution rates, employers have the discretion to contribute a higher percentage.
“Hence, mandating employers a higher contribution rate will be detrimental, especially for the SMEs that make up 97% of businesses.
“In addition, we believe that with EPF’s strong governance structure and continued prudent and good investment practices, which have produced enhanced returns, it will continue to further strengthen and enrich the retirement savings of its members,” he added.
Meanwhile, SME Association of Malaysia national president Ding Hong Sing said with the economy slowing down, increasing contribution rates would mean salaries too had to be increased.
The cost would be passed to customers, in turn resulting in a rise in prices of goods and services, he said.
“The last time, there was an increase of 2% to 3% in prices. If it goes up to 10%, it will be difficult,” he added.
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Ding said the government should also consider the situation on the field before even considering such proposals.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said a weaker ringgit would mean a higher import bill for raw materials and services rendered by external vendors.
“Higher cost means lower margins. Typically, businesses will find ways to reduce their operating cost, especially on labour. We certainly don’t want that to happen.
“The engagement session with the industry players will allow the government to get more information and feedback, and any policy implementation can be tailor-made,” he said.
Afzanizam said that currently the economic condition remained fluid, hence the approach for policy implementation had to be flexible and pragmatic.
He said industry players’ feedback should be sought first before the proposal to increase employers’ contribution to 20% was implemented.
“We wouldn’t want to put more strain on the businesses’ rising cost, as this will impede their decision on labour hiring,” he added.
The ringgit closed at 4.6030/6060 yesterday against the greenback after opening at 4.6160/6205 in the morning in the wake of the United States debt ceiling impasse.
The local currency has been hovering between RM4.50 and RM4.62 against the US dollar since May 1.
