KUCHING: Starting October 2025, both employers and their foreign workers will be required to contribute two (2) per cent each to the Employees Provident Fund (EPF), a move aimed at safeguarding workers’ welfare across the board.
However, Sarawak Housing and Real Estate Developers’ Association (SHEDA) advisor Datuk Sim Kiang Chiok has cautioned that while well-intentioned, the policy could have negative repercussions on the construction industry, particularly in terms of project costs, housing affordability, and labour availability.
In a press statement issued today, Sim said the mandatory contributions would further tighten profit margins in a sector already burdened by high material costs, labour shortages, and currency depreciation.
“Rising costs from this mandatory two per cent contribution from both employer and foreign worker will add to already-tight margins in the construction sector,” he said.
He pointed out that the additional EPF contributions would inevitably increase the overall cost of construction projects.
“In an industry where margins are already squeezed by escalating material prices, workforce shortages, and currency fluctuations, and with the impending Sales and Service Tax (SST) taking effect in July 2025, this new requirement could further strain developers and contractors, especially small and medium-sized firms with limited capital reserves,” he said.
Citing statistics presented in Parliament and reported by The Star on December 5, 2024, Sim noted that as of September 30, there were 2,470,781 active foreign workers in Malaysia, with 698,407 employed in the construction sector, which is the second highest after manufacturing.
“These figures highlight the industry’s heavy reliance on foreign labour, particularly for manual and semi-skilled work that many locals are unwilling to take on,” he said.
Sim warned that if developers are forced to absorb the increased labour costs, profitability may decline and result in project delays or cancellations, while passing the costs on to buyers could drive up property prices and affect affordability, particularly for first-time homeowners in the B40 and M40 income brackets.
He also voiced concerns about Malaysia’s competitiveness in attracting foreign workers compared to neighbouring countries like Singapore.
“Our currency is already weaker than Singapore’s. If foreign workers perceive EPF deductions as reducing their take-home pay, they may opt for job markets that offer better net earnings,” he added.
Sim urged the government to review the policy or consider implementing mitigating measures such as tax incentives or subsidies for developers and contractors.
“While we support initiatives to improve retirement savings for foreign workers, it should not come at the expense of vital housing and infrastructure development. A balanced approach is essential to ensure the construction industry remains viable, competitive, and continues to contribute to national growth,” he said.
