Non-governmental organisations (NGOs) are at crossroads with the government over the compulsory two percent reduction for workers' contribution to the Employees Provident Fund (EPF) which was announced recently.

Federation of Malaysian Consumer Associations (Fomca) secretary-general, Muhammad Sha'ani Abdullah told malaysiakini today existing regulation only served to regulate the minimum contribution by both employers and employees.

He said under Section 42(3) of the Employee Fund Act 1991, employees and employers are free to contribute at a rate higher than that set by the EPF board.

"The EPF board is the one which sets the rate of contribution in the Third Schedule, but employees can choose to contribute more than what is determined," he said. A large segment of workers have been contributing at more than 11 percent for the past five years, he added.

Yesterday, Prime Minister Dr Mahathir Mohamad said the two percent reduction announced earlier this week was compulsory and is part of a RM3 billion stimulus package to offset the local effects of the American economic slowdown.

Sha'ani argued that workers should be allowed to opt out of the new rate and the government should not impose restrictions to stop employees who voluntarily contribute in excess.

"The new nine percent rate should not be forced upon contributors and they should be given the choice to maintain the present rate," he said.

Retain option

Sha'ani also expressed his concern for the fixed-wage earners. He cited them as "easy victims" who would suffer the consequences of the government's measures, among which is the reduced EPF annual dividends paid in the recent years.

Meanwhile, Malaysian Trade Union Congress secretary-general G Rajasekaran when contacted, reiterated that employees should not be deprived of their right to maintain their share of contribution at 11% although the government has proposed a new statutory minimum.

He said since the employees' contribution was last reviewed and adjusted to 11% in 1996, many employees have been contributing to the EPF at 15%t, the maximum rate allowed then.

"If they were allowed to contribute more then, why should things be any different now? Furthermore, the reduction does not necessarily mean that employees have more money to spend," he said.

"A portion of this extra money will go to income tax. Worse still, this could result in employees paying more for income tax, which is based on the paid salaries they get," said Rajasekaran.

He said the workers' livelihood after retirement would be affected by the reduction, adding it is for this reason the workers should be permitted to choose for themselves whether they want to maintain their contribution at 11% or switch to the new rate, as these are their rights according to the law.

EPF media relations assistant manager, Usha Banu refused to comment on the issue when contacted.