Payroll update - April 2025

Contributions to the Employee Welfare Fund will commence on 1 October 2025

Based on a Royal Decree published in the Royal Gazette on 11 November 2024, the Employee Welfare Fund (“EWF”) will come into effect on 1 October 2025.Under this new regulation, both employers and employees are required to contribute to the fund, which aims to provide financial support to employees in the event of termination of employment, death, or missing persons being declared dead by a court.

Objective of the EWF

The primary objective of the EWF is to provide financial support to employees who lose their jobs, regardless of the reason (e.g., voluntary resignation, dismissal, or redundancy).

In contrast to a provident fund (“PVF”), which stipulates that an employee dismissed for gross misconduct (in accordance with Section 119 of the Labour Protection Act) is ineligible to receive the employer's part of any contributions made, the EWF ensures that employees will receive:

their own contributions;
the employer’s contributions; and
any accrued interest from the fund.

If an employee passes away, the designated beneficiaries will receive compensation based on the percentage allocated by the employee.

If no beneficiary is specified, the funds will be distributed equally among the employee’s legitimate heirs, such as children, spouse, and parents.

Employer Obligations

From 1 October 2025, employers with ten or more employees must register their employees with the EWF and begin deducting contributions from October 2025 onwards.

Exemptions from contributing to the EWF

Employers are exempt from contributing to the EWF if they fall into one of the following categories:

1. Businesses employing workers without the intention of generating a profit, as specified in the Ministerial Regulation issued under the Labour Protection Act (e.g., charities, associations, and non-profit organizations).

2. Employers that already provide a PVF under the Provident Fund Act.

3. Employers offering a private financial fund providing benefits equivalent to the EWF, in compliance with rules and procedures set out in applicable Ministerial Regulations.

However, if certain employees are ineligible to join an existing PVF or private fund (e.g., employees on probation) or voluntarily choose not to participate, the employer is required to make contributions to the EWF for those employees.

Additionally, employers not required to contribute to the EWF may voluntarily choose to participate if both the employer and employees agree to do so.

Definitions of key terms for the EWF

Employee: This includes all types of employees, regardless of the type of contract they are working under (e.g., part-time, full-time, subcontracted employees).
Wage: This refers to money to be paid by the employer to the employee, as agreed on, in return for work set out in the employment contract for regular working periods, including money paid on holidays and leave, as set out in Section 5 of the Labour Protection Act.

Recommended adjustments for employers with a PVF

Employers with a PVF are strongly recommended to revise certain PVF conditions to ensure compliance with EWF exemptions and avoid mandatory contributions to both funds. Key elements to update include the following:

1. Ensure that the PVF’s definition of "employee" matches the definition under the Labour Protection Act.

2. Allow employees to join the PVF from their first day of employment.

3. Permit employees to re-join the PVF after exiting from the PVF.

By making these adjustments, employers can ensure their PVF meets the criteria for being exempt from making contributions to the EWF, thus avoiding unnecessary dual contributions, while also maintaining comprehensive financial benefits for their employees.

EWF contribution rates and payment deadlines

Contributions are divided into two phases:

Periods	Employee contributions	Employer contributions
From 1 October 2025 to 30 September 2030	0.25%	0.25%
From 1 October 2030 onward	0.50%	0.50%

Key issues to note in regard to EWF contributions[SR5] [NP6]

Unlike with Social Security Fund contributions, there is no maximum wage ceiling.
Contributions must be remitted by the 15th of the following month.
Late or missed payments will be subject to a 5% surcharge per month on the unpaid amount.
Authorities have verbally confirmed that an electronic filing and payment system similar to the e-service of the Social Security Office or e-filing of the Revenue Department will be implemented.

Tax deductibility of EWF contributions

At present, there is no official confirmation that EWF contributions will be tax deductible, as PVF or Social Security Fund contributions currently are. Nevertheless, there is generally believed that these contributions will indeed be tax-deductible. We will provide an update on this issue when an official announcement is made.

To help employers determine how they should deal with the EWF regulations, we have set below a flowchart for their reference: