By Luqman Amin / theedgemalaysia.com

07 Nov 2024, 02:41 pm

KUALA LUMPUR (Nov 7): A group of 14 Malaysian plantation organisations have jointly urged the government to reconsider the upcoming mandatory Employees Provident Fund (EPF) contribution for foreign workers, stating that the policy could overburden planters and potentially contradict the EPF Act.

The policy will impose substantial new costs on plantation companies which already face pressures from fluctuating global markets, sustainability requirements, and increasing labour expenses, the association said in a joint statement on Thursday.

“The association warns that implementing the policy in its entirety could severely affect the operating costs of companies, especially small and medium-sized enterprises,” the statement read.   

Malayan Agricultural Producers Association (MAPA) in the statement pointed out that the policy is “against the fundamental objective of EPF Act 1991”, which is to provide retirement savings for employees.

“Since foreign workers will not work past their retirement age and will return to their own countries after their work contracts ended, it does not qualify them to join EPF scheme in Malaysia,” it said.  

MAPA added that the Act showed that foreign workers may contribute to the EPF subject to the application to the EPF board and their respective employers which mean “it is a voluntary scheme, and it cannot be made compulsory”.  

EPF’s long-term intent misaligned with short-term foreign workforce

The association also raised concerns over a “disconnect between EPF’s long-term savings goals and the typically short-term nature” of foreign employment in Malaysia, noting that foreign workers often stay for only two to four years.

This limited duration means they are unlikely to build meaningful retirement savings, which cannot be accessed until age 55, the association noted.

In addition, the policy could lower foreign workers’ take-home pay, potentially affecting their ability to meet financial obligations and diminishing their motivation to work in Malaysia.

“This reduction in disposable income could create dissatisfaction and impact the industry’s ability to retain workers in an already labour-constrained environment,” it said.

Alternative solutions and phased approach suggested

The Malaysian Estate Owners Association (MEOA) said in the statement that most foreign workers, unlike high-income expatriates, regularly remit earnings to support families back home, making short-term financial benefits more relevant to them than retirement savings.

“Without a streamlined system for accessing savings, foreign workers may find this policy burdensome, as it reduces immediate earnings without providing accessible retirement benefits,” MEOA said.  

The association suggested creating a separate savings fund for foreign workers with flexible withdrawal options, allowing portability across borders.

It also called for policies that reflect the transitional nature of foreign employment and address the challenges foreign workers may face in accessing their savings after they return to their home countries.

Sarawak Oil Palm Plantation Owners Association (SOPPOA) in the statement urged the government to explore voluntary savings programmes as an alternative, better aligned with foreign workers’ financial goals.

Other organisations in the statement include the Malaysian Palm Oil Association (MPOA), East Malaysia Planters Association (EMPA), Sarawak Dayak Oil Palm Planters Association (DOPPA), and Sabah Employers Consultative Association (SECA).

Call for phased implementation and open dialogue

The association has advocated for a phased implementation of the policy to ease the immediate financial impact on companies, and for engagement with foreign workers and labour-sending countries to gather insights on retirement savings.

They urged the government to facilitate open dialogue with industry representatives and to issue clear guidelines, while considering support measures or exemptions, especially for smaller entities within the palm oil sector.

“With Malaysia under international scrutiny for labour practices, this mandate may amplify negative perceptions, potentially discouraging foreign workers from choosing Malaysia as an employment destination,” it added.

Edited By Isabelle Francis

Source : Malaysian plantation associations call for review of mandatory EPF contribution for foreign workers

KUALA LUMPUR: A total of 14 palm oil industry associations have called on the government to reconsider the government’s 2025 Budget proposal to mandate Employees’ Provident Fund (EPF) contributions for foreign workers, warning of severe cost pressure.

The associations include Malaysian Palm Oil Association (MPOA), Malaysian Estate Owners’ Association (MEOA), Sarawak Oil Palm Plantation Owners Association (SOPPOA), and East Malaysian Planters Association (EMPA), among others.

According to the associations, the labour intensive Malaysian palm oil industry relies heavily on foreign labour due to persistent local workforce shortages, particularly for the demanding fieldwork required on plantations. 

“The association warns that implementing the policy in its entirety could severely affect the operating costs of companies, especially SMEs,” it said in a statement today.

As such, the association advocates for a phased approach to any new EPF contributions for foreign workers to mitigate immediate financial impact on companies. 

Plantation companies, particularly smaller operators, are likely to face additional pressures in managing these new requirements, diverting resources from investments in productivity and sustainability initiatives.

The associations encourage the government to consider support measures or exemptions to alleviate this burden, especially for smaller entities within the palm oil sector.

It said ongoing engagement with the government is essential to ensure that any changes to EPF contributions are economically feasible and aligned with the unique operational constraints of the palm oil industry.

The association said while it appreciates the government’s efforts to enhance foreign workers’ welfare, there is a need for a well-thought-out and feasible approach to achieve these goals.

It added that it is committed to working alongside the government to develop solutions that respect the rights and needs of foreign workers while supporting the sustainability of Malaysia’s palm oil industry.

“As Malaysia strives to be a global leader in sustainable palm oil, the association believes that policies supporting foreign workers should be fair, feasible, and mutually beneficial.”

“The success of the palm oil industry relies on a positive relationship between employers and foreign workers, and the association is ready to engage in constructive dialogue with the government and other stakeholders to develop a policy framework that works for everyone,” it noted.

Source : 14 palm oil groups urge govt to reconsider mandatory EPF for foreign workers