KUALA LUMPUR: Companies should be given more time to prepare for the proposed policy requiring foreign workers to contribute to the Employees Provident Fund (EPF), industry executives said.

They said the proposal will affect labour-intensive industries such as manufacturing, retail and services more than those of capital-intensive.

On Oct 18, Prime Minister Datuk Seri Anwar Ibrahim said the government planned to make it mandatory for all foreign workers working in Malaysia to contribute to the EPF.

He said the proposed mandatory contributions from non-citizen workers will be implemented in phases.

Glomac group managing director and chief executive officer Datuk Seri FD Iskandar acknowledged the long-term benefits but said the construction industry, which pays foreign workers daily wages, will face significant short-term challenges from such policy.

“In construction, you go through certain stages. Now you might need barbenders. Next stage, you need bricklayers. Next, you need painters and so forth.

“Even though we have the minimum monthly rate, they are looking at the daily wage as well. So it will definitely in the short term affect the employers,” he said at Glomac’s 40th annual general meeting here today.

SME Association of Malaysia president Chin Chee Seong said the proposed non-citizen EPF contribution, together with the wage hike, will not affect all sectors equally.

Labour-intensive industries such as manufacturing, retail and services will be disproportionately affected compared to capital-intensive sectors.

Chin warned that the measures could cause unsustainable financial strain on small and medium enterprises (SMEs), many of which are still in a fragile state of recovery following the Covid-19 pandemic.

“We cannot ignore the fact that the proposed wage and EPF adjustments, if enforced without additional support mechanisms, may threaten the survival of countless small and medium enterprises.

“SMEs, which constitute over 97 per cent of Malaysia’s business landscape and employ millions of people, operate under significantly tighter margins compared to larger corporations. Their ability to absorb these additional costs is minimal, and many are already struggling with escalating costs in raw materials, energy, logistics, and financing,” he said in a statement.

Chin said for labour-intensive industries, where profit margins are already razorthin, the move could result in reduced hours for workers or even a shift towards automation, ultimately displacing jobs.

Therefore, the association recommended the government to introduce a gradual increase in wages and EPF contributions over an extended timeline to allow SMEs sufficient time to adapt.

Meanwhile, FD Iskandar said the government needs to push the industrial building system (IBS) as a way to reduce reliance on foreign labour.

“Developers or contractors have to adopt this because you cannot keep on employing foreign workers.

“But by asking people to adopt IBS, I think incentives must be given, if not monetary incentives, maybe you can give certain things like higher plot ratio, faster approvals, things like that,” he added.

Source: New Straits Times