LETTER | In Malaysia, the Employees Provident Fund (EPF) is often treated as the sole retirement safety net for private sector workers. However, EPF alone is not a complete “retirement benefit”.
While EPF is a critical statutory savings scheme, it does not absolve employers of the responsibility to provide actual retirement benefits upon termination due to age.
Workers who have served for decades often leave with no financial recognition beyond their own savings - a moral, legal, and constitutional gap that demands reform.
Under Article 5 of the Federal Constitution, every citizen has the right to life, which courts have interpreted to include the right to livelihood.
Retirement is a natural stage of life, and employees retiring at 60 years are entitled to fair treatment and recognition. Denying retirement benefits and relying solely on EPF undermines both social justice and constitutional principles.
What EPF is - and what it is not
The EPF, established under the Employees Provident Fund Act 1991 (Act 452), is a compulsory savings fund. Both employer and employee contribute monthly (typically 13 percent from the employer and 11 percent from the employee), and these savings are managed by the EPF Board for post-retirement security.
The preamble of Act 452 states that the EPF is “a scheme of savings for employees’ retirement” and aims to “provide retirement benefits”. However, these “retirement benefits” refer only to the accumulated savings employees can withdraw upon retirement or under certain conditions.
EPF is not:
A gratuity or lump-sum payment given by the employer at the end of service.
A contractual or customary reward for long years of work.
A discretionary payment recognising loyalty or service.
Even the employer’s contribution is mandated by law, not a gift or bonus. EPF is fundamentally a retirement savings scheme, not a retirement benefit in the traditional or moral sense, such as pensions or gratuities.
Therefore, while EPF is essential, it cannot replace the employer’s legal, moral, or constitutional duty to provide additional retirement benefits where applicable.
Denial of benefits
Under Regulation 4(a) of the Employment (Termination and Lay-Off Benefits) Regulations 1980, workers are denied termination benefits if they retire upon reaching the retirement age set by contract, collective agreement, or company policy:
4. Termination
“(1) Subject to paragraphs (2), (3), and (4), an employee shall be entitled to termination benefits payment where his contract of service is terminated for any reason whatsoever otherwise than –
“(a) by the employer, upon the employee attaining the age of retirement if the contract of service contains a stipulation in that behalf; or…”
Employers frequently rely on this loophole to avoid paying any retirement or termination benefits, leaving workers with only their EPF savings, much of which is their own money.
With less than eight percent of Malaysian workers unionised - and not all collective agreements providing retirement benefits - more than 92 percent of workers, particularly in the private sector, risk retiring with nothing beyond their EPF savings.
When workers are retrenched by the employer for reasons such as poor business performance or other company-driven justifications, they are entitled to retrenchment benefits under Section 12 of the Employment Act 1955.
Although these workers may receive compensation based on their years of service, they often become “new workers” again when seeking employment elsewhere. Older workers’ chances of securing new employment are slim. The law recognises this hardship and thus provides retrenchment benefits.
However, when employees continue working diligently until the retirement age of 60 and are then terminated solely because of age, they are sent off empty-handed. The employer, on the other hand, continues running the business with existing employees or by hiring new ones.
The critical question: Is it fair that workers who serve until 60 walk away with nothing? They should be entitled to retirement benefits under the law, in addition to their EPF savings, reflecting fair treatment and recognition of long service.
EPF no substitute for retirement benefits
This reasoning fundamentally misunderstands the nature of retirement benefits.
EPF is a statutory obligation, comparable to paying minimum wage, contributing to Socso, or complying with occupational safety laws.
Employers do not “pay twice” when they observe multiple statutory requirements - each serves a distinct legal and social function.
Retirement benefits are not savings. They are a gratuity - a final acknowledgement of long service, a dignified send-off for decades of contribution to the enterprise.
Workers who dedicate their lives until the mandatory retirement age of 60 should not walk away empty-handed, especially when employees who are retrenched earlier receive termination benefits under the Employment Act.
Equating EPF with retirement benefits is therefore misleading:
EPF is a statutory savings mechanism, designed to ensure financial security in old age.
Retirement benefits are recognition of long service, grounded in fairness and dignity, and already a norm in many jurisdictions.
Malaysia leaves long-serving workers vulnerable. They may serve faithfully until 60, only to be told their EPF is “enough” - even though this fund is essentially their own savings.
Retirement benefits, in addition to EPF, are therefore a matter of justice, recognition, and alignment with international labour standards and constitutional rights under Article 5.
Sole reliance on EPF is risky
Recent audits reveal troubling signs. The 2025 Auditor-General’s Report found that nine EPF subsidiaries recorded combined losses of RM224.21 million in 2023. EPF’s investment income in the first quarter of 2025 dropped 13 percent year-on-year.
Commentators such as P Gunasegaram estimate real losses could be closer to 23 percent, raising concerns over transparency, possible mismanagement, and politically influenced decisions - including the controversial RM60 billion pandemic withdrawals.
EPF is not guaranteed. It is subject to market volatility and governance risks - meaning employers should not rely on it as the only form of retirement provision.
Right to livelihood
The Minimum Retirement Age Act 2012 (Act 753) sets the minimum retirement age at 60 years, ensuring employees cannot be forced to retire prematurely.
However, the Act does not address or guarantee retirement benefits beyond EPF. Some employers exploit this silence to deny retirees any additional financial recognition.
Article 5 of the Federal Constitution guarantees the right to life, interpreted to include the right to livelihood. Retirement is a natural stage of life, and employees retiring at 60 are entitled to fair treatment and recognition.
Denying retirement benefits solely because EPF exists undermines both social justice and constitutional principles.
In other words, the right to livelihood implies a right to fair treatment once an employee retires at 60. Retirement benefits, in addition to EPF, are not merely discretionary - they are a matter of justice, dignity, and constitutional fairness.
Govt must intervene
Malaysia should:
Amend Regulation 4(a) so termination benefits apply unless a retirement benefit is already provided.
Enact a Retirement Benefits Act or amend the Employment Act to make such benefits mandatory.
Ensure that retirement benefits are established as a mandatory term in collective agreements.
Recognise that retirement is not merely the end of employment, but a stage of life where employees have a constitutional right to livelihood (Article 5). Retirement benefits should reflect fair treatment and dignity, in addition to EPF savings.
Reform should make clear that EPF is a savings scheme, not a substitute for retirement benefits. Workers who have served for decades should not be sent off empty-handed - justice, fairness, and the Constitution demand more.
Workers deserve dignity beyond EPF savings
EPF is not a retirement benefit in the full sense - it is primarily a savings scheme consisting of employees’ contributions plus mandatory employer contributions.
Employers must recognise that simply contributing to EPF does not satisfy their legal, moral, or constitutional obligations. Genuine retirement benefits - such as gratuities, pensions, or other financial recognition - are necessary to honour decades of service and ensure retirees are treated fairly.
Denying retirement benefits not only undermines justice and dignity but also risks violating the constitutional principle of the right to livelihood under Article 5. Legal reform is urgently needed to:
Clarify and enforce employer obligations beyond EPF,
Guarantee retirement benefits as a matter of fair treatment, and
Align Malaysia’s labour laws with international standards and human dignity.
Employees who retire at 60 deserve a dignified exit, recognition of long service, and security beyond their personal savings. Strong advocacy, legislative amendment, and policy enforcement are essential to make this a reality.
It is high time for the government to intervene to reform labour laws. The Federal Constitution is a living document, and the right to life under the Constitution must be interpreted broadly, taking into account contemporary circumstances and societal developments
The writer is a legal professional.
The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.
