In a significant step towards equitable labour policies, Malaysia has passed the Employees Provident Fund (Amendment) Bill 2025, mandating foreign workers and their employers to contribute to the national retirement fund. Announced by Finance Minister II Datuk Seri Amir Hamzah Azizan, the policy is set to take effect in the fourth quarter of 2025, following its approval in the Dewan Rakyat on 6 March. This reform aims to bridge disparities between local and foreign workers, ensuring broader social protection under the Employee Provident Fund (EPF), Malaysia’s cornerstone retirement savings scheme.

The new legislation requires both foreign workers and their employers to contribute 2% of monthly wages to the EPF. Unlike Malaysian contributors, foreign workers will be allowed to withdraw their savings upon returning to their home countries, provided their work permits have expired and their employment has officially ended. This measure, as articulated by Amir Hamzah during his winding-up speech in parliament, seeks to balance fairness with flexibility for the transient workforce that plays a vital role in Malaysia’s economy.

Malaysia hosts approximately 2.5 million foreign workers, many of whom are employed in sectors such as construction, manufacturing, and domestic services, often under precarious conditions. Historically, participation in the EPF has been optional for this demographic, with only 22,635—or a mere 0.9%—actively contributing as of December 2024, according to government figures. The vast majority have lacked access to formal retirement or social security schemes, leaving them vulnerable upon completion of their contracts or in cases of sudden repatriation.

By mandating contributions, the government aims to address this gap, ensuring that foreign workers are integrated into the same protective framework as their Malaysian counterparts. “Mandating contributions will bridge the disparity between Malaysians and foreign workers and ensure that all workers are covered under a social protection scheme,” Amir Hamzah stated during the parliamentary debate. This move aligns with broader regional efforts to improve migrant worker welfare, a pressing issue in South East Asia where millions cross borders for employment.

However, the policy’s impact hinges on effective implementation. The EPF is currently developing a registration mechanism in collaboration with federal agencies like the Immigration Department. This system will integrate databases to enable automatic registration of foreign workers and allow banks to verify account details for non-citizens. Additionally, the EPF plans to expand online registration through its i-Akaun (Employer) platform and self-service terminals, streamlining the process for employers and workers alike.

Balancing Economic Impacts

The decision to set the contribution rate at 2% for both employers and employees reflects a cautious approach to managing economic repercussions. Amir Hamzah emphasised that this rate is intended to control cost increases for employers, structuring the rollout to minimise the risk of economic shock. For businesses reliant on foreign labour, even a modest hike in operational costs could prompt adjustments, potentially affecting hiring practices or passing costs onto consumers.

Economists have mixed views on the policy’s implications. On one hand, it could formalise the labour market, ensuring greater financial security for foreign workers and potentially reducing turnover. On the other, if employers perceive the contributions as burdensome, there may be a push to reduce reliance on foreign labour or, in extreme cases, circumvent the system through informal arrangements. Such outcomes, if they materialise, could undermine the policy’s intent, though there is no evidence at this stage to suggest widespread non-compliance.

For foreign workers already contributing to the EPF, the government has offered flexibility. Those currently enrolled can request to maintain their existing contribution rates, providing a transition buffer as the new mandate rolls out. This provision acknowledges the diversity of circumstances among the foreign workforce, many of whom send remittances home and may face financial strain from mandatory deductions, even at a low rate.

Regional Context and Worker Welfare

Malaysia’s move comes amid growing scrutiny of migrant worker conditions across South East Asia. Neighbouring countries like Thailand and Singapore have also grappled with balancing economic reliance on foreign labour with the need for robust social protections. In Thailand, for instance, migrant workers from Myanmar, Laos, and Cambodia often lack access to formal social security, despite their critical role in agriculture and construction. Singapore, by contrast, enforces mandatory contributions to the Central Provident Fund for certain categories of foreign workers, though access to benefits varies based on visa type.

In Malaysia, foreign workers hail predominantly from Indonesia, Bangladesh, Nepal, and Myanmar, often entering through regulated channels but facing challenges such as wage delays, poor living conditions, and limited legal recourse. The EPF mandate could set a precedent for further reforms, potentially encouraging other nations in the region to adopt similar measures. If successful, it may also enhance Malaysia’s reputation as a destination for migrant labour, countering narratives of exploitation that have periodically surfaced in international reports.

Yet, challenges remain. The ability to withdraw EPF savings upon repatriation is a welcome provision, but it assumes workers have the documentation and support to navigate the process. Many foreign workers operate in rural or informal settings, where access to digital platforms or bureaucratic systems may be limited. Without targeted outreach—such as multilingual support or mobile registration units—the policy risks excluding the very individuals it aims to protect.

Broader Implications for Labour Policy

The passage of the Employees Provident Fund (Amendment) Bill 2025 also reflects Malaysia’s evolving approach to labour policy under the current administration. Since taking office, the government has signalled a commitment to modernising social safety nets, with initiatives ranging from minimum wage adjustments to enhanced worker protections. This latest reform fits within that trajectory, positioning Malaysia as a leader in progressive labour policies within the ASEAN bloc.

Politically, the bill’s approval in the Dewan Rakyat underscores bipartisan support for addressing systemic inequities, though not without debate. Some parliamentarians reportedly raised concerns about enforcement mechanisms and the potential for employer pushback, though specific objections were not detailed in public statements. The government’s response—emphasising structured implementation and cost control—appears to have assuaged these worries for now.

Looking ahead, the policy’s success will depend on rigorous monitoring and adaptation. If registration systems falter or if employers find ways to evade contributions, the government may need to introduce stricter penalties or incentives to ensure compliance. Conversely, if the mandate leads to tangible improvements in worker welfare without disrupting economic stability, it could pave the way for higher contribution rates or expanded benefits in the future. Such outcomes remain speculative at this stage, with no confirmed projections available.

Voices from the Ground

While official statements frame the policy as a win for equity, the perspectives of foreign workers and employers will be critical to its real-world impact. Many workers may welcome the prospect of savings they can access upon returning home, particularly those from lower-income brackets for whom even small sums can make a significant difference. However, others might view the 2% deduction as a strain on already tight budgets, especially if wages remain stagnant.

Employers, particularly in labour-intensive industries, face a delicate balancing act. Small and medium enterprises (SMEs), which form the backbone of Malaysia’s economy, may struggle with the added financial burden, even at a modest rate. Larger corporations, while better equipped to absorb costs, could lobby for exemptions or reductions if they perceive the policy as a competitive disadvantage.

Public sentiment, as gauged through social media platforms like X, appears cautiously optimistic. Posts from Malaysian users highlight the importance of fairness in the labour market, while some express concern about potential price increases in sectors reliant on foreign workers. These views, while not representative of the entire population, suggest a nuanced reception that the government will need to navigate as the policy takes shape.

A Path Forward

As Malaysia prepares to implement the EPF mandate for foreign workers, the coming months will serve as a litmus test for its commitment to inclusive labour policies. The fourth quarter of 2025 looms as a critical deadline, with the government tasked with ensuring that registration systems are robust, accessible, and equitable. Beyond logistics, the policy’s broader impact on worker welfare, employer dynamics, and regional labour standards remains to be seen.

For now, the Employees Provident Fund (Amendment) Bill 2025 stands as a landmark reform, one that could reshape the landscape for Malaysia’s 2.5 million foreign workers. If executed effectively, it may not only enhance social protection but also set a benchmark for other nations grappling with similar challenges. As Amir Hamzah reiterated in parliament, the goal is clear: to create a system where all workers, regardless of nationality, are afforded dignity and security in their contributions to Malaysia’s growth.