Unlawful for EPF to implement the two per cent cut of  employees’ EPF contribution from April 1 as the nine per cent minimum statutory rate has not been gazetted to  become law


Media Statement
by Lim Kit Siang
 

(Petaling Jaya, Thursday): The Employees Provident Fund (EPF) is being thick-headed in refusing to consider proposals for a  convenient and hassle-free method for the 9.7 million EPF contributors who want to continue to pay 11% rate of contribution instead of nine per  cent as announced by the Prime Minister, Datuk Seri Dr.Mahathir Mohamad in the RM3 billion economic stimulus package to counter the US economic recession.

EPF public relations officer Nik Affendi Jaafar said yesterday that  the 9% contribution by workers is now the minimum statutory rate and those who want to contribute more must give notice to the Fund.

He said: "The employer has to submit the form together with the contribution at the nearest EPF office. Upon receipt, EPF will process the application for the increased contribution.''

The EPF is already groaning under an avalanche of various applications by EPF members and the EPF Chairman Tan Sri Abdul Halim Ali had been pleading for patience and understanding from the EPF members for the delay in processing their applications.

He said  some 800 contract workers have been employed and shift and overtime systems introduced to clear the backlog of applications from EPF contributors under various EPF schemes last year.

Normally, the EPF gets about 400,000 applications a year, but after the introduction of various new schemes in the middle of last year, the number shot up to 1.2 million last year.   Some 500,000 were  received in the first two months of 2000.

Halim has promised to clear the backlog by October.

If EPF needs to take another six months before it could clear its backlog of applications by EPF members last year, wouldn’t it grind to a halt if the EPF has to process the option forms of five million  EPF contributors who want  to continue to make 11% instead of nine per cent contribution?

I had suggested that the most convenient and hassle-free method for the 9.7 million EPF contributors who want to continue to pay 11% rate of contribution instead of nine per  cent  is for the EPF to recognise any continuation of the previous EPF contributions without the two per cent reduction as adequate notice of such option.

This would mean that there would  be no need for any EPF contributor to go through the hassle and red tape of having to send a separate notification to the EPF to forgo the two per cent cut and to keep to the 11% contribution rate - which could run into millions of notices inundating the EPF and  grinding it to a halt.

I have studied the EPF Act 1991 and it is clear that such a convenient and hassle-free method is permissible under the law.

The EPF is wrong in maintaining that the minimum statutory rate for employees’ EPF contribution is now  9%, and it is acting unlawfully in implementing the two per cent cut in employees’ EPF contribution with effect from April 1, 2001 as this change has not yet been gazetted to become law.

The EPF implements the EPF law but it has no right to change the law. I visited the EPF website http://www.kwsp.gov.my/kwsp/ and was surprised that it had put up an unauthorised and unlawful “new Third Schedule as of 1st April 2001” on the rate of  employees’ EPF contributions solely on the authority of the EPF Chairman.

The unlawful “new Third Schedule” was preceded by an undated note by the the EPF Chairman, as follows:
 
 

NOTIS KEPADA MAJIKAN

Penurunan Kadar Caruman Bahagian Syer Pekerja
Kumpulan Wang Simpanan Pekerja (KWSP)

Adalah dimaklumkan bahawa kerajaan telah mengumumkan penurunan kadar caruman KWSP bahagian syer pekerja sebanyak 2% iaitu daripada  11% kepada 9%. Kadar caruman bahagian syer majikan tidak berubah (12%). Dengan pindaan ini jumlah kadar caruman KWSP adalah sebanyak 21% untuk warganegara dan (RM5.00 + 9%) untuk pekerja bukan warganegara.

Kadar baru ini akan mula berkuatkuasa pada 1 April 2001. Ini bermakna  gaji bulan April 2001 perlu dibayar sebagai caruman bulan Mei 2001. Pindaan kadar caruman ini berkuatkuasa  sehingga  gaji bulan Mac 2002.

Bersama-sama ini disertakan Jadual Ketiga baru Akta KWSP 1991. Majikan dikehendaki membayar caruman bahagian syer pekerja berdasarkan Jadual Ketiga ini.

Sekiranya tuan/puan memerlukan penjelasan lanjut mengenai hal-hal KWSP, tuan/puan dinasihatkan supaya menghubungi mana-mana Pejabat KWSP Negeri/Cawangan atau e-mail kepada alamat berikut; [email protected] Tuan/puan juga boleh mengunjungi  laman web KWSP www.kwsp.gov.my/kwsp
 

Sekian, terima kasih.
 

“BERKHIDMAT UNTUK NEGARA”
 
 

TAN SRI ABDUL HALIM BIN ALI
Pengerusi Lembaga
Kumpulan Wang Simpanan Pekerja


Although the Prime Minister, Datuk Seri Dr. Mahathir Mohamad had announced the two per cent cut for employees’ EPF contribution to nine per cent on March 27, 2001 when announcing the RM3 billion economic stimulus package, Mahathir cannot change the EPF law by a mere announcement.

The EPF rate is governed by the following  two sections in the EPF Act 1991:
 

“43(1). Subject to the provisions of Section 52, every employee and every employer of a person who is an employee within the meaning of this Act shall be liable to pay monthly contributions at the rate respectively set out in the Third Schedule.”

“74. The Minister may, by order notified in the Gazette, amend, add to or vary any of the Schedules to this Act.”


Up to this date, the Finance Minister has not notified by gazette the amendment of the Third Schedule of the EPF Act to reduce the statutory minimum rate of employees’ EPF contribution to nine per cent.

Under the circumstances, the EPF Chairman’s notice of a new Third Schedule posted on the EPF website is unauthorised and unlawful, and should be taken down immediately.

It is most shocking that EPF does not understand that any attempt to enforce the 2% minimum mandatory employees’ contribution from April 1, 2001  is illegal, null and void as the reduction has not been gazetted as required by Section 74
of the EPF Act.

The reduction must first be gazetted before it could be enforced and there is no provision for  retrospective reduction.  This means that the  two per cent cut in EPF contribution for employees can only take effect on May 1 provided it is gazetted before April 30, 2001.

The EPF should realise any attempt to illegally enforce the 9% statutory minimum rate for employees’ EPF contribution  with effect from April 1, 2001 invites a public interest litigation to ask  the court to declare such EPF action unlawful, null and void.

It is most shocking that the government and the EPF could be so slipshod in their understanding and operating the EPF law, despite my publicly pointing this out more than once - which can only further undermine  public confidence in the competence, professionalism and integrity of EPF management and investment of the RM181 billion EPF funds belonging to the 9.7 million EPF members as their old-age savings and raising anew the whole question of EPF accountability and transparency.

Can the Finance Minister, Tun Daim Zainuddin explain whether the two per cent EPF cut for employees’ EPF contribution would be gazetted by before the end of this month and whether he would direct the EPF to opt for a hassle-free method to allow EPF members to continue to pay 11% contribution without any additional red-tape and paperwork, or whether this would have to be looked into by the new Economic Adviser to the Prime Minister,  Tan Sri Ali Abul Hassan Sulaiman?

(19/4/2001)


*Lim Kit Siang - DAP National Chairman