What does "Include in EPF Wage" mean?

Modified on Wed, 5 Nov at 12:19 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 Base.

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

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

According to the EPF Monthly Contribution:

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

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.

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

EPF contribution is calculated based on EPF Base of RM5,100 × 12% = RM612.

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 the Total Earnings exceed 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.