What does "Include in EPF Wage" mean?

Modified on Fri, 30 Jan at 1:32 PM

This article explains the impact of "Include in EPF Wage" in the payroll item setting.

To set up payroll item, refer to Creating/Edit Payroll Items

This setting determines whether a payroll item (e.g. allowance, bonus) is included in the employee’s EPF Wage.

Depending on the total wage amount, the employer contribution rate will be 12% or 13%, following the EPF Act 1991 and Jadual 3.

Whereas EPF base is the base amount that will be used to calculate EPF contribution. To include in EPF base, tick on the EPF statutory checkbox in the government statutory section.

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Definition of wages according to Section 2 , EPF Act 1991 as below:

Examples

1. Scenario of "Include in EPF Wage" is toggled on

2. Scenario of "Include in EPF Wage" is toggled off

Definition of wages according to Section 2 , EPF Act 1991 as below:

Refer to EPF Contribution Calculation for further info.

Refer to Jadual 3 2025, if the total wage (including bonus) exceeds RM 5,000, the epf contribution will be 13%.

According to the EPF Monthly Contribution:

For salaries under RM5,000, the default Employer's contribution is 13%, as follows Jadual 3.
For salaries above RM5,000, the default Employer's contribution is 12%, as follows Jadual 3.
(refer to Jadual 3)

Examples

Both items of salary and CP Allowance ticked EPF checkbox.

1. Scenario of "Include in EPF Wage" is toggled on

Total Earnings: RM4,900 + Allowance: RM200 = Total: RM5,100;

Allowance is included in the Monthly Wage: Monthly Wages = RM 5100, which exceeds RM5,000, so 12% is the employer contribution percentage.

For Monthly Wages exceeding RM5000, EPF contribution refers to Jadual 3, which is RM612.

2. Scenario of "Include in EPF Wage" is toggled off

Total Earnings: RM4,900 + Allowance: RM200 = Total: RM5,100

Allowance isn’t included in the Monthly Wage: Monthly Wages = RM 4900, which is less than RM5000.

For Monthly Wages less than RM5,000, the Employer's contribution rate will be 13%.

EPF contribution is calculated based on EPF Base of RM5100 x 13% = RM663.

(calculated directly since the EPF Table only has a contribution of 13% up to RM 5000.)

Although EPF Base exceeds RM5,000, the system refers to the EPF Wage (excluding the allowance) to determine the applicable contribution rate.

We hope this explanation clarifies the matter. If you require further assistance, please don't hesitate to contact our support team.