22 October 2011

Budget 2012: How Does 1% more EPF Affecting YOU?

During the recent Budget 2012 announcement, one of the controversial issue is the increment of 1% contributed by employers to EPF effective 1st January 2012. This will bring the minimum contribution rate by employers to 13% from 12% currently for those earning less than RM5,000 per month.

The Fatter EPF
While employees are welcoming the new rules, many employers are voicing out their concern on the extra burden being bear by them. "This is not fair to us, especially during current scenario where businesses are bracing for more challenging times ahead", says one of the concerned boss. Although there is some sort of tax-relief for employers who contribute more, bosses are still unsatisfied by the new ruling which adds to their fixed costs.

What is the rationale behind?
The reason is somewhat very good, that is "to equip Malaysians more retirement funds for their golden age" after recent facts shown that Malaysian generally fully utilized their EPF monies between 3-10 years time after retired. This is an alarming issue which prompt government to impose the new ruling.

We work hand-in-hand
However, Finance Malaysia found another good reason behind all this. That is "EPF needs more money". Why?

  1. General election is coming very soon
  2. We need a feel good factor on Bursa Malaysia
  3. External environment resulting in a not so perform KLCI

If we link all the three points together, we can come out a conclusion, which is "Due to the gloomy economic outlook caused by western countries, Bursa Malaysia is in red territories in-line with other countries. Normally, KLCI is also an index which measures the health of Malaysia's economy. In other words, people perceived that our economy is good if KLCI is advancing, which acts as an advantage for the government in the coming general election. And, one of the important supporters was EPF". So, you know why EPF needs more money now?

Then, how does 1% more EPF affecting you?
Less Increment. If raw materials prices eats into profit, bosses will pass the extra costs to end consumers. Does this 1% more EPF consider as extra cost to bosses? Definitely. But, this is called operating costs to employers. So, the natural option for employers is to giving you less increment, thus reducing the effect of 1% more EPF contributions.


Example, you may only get a 9% increment, instead of your deserved 10%. Anyway, you still get the money in this case, but is in your EPF account rather than cash in hand. Good luck, buddies.

Note: This is purely for your own consumption without the intention to provoke any parties.

3 comments:

  1. 1% increase for those only making RM5K per month is nothing lah. Insignificant! Labour law in Malaysia is horrible. We need better retirement plan or employee benefits outlined by the government that would cover the whole private sector.

    ReplyDelete
  2. True, from company standpoint, it's like taking from left pocket and put into right pocket.

    ReplyDelete
  3. After how many years, all of a sudden, they come up with this idea.. Are they getting smarter?
    But in actual fact, where the hell you guys think the gomen gets the money to pay the RM500 n the subsidies they were happily announcing earlier?
    Some way or another, they will get ppl to pay it back.. Now the employers, sooner or later it will be the ppl..

    ReplyDelete

Finance Malaysia Blog appreciates your comment. Cheers!

Related Posts Plugin for WordPress, Blogger...