The pros and cons of making EPF mandatory for freelancers

Freelancers often work without the benefits that salaried employees take for granted, and retirement saving is one of the clearest examples. There is no payroll department to sweep a fixed percentage into the Employees Provident Fund, no employer top up arriving quietly each month, and no automatic reminder that the future needs cash just as surely as the present does. When people debate whether Malaysia should make EPF mandatory for freelancers, they are not arguing about the value of saving in the abstract. They are arguing about whether a compulsory system can protect living standards later in life without destabilizing the budgets that independent workers manage today. The question lives at the junction of retirement adequacy and cash flow reality, and any honest answer has to respect both.

To understand the attraction of an EPF mandatory for freelancers model, consider how people actually behave. Good intentions do not automatically become good habits. Irregular income makes it easy to postpone transfers to the future, and the habit slips further when invoices are late or when an unexpected bill jumps the queue. Compulsion changes the default. Instead of asking a freelancer to make a fresh decision each month, a rule requires a small share of each ringgit earned to be set aside. This shift from optional to expected matters because compounding needs time and consistency. A decade of sporadic contributions behaves like a leaky bucket, whereas a decade of modest, regular funding builds a base that inflation, medical costs, and bad luck struggle to erode. If a mandatory EPF structure can raise participation and smooth contributions over a working life, it can lift the income floor in retirement in ways that marketing campaigns and one time top ups rarely achieve.

Policy makers are drawn to mandates for two linked reasons. The first is a desire to reduce poverty in old age by ensuring that more citizens arrive at retirement with assets, not just promises. The second is the need to keep the public safety net sustainable by asking current earners to fund a larger share of their own future. When large parts of the labor market are self employed or gig based, voluntary schemes alone may not bring enough people into the system. A requirement tied to income can generate broad coverage without the friction of repeated persuasion, and that broader coverage justifies building better rails, clearer rules, and targeted support for those who need it most.

The case for making EPF mandatory for freelancers is clear on paper. Defaults drive behavior, and behavior shapes outcomes. If every invoice triggers a small percentage contribution, the retirement base grows almost invisibly. The discipline becomes a background process that saves mental energy for client work and skill building. Alignment also feels fair. Salaried workers already contribute through payroll, and they benefit from employer matches. When the economy has a growing share of independent workers, allowing rules to diverge by employment status can feel inconsistent. A mandate tightens the gap, signals shared responsibility, and opens the door to policy tools that only work when participation is predictable, such as temporary matching for low earners, tax relief for middle earners, and automatic pauses during income shocks.

Yet the arguments against a blanket mandate are just as real, and ignoring them would repeat an old policy mistake, the mistake of designing for averages while people live through extremes. Freelance income is lumpy. A rule that takes a fixed slice regardless of cash flow will bite hardest in thin months, and if the choice is between contributing to EPF and paying rent, some people will borrow at high interest to meet the rule. That is the worst possible outcome, since the interest cost can easily outpace the returns on the retirement savings and leave net worth lower, not higher. Administrative complexity is another risk. Independent workers already juggle invoicing, tax calculations, client management, and marketing. If contributions involve extra reporting, proof of income, and awkward payment schedules, compliance will suffer and under reporting may rise. There is also the question of opportunity cost. Early in a freelance career, every ringgit might be needed for tools, training, and portfolio building. Redirecting scarce cash into long term savings too soon can slow business viability, reduce lifetime earnings, and ultimately shrink the pool of future contributions.

These tensions do not mean that an EPF mandatory for freelancers model is doomed. They mean design matters more than slogans. A smart system respects the unevenness of independent work. It sets contributions as a percentage of actual receipts rather than as a fixed monthly amount, and it collects those contributions in micro payments that ride on the same rails as the income itself. When a client pays, the contribution moves. When a month is slow, there is nothing to move, and there is no penalty. It also builds in hardship levers that activate automatically below a reasonable income floor, so that the rule flexes in bad months without forcing a bureaucratic appeal. Catch up windows should exist for when work rebounds, because life rarely moves in straight lines. The rate should phase in over time, especially for new entrants who are still learning how to price, budget, and smooth their workload. Education should speak to household budgeting, debt management, and insurance basics, not only to long horizon investing theory. The simpler the process and the clearer the language, the more people will follow the rule in spirit rather than only in letter.

Independent workers should examine this debate through the lens of their own cash cycles. Ask how quickly clients pay, how much of each month’s spending is fixed, and how large a buffer is available for tax season or a slow quarter. If a contribution is taken from each receipt, can your current rates and expenses absorb it without sending you to a credit card by the third week of the month. If you already carry high interest debt, how will a mandatory percentage interact with your payoff plan. These are not abstract questions. They decide whether a mandate helps you build wealth or only moves numbers around while stress rises.

One practical way to frame the tradeoff is to think in layers. The first layer is stability, which covers essential living costs and a small emergency buffer. The second layer is momentum, which includes the equipment, software, skills, and marketing that increase your earning power. The third layer is future income, which includes EPF and other retirement savings. A mandate asks you to protect the third layer earlier and more consistently than many freelancers would choose on their own. That is easier when the first layer is steady and the second layer is funded at a basic level. If the first layer is fragile or the second is starved, the rule can feel like a tax on survival or on growth. The right design acknowledges this by linking contributions to cash in hand and by allowing the rate to rise gradually as the business matures.

Fairness deserves a careful look. Employees do not build retirement savings alone. Employers add a share on top of wages. In a freelance context, that extra share must come from the price charged to clients. If the market is competitive, passing on the cost may be difficult in the short run. Over time, as an EPF mandatory for freelancers framework becomes normal, rates can adjust to reflect the new baseline, just as markets adjust to changes in fuel costs or taxes. The transition period is the tricky part. Temporary credits, reduced starter rates, or targeted matching can soften the shift. Freelancers who already price to include retirement saving will feel less pressure than those who set prices only to cover rent, transport, and software.

There are quieter benefits that are easy to miss. Every decision you automate is a decision you no longer need to re negotiate with yourself, and that freed attention is valuable. If the contribution simply happens when a payment lands, you no longer waste energy deciding whether this month is the month to pause or to double up. That predictability also supports planning for big life goals. Mortgages, education, and caregiving are easier to support when your retirement base grows in the background rather than in sporadic jumps. Many people equate freedom with maximum optionality. With money, freedom often comes from a few sturdy structures that reduce the number of times you need to exercise willpower. A well designed mandate can be one of those structures.

There are risks and unintended consequences to guard against. If the contribution rate ignores the reality of high interest debt, people may do the right thing on paper and the wrong thing for net worth. If penalties for non compliance are severe, vulnerable workers may withdraw from formal channels, hurting both tax compliance and access to benefits. If funds are locked too tightly without sensible emergency alternatives, households may turn to expensive credit the moment life interrupts income. None of these outcomes is inevitable. They are warnings that exemptions, hardship rules, and complementary short term savings tools are essential companions to any compulsory scheme. Long term prudence should not be confused with short term rigidity.

Comparisons to other systems can be helpful without becoming copy and paste. Automatic enrolment in other countries works because contributions are small, regular, and connected to payroll. Freelancers do not have payroll in the same way, so the rails must be different. The lesson to borrow is the primacy of the default. Tie contributions to the moment cash arrives, make the process invisible once set up, and reduce paperwork at every step. Where possible, let platforms do the maths and the deduction, then deliver clear statements that show progress without demanding administrative labor from the worker.

While policy discussions continue, freelancers do not need to wait to build a personal default. Choose a small percentage to divert from each invoice once the funds clear. Automate the transfer on the same day, so the habit does not depend on memory or mood. Keep a modest cash buffer so the habit survives an uneven month. Review your pricing so retirement saving is a line item, not an afterthought squeezed into the margins. If you carry expensive debt, split new inflows between debt reduction and long horizon saving rather than stopping one to do the other. This stabilises your budget while compounding begins its slow work. These small, unremarkable decisions create a rhythm that makes any future EPF mandatory for freelancers framework feel familiar instead of intrusive.

It is useful to consider who gains most and who may struggle. Mandates tend to help those who value retirement security but find consistency difficult, either because income is irregular or because mental bandwidth is limited. Younger freelancers benefit if the rate starts low and steps up, giving compounding time to work. Households with variable income can benefit if the rule flexes with receipts and allows pauses without stigma during genuine hardship. Those already saving at healthy levels will see less change, apart from the convenience of formalised rails. The people at greater risk include new entrants with thin cash flow, families juggling caregiving costs, and small creative businesses that must reinvest heavily in tools and training. These groups need thoughtful safeguards, including phased rates, income floors, temporary relief during downturns, and clear coordination between retirement saving, cash buffering, and basic protection cover.

The debate should not collapse into a binary choice between compassion and discipline. The goal is to design a system that turns volatility into continuity without punishing people for building their own livelihoods outside traditional employment. An EPF mandatory for freelancers framework can raise retirement adequacy, normalise saving across worker types, and reduce decision friction. It can also strain budgets, create compliance fatigue, and produce perverse outcomes if it ignores debt, emergencies, and the messy cadence of freelance income. The difference lies in the details. If contribution timing matches cash flow, if rates protect low earners through floors and phase ups, if rails are simple and education is practical, the system can deliver more security with less friction. If those elements are missing, the rule will look sensible on paper while undermining resilience in practice.

A calm conclusion helps. Independent work is not a fad, and retirement is not optional. The country benefits when more citizens age with assets, and households benefit when their future does not rest entirely on hope. A carefully designed EPF mandatory for freelancers policy can serve both aims. Until such a policy arrives, every freelancer can create a personal version by automating a small percentage from each paid invoice, by pricing with the future in mind, by keeping a simple emergency buffer, and by securing basic insurance that protects the ability to keep contributing. None of these steps is glamorous. All of them are cumulative. Over time they replace anxiety with steadiness. Should a mandate come into force, the habit will already be in place. If it never does, the habit itself will have done the work that policy aims to accomplish, which is to turn intention into a life that feels both freer and safer.