PETALING JAYA: The proposed mandatory Employees Provident Fund (EPF) contributions for foreign workers will reduce the take-home pay, potentially affecting their financial obligations and motivation to work in Malaysia, said palm oil industry players.
“For many foreign workers, the priority is to send a large portion of their earnings back home to support their families. Mandatory EPF contributions reduce the amount they can send back. This reduction in disposable income could create dissatisfaction and impact the industry’s ability to retain workers in an already labour-constrained environment,” said more than a dozen associations affiliated with the palm oil industry in a statement.
The associations urged the government to reconsider its proposal to mandate EPF contributions for foreign workers as announced in the recent Budget 2025, citing the reason above as well as other issues that may arise from the plan, including higher costs.
The associations said the proposal has prompted widespread discussion in the industry, which foresees economic hurdles that may affect palm oil companies.
“The Malaysian palm oil industry relies heavily on foreign labour due to persistent local workforce shortages, particularly for the demanding fieldwork required on plantations.
“The proposed mandatory EPF contributions could impose substantial new costs on plantation companies, which already face pressures from fluctuating global markets, sustainability requirements and increasing labour expenses.
“Implementing the policy in its entirety could severely affect the operating costs of companies, especially small and medium- sized enterprises,” said the associations.
They proposed a phased approach to any new EPF contributions for foreign workers to mitigate the financial impact on palm oil companies. The associations said engagement with the government is essential to ensure any changes to EPF contributions are economically feasible and with the unique operational constraints of the palm oil industry taken into consideration.
The government, they said, should also consider support measures or exemptions to alleviate the burden, especially on smaller entities, if it goes ahead with the proposal.
The associations said requiring a 13% employer contribution places financial strain on palm oil growers, particularly during periods of low crude palm oil (CPO) prices.
They also pointed out that EPF’s goal for long-term retirement savings will not be met as foreign workers are usually employed for only between two and four years.
“Moreover, EPF restricts access to one’s savings until age 55. Policies should take into account the transitional nature of foreign employment and address the challenges foreign workers may face in accessing their savings after they return to their homeland,” said the industry players.
They suggested that the government explore alternative and voluntary savings schemes that provide better support for the financial goals of foreign workers.
“We appreciate the government’s efforts to enhance foreign workers’ welfare but it should be well thought out and a feasible approach to achieve these goals,” they said.
The associations are the Malaysian Palm Oil Association, Malaysian Estate Owners’ Association, Sarawak Oil Palm Plantation Owners Association, East Malaysian Planters Association, Sarawak Dayak Oil Palm Planters Association, Sabah Employers Consultative Association, Palm Oil Millers Association, Malayan Edible Oil Manufacturers’ Association, Malaysian Oleochemical Manufacturers, Malaysian Biodiesel Association, Malayan Agricultural Producers Association, Incorporated Society of Planters, Palm Oil Refiners Association of Malaysia and National Association of Smallholders.
