InfoSAWIT, KUALA LUMPUR – The Malaysian palm oil industry is urging the government to reconsider its decision to mandate a 2% contribution to the Employees Provident Fund (EPF) from foreign workers, citing the potential for significant cost increases.
The proposed policy requires foreign workers to contribute 2% of their salaries to the EPF, which will be matched by a 2% contribution from employers.
With approximately 336,500 foreign workers employed in the plantation sector, the industry is expected to incur additional costs of around RM274 million per year, according to a statement issued by 12 Malaysian plantation organizations that are part of an association.
“Given the financial pressures already faced by this sector, the association requests that this policy be reviewed to ensure it does not add to the burden for employers or foreign workers,” the association stated, as reported by InfoSAWIT from The Edge Malaysia on Monday (March 17, 2025).
Malaysia heavily relies on foreign workers, particularly from Indonesia and South Asian countries such as India, Nepal, and Bangladesh, to work in plantations as harvesters, while local workers tend to avoid these jobs.
The proposed policy is currently under discussion at the Cabinet level, with the Ministry of Human Resources scheduled to announce details soon.
The association believes that the implementation of mandatory EPF contributions will create financial and administrative challenges for plantation companies, diverting their focus from productivity and sustainability improvements.
“EPF is designed for long-term retirement savings, which may not align with the financial needs of foreign workers,” the statement read. “Most foreign workers are in Malaysia for short-term work cycles of two to four years and prioritize sending their earnings back home.”
The association also warned that the reduction in net income for foreign workers due to this policy could make Malaysia a less attractive destination for work.
Additionally, the lack of a clear withdrawal mechanism for foreign workers wishing to return to their home countries is also a major concern.
“Without a clear withdrawal mechanism, many workers may struggle to claim their savings, which could lead to dissatisfaction and complicate employers' compliance with this policy,” the statement continued.
The association highlighted that small and medium-sized plantation companies would be the most vulnerable to the cost impacts of this policy, reducing profitability and hindering the competitiveness of the Malaysian palm oil industry in the global market.
While acknowledging the government's intention to improve worker welfare, the association emphasized the importance of fair and practical policies.
“We remain committed to working with the government and relevant stakeholders to develop a balanced approach, ensuring that the Malaysian palm oil industry continues to thrive without compromising worker welfare,” the statement concluded. (T2)
