Mandatory pension contributions for foreign workers in Malaysia? A look at other countries that have implemented similar schemes
Beginning next year, Malaysia will join Japan, Singapore, Hong Kong and Canada that have opted for compulsory coverage of employment-based pension savings schemes for legal foreign workers residing in the country. — Piture by Sayuti Zainudin
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Thursday, 24 Oct 2024 7:00 AM MYT
KUALA LUMPUR, Oct 24 — Come 2025, Malaysia would join the ranks of countries that have opted for compulsory coverage of employment-based pension savings schemes for legal foreign workers residing in the country.
Thursday, 24 Oct 2024 7:00 AM MYT
KUALA LUMPUR, Oct 24 — Come 2025, Malaysia would join the ranks of countries that have opted for compulsory coverage of employment-based pension savings schemes for legal foreign workers residing in the country.
Why is Malaysia doing this?
During the tabling of Budget 2025, Putrajaya announced its plan to make it compulsory for all non-Malaysian workers to contribute to the Employees’ Provident Fund (EPF).
At present, non-Malaysian workers can opt to contribute to the EPF voluntarily. It is mandatory for Malaysian citizens employed in the private sector.
In welcoming the move, EPF chief executive Ahmad Zulqarnain Onn was quoted as saying the initiative would provide greater fairness in the labour market by ensuring social protection for all workers, regardless of nationality, in line with international standards.
With that in mind, Malay Mail looks at other countries that have implemented similar pension savings schemes.
Japan
The Japanese National Pension (JNP) — administered by the Japan Pension Service under its federal government — is a public pension system that all registered residents of Japan, both Japanese and foreign aged 20 to 59, are required to enrol in.
As of 2024, the national pension premium is fixed at ¥16,980 (RM485) a month.
In addition, a full-time employee is also likely enrolled in the Employee’s Pension Insurance (EPI) System where the contribution amount is determined by the employee’s salary, which is periodically adjusted.
Contributions to the EPI are calculated as a percentage of the employee’s salary, with the current rate being around 18.3 per cent, split equally between the employer and employee.
This means an employee in Japan can receive the additional benefits from the EPI together with the benefit from the JNP.
Singapore
The Central Provident Fund (CPF) — administered by a statutory board operating under its Ministry of Manpower — is a compulsory pension scheme for persons, including permanent residents, who are employed in Singapore under a Contract of Service.
As of 2024, the CPF contribution rate for employee's (with a monthly wage of at least S$50) aged 55 and below is fixed at 37 per cent of their wage.
The 37 per cent contribution is split between 20 per cent from the employee and 17 per cent from their employer.
Hong Kong
The Mandatory Provident Fund (MPF) — administered by the Mandatory Provident Fund Schemes Authority — is a compulsory pension fund for employed and self-employed persons aged 18 to 64 residing in Hong Kong.
As of 2024, a regular mandatory contribution to an MPF scheme of five per cent of the employee’s income by both employee and their employer is required.
An employee whose income is less than the minimum level of relevant income (currently HK$7,100 per month or HK$280 daily) is not required to contribute. However, their employer is still required to make mandatory contributions.
Exemptions are provided to persons from overseas who enter Hong Kong for employment or self-employment for less than 13 months.
Canada
The Canada Pension Plan (CPP) — a statutory programme governed by its federal government and the provinces, except Quebec — is a compulsory pension programme for all Canadians, including migrant workers and permanent residents, aged 18 to 64 who earn more than CA$3,500 annually.
As of 2024, employees and employers are required to contribute 5.95 per cent of the employee’s pensionable earnings to the CPP.
If an employee’s earning is above the maximum annual pensionable earnings of CA$68,500, a second-tier contribution of rate of per cent applies to both employer and employee up to a second earnings ceiling of CA$79,400.
In welcoming the move, EPF chief executive Ahmad Zulqarnain Onn was quoted as saying the initiative would provide greater fairness in the labour market by ensuring social protection for all workers, regardless of nationality, in line with international standards.
With that in mind, Malay Mail looks at other countries that have implemented similar pension savings schemes.
Japan
The Japanese National Pension (JNP) — administered by the Japan Pension Service under its federal government — is a public pension system that all registered residents of Japan, both Japanese and foreign aged 20 to 59, are required to enrol in.
As of 2024, the national pension premium is fixed at ¥16,980 (RM485) a month.
In addition, a full-time employee is also likely enrolled in the Employee’s Pension Insurance (EPI) System where the contribution amount is determined by the employee’s salary, which is periodically adjusted.
Contributions to the EPI are calculated as a percentage of the employee’s salary, with the current rate being around 18.3 per cent, split equally between the employer and employee.
This means an employee in Japan can receive the additional benefits from the EPI together with the benefit from the JNP.
Singapore
The Central Provident Fund (CPF) — administered by a statutory board operating under its Ministry of Manpower — is a compulsory pension scheme for persons, including permanent residents, who are employed in Singapore under a Contract of Service.
As of 2024, the CPF contribution rate for employee's (with a monthly wage of at least S$50) aged 55 and below is fixed at 37 per cent of their wage.
The 37 per cent contribution is split between 20 per cent from the employee and 17 per cent from their employer.
Hong Kong
The Mandatory Provident Fund (MPF) — administered by the Mandatory Provident Fund Schemes Authority — is a compulsory pension fund for employed and self-employed persons aged 18 to 64 residing in Hong Kong.
As of 2024, a regular mandatory contribution to an MPF scheme of five per cent of the employee’s income by both employee and their employer is required.
An employee whose income is less than the minimum level of relevant income (currently HK$7,100 per month or HK$280 daily) is not required to contribute. However, their employer is still required to make mandatory contributions.
Exemptions are provided to persons from overseas who enter Hong Kong for employment or self-employment for less than 13 months.
Canada
The Canada Pension Plan (CPP) — a statutory programme governed by its federal government and the provinces, except Quebec — is a compulsory pension programme for all Canadians, including migrant workers and permanent residents, aged 18 to 64 who earn more than CA$3,500 annually.
As of 2024, employees and employers are required to contribute 5.95 per cent of the employee’s pensionable earnings to the CPP.
If an employee’s earning is above the maximum annual pensionable earnings of CA$68,500, a second-tier contribution of rate of per cent applies to both employer and employee up to a second earnings ceiling of CA$79,400.
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