Low-wage workers’ pension fund contributions to EPF rise under new rules

KUALA LUMPUR, 2 OCTOBER 2026 —

The proposal to restructure the Employees Provident Fund (EPF) contribution rates, aimed at accelerating retirement savings for low-income workers, has been put forward by Tan Sri Shahril Ridza Ridzuan, the Chairman of Axiata Group Bhd. According to reports from Berita Harian, the core of this initiative involves a progressive wage policy where employers would contribute a higher percentage of wages for employees earning less than RM5,000, while significantly reducing the employer contribution rate for those earning more than RM10,000.

The primary objective of this proposal is to address the disparity in retirement readiness among Malaysian workers. By increasing the employer contribution for lower earners, the policy aims to build up their EPF accounts more rapidly. Tan Sri Shahril Ridza Ridzuan explained that this approach is inherently progressive, as it allows lower-income groups to enhance their savings potential without necessarily increasing their own out-of-pocket contributions.

The strategy recognizes that workers with higher incomes are already on a favorable trajectory for achieving their financial retirement plans, suggesting that their current contribution levels are sufficient to meet their long-term goals.

In practical terms, the proposed framework suggests that employers could contribute approximately 15 to 16 percent for workers with monthly incomes below RM5,000. Conversely, for employees earning more than RM10,000, the employer contribution rate would be lowered to around four percent. This differential treatment is intended to create a more equitable system where the financial support for retirement is targeted at those who need it most.

The Chairman emphasized that this method helps in building retirement savings for low-income workers more quickly, ensuring that the gap between the wealthy and the less affluent in terms of retirement security is narrowed.

Tan Sri Shahril Ridza Ridzuan noted that the current system may not adequately support the financial planning needs of lower-income workers, who often struggle to accumulate sufficient funds for their post-retirement years. By capping the employer contribution for high earners, the proposal seeks to optimize the overall cost of labor for businesses while simultaneously boosting the retirement funds of those in the lower income brackets.

He stated, "This helps build retirement savings for low-income workers more quickly and it is progressive because it allows the low-income group to increase their savings." This direct quote underscores the intent behind the policy, highlighting the dual benefit of accelerated savings for the poor and a streamlined contribution structure for the rich.

The economic rationale behind this proposal extends to the impact on businesses. According to the Chairman, this approach could potentially reduce the overall burden on companies. The logic is that the increase in employer contributions for low-income workers is offset by the decrease in contributions for high-income workers.

This balancing act is designed to ensure that the total cost of labor for employers remains manageable, if not reduced, while still achieving the social objective of improved retirement security for the lower-income segment. This perspective suggests that the policy is not merely a social welfare measure but also a strategic economic adjustment that considers the financial health of the private sector.

However, the implementation of such a significant change to the EPF contribution structure is not without its complexities. Tan Sri Shahril Ridza Ridzuan acknowledged that this change needs to be thoroughly examined from the perspective of its impact on the economy, workers, and employers before it can be put into practice. The potential ripple effects on various industries, particularly those with a high concentration of low-wage workers, must be carefully assessed.

The proposal highlights the need for a comprehensive study to determine the feasibility and long-term sustainability of this progressive contribution model within the broader Malaysian economic landscape.

A critical aspect of the discussion involves the growing gig economy in Malaysia. The source notes that workers in the gig sector also require mechanisms for retirement protection, as gig platforms do not contribute to their EPF accounts in the same manner as formal employment. This highlights a significant gap in the current social safety net, where a large and growing segment of the workforce is left without the traditional employer-sponsored retirement benefits.

The proposal, while focused on formal employment, indirectly points to the need for broader reforms that could extend similar protective measures to gig workers, ensuring that the benefits of progressive retirement savings are not limited to those in traditional job roles.

The context of this proposal is set against a backdrop of ongoing discussions about wage policies and social security in Malaysia. The idea of a progressive wage policy, where contributions are adjusted based on income levels, aligns with global trends aimed at reducing inequality and ensuring that all workers, regardless of their income bracket, have access to adequate retirement funds.

The involvement of a prominent business leader like Tan Sri Shahril Ridza Ridzuan in advocating for such a policy adds weight to the argument, suggesting that the private sector is increasingly recognizing the importance of social stability and the long-term economic benefits of a well-prepared workforce.

The proposal also touches on the broader issue of financial literacy and planning among Malaysian workers. By targeting the lower-income group, the policy aims to address the root causes of inadequate retirement savings, which are often linked to low wages and limited access to financial planning tools. The increased employer contribution is seen as a direct intervention to boost savings, thereby reducing the reliance on other forms of social assistance in old age.

This approach is consistent with the government's broader goals of enhancing the social safety net and promoting economic resilience among the lower-income population.

Despite the potential benefits, the proposal faces the challenge of political and administrative implementation. The need for a detailed impact assessment on the economy, workers, and employers underscores the complexity of the issue. Stakeholders, including trade unions, business associations, and government agencies, will likely have varying views on the specifics of the proposal.

The balance between protecting low-income workers and maintaining the competitiveness of Malaysian businesses will be a key point of contention in the upcoming discussions. The source indicates that while the intent is clear, the path to implementation requires careful navigation of these competing interests.

In conclusion, the proposal by Tan Sri Shahril Ridza Ridzuan represents a significant step towards rethinking the EPF contribution structure in Malaysia. By advocating for a progressive model that favors lower-income workers, the proposal aims to address the growing disparity in retirement savings and ensure that all workers have a fair chance at a secure retirement. The potential to reduce the burden on businesses while enhancing social welfare makes this a compelling policy option.

However, the success of this initiative will depend on a thorough analysis of its economic implications and the ability to reach a consensus among all stakeholders. The focus on gig workers further highlights the need for a comprehensive approach to retirement security in the modern economy.