Putrajaya has been urged to reduce the employer’s contribution rate to the Employees Provident Fund (EPF) to at least 5% from the current 12% and 13%, as companies struggle with cash flow problems after being battered by the Covid-19 crisis.

The Malaysian Employers Federation (MEF) said the arrangement would also help ensure that employees would still have some savings.

“Reducing EPF contributions for employers will help in job retention. The market is bad,” MEF executive director Shamsuddin Bardan told FMT.

“We are expecting a lot of retrenchments and little, if any, recruitment.”

Currently, employees contribute 11% to their EPF, while employers put in between 12% and 13% depending on the salary amount.

But Shamsuddin said a reduction of EPF contributions must be coupled with an enhanced wage subsidy programme.

He said the government’s current wage subsidy programme was not as much as that announced in countries such as Singapore and the United Kingdom.

“Private sector wages per month in Malaysia amount to RM27.5 billion,” he said, adding the allocation for the wage subsidy programme was RM13.8 billion for three months.

This, he said, amounted to RM4.6 billion per month or 16.7% of the private sector’s monthly wage bill.

In Singapore and the UK, the wage subsidy covered 75% and 80% of the private sector monthly wage bill.

“Now, it is about sharing the burden, we have to stretch what money we have. If my cash flow allows me to survive for two months, I cannot be incurring the same costs while revenues are affected for more than that or my company will die.”

He said even after the movement control order (MCO) was lifted, businesses would take some time to recover.

He said the government needed to step in to make a decision, as waiting for employers and employees to come to an agreement where sharing the burden was concerned would be difficult and too time consuming.

“When companies talk about the possibility of closing, it’s not empty talk. These are real fears.”

SME Association of Malaysia president Michael Kang said they had earlier proposed a six-month EPF contribution moratorium for employers and employees to the government.

“This way, both employers and employees will have more cash in hand and more importantly, it will help companies retain staff.”

However, he said, the proposal was not accepted.

EPF contribution, he said, was no “small amount”.

Giving the example of a company with 10 employees earning RM3,000 a month, he said EPF contributions alone would cost the company at least RM3,000.

“Now many companies are not earning revenues, but still need to pay bills and wages. We hope the government can reconsider this because if companies go out of business, then what is the point?”

Economist Kameel Mydin Meera agreed that the government should allow for a moratorium on EPF contributions for at least six months.

“A lot of businesses are facing cash flow issues, not just EPF contributions but even rentals should be deferred.

“We cannot expect businesses to sustain their costs if they cannot do business. The concern now should be on job retention and business sustainability,” said Kameel, a former dean of the Institute of Islamic Banking and Finance at the International Islamic University Malaysia.