Outstanding Does Things Differently

Malaysia has one of the youngest mandatory retirement ages globally. With some luck and good health, our retirement years could potentially be as long as our work career. But funding one’s retirement years may not be cheap, due to inflation and rising cost of living. Studies show that it is possible for many of us to work up to retirement age and still not have enough saved up for our long term financial goals.

Here is where employers can play a crucial role in helping employees make the transition from work to retirement. Existing mandatory and public pension plans provide a good start, but they are often insufficient to sustain the duration of our post-working years.

As an employer, you can set your company apart from others by helping employees plan for their future. Organize financial education sessions to help your employees understand what retirement planning entails and offer a retirement savings programme like the Private Retirement Schemes (PRS), a voluntary long-term savings and investment scheme designed to supplement retirement savings. Employees who are financially secure create a work environment that is positive and productive.

Why Should Employers Consider PRS?

Providing employees an avenue to save for their future should be neither complicated nor costly. Employers can start by simply facilitating PRS account enrolments and providing the option for monthly salary deduction thereafter. Employees who save in PRS can enjoy individual tax relief, take advantage of ringgit-cost-averaging, and benefit from compounding growth over the long term. Early discussion with employees about retirement will help a long way for their financial future.

If you would like to go one step further, consider also making PRS contributions on behalf of employees or matching their PRS contribution. Employers who do so are eligible for tax deductions of up to 19%. This tax advantage also applies for vesting schedules or performance bonus awards via PRS contributions.

Stand Out with PRS

Outstanding does things differently – which is what you can do to attract talent, engender loyalty and increase staff retention while profoundly shaping the lives of your employees. Take the next step and implement PRS in your organization.

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In addition to the existing remuneration package, PRS can form part of your employee retention program that will not only help the employees in terms of accumulating their retirement savings but also provides tax deduction to your organization. This is because employers who contribute in PRS on behalf of their employees are eligible for tax deduction of up to 19% as illustrated below.

Tax deduction for contributions made by Employers

Example*

Kreatif Sdn Bhd made the following contributions for the accounting period ending on 31 December 2013:

(a) EPF = 12% of employees’ remuneration and
(b) PRS funds = 7% of employees’ remuneration

Total employees remuneration for the period was RM300,000. Allowable deduction to the company under subsection 34(4) of the Income Tax Act is RM57,000 (RM300,000 x 19%).

Notes*

(1) Employer contribution rate at 12% of employees remuneration.
(2) Contributions made by employers on behalf of their employees are allowable as a deduction under subsection 34(4) of the Income Tax Act subject to a maximum of 19% of the employees’ remuneration.

* Source: Inland Revenue Board (Private Retirement Scheme – Public Ruling No. 9/2014 Section 5.2).

By promoting retirement wellbeing with the PRS, your organisation will be reflected as a caring employer in the efforts to increase your employees’ awareness and education on the need to plan and prepare for their retirement. PRS further complements your employees’ mandatory retirement savings which will enable them to enjoy a better financial security when they retire.

Benefits of PRS for Employers



As an employer you are able to introduce PRS by either implementing Sponsor PRS Programme and/or Employer Contribution Programme. The implementation of PRS can be simple with the right advice and method.

Employer Sponsor PRS Program

  • Employer sponsor adoption of the PRS scheme will enhance employees’ retirement financial security
  • Actively promote PRS scheme to employees on voluntary enrollment basis
  • Select PRS Providers to market, educate and enroll employees to PRS schemes
  • Employees select PRS funds, enrolls with Providers through regular monthly contributions
  • Employer facilitates payroll deductions for employee PRS contributions to Providers

Employers PRS Contribution Programs

  • Employers choose to make additional contributions up to 19% above mandatory EPF contributions to employees’ PRS schemes
  • Employers choose to channel existing EPF contributions above mandatory contributions to employee PRS schemes
  • Employer-Employee Co-contribution program – employers making equal contributions to employees’ PRS contributions

Please download the PDF guide below for the application guide on salary deduction under Jabatan Tenaga Kerja (JTK).

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