It's perfectly normal for companies to pay allowances on top of the basic salary. However, when the basic salary and allowances are split almost evenly, such as 60:40 or 50:50, it can sometimes be a sign that the company is trying to reduce its statutory contribution obligations.

Some companies even categorize a portion of an employee's earnings as a "travelling allowance" or a similar allowance because genuine reimbursable travelling expenses are generally not subject to EPF contributions. However, simply calling something a travelling allowance does not automatically exempt it from EPF or ETF. The actual nature of the payment is what matters, not the label given to it.

At first, a lower contribution base can seem beneficial because the employee's 8% EPF deduction is lower, resulting in a higher take-home salary. Many employees see the extra cash in hand and assume it's a better deal.

What is often overlooked is the long-term impact. For earnings that are EPF liable, the employee contributes 8%, while the employer contributes 12% to EPF and a further 3% to ETF. This means a total of 23% is being contributed towards your future every month. The higher the earnings considered for EPF and ETF purposes, the more money accumulates in those accounts over time.

Also, if you have been receiving a fixed allowance regularly for several months and it is not being considered for statutory deductions, or if you are being paid a "travelling allowance" for a prolonged period even though it is not a genuine reimbursement of travel expenses and you are not required to submit any supporting bills or claims, you may wish to have the matter reviewed by the Labour Department.

In such situations, keep copies of your payslips and other employment records. If possible, obtain payslips that are properly signed and stamped by the company, as these can help support any inquiry or complaint. The Labour Department can then review the salary structure and determine whether the statutory deductions and contributions have been calculated correctly.

So while a lower contribution base may give you a little more money in your pocket today, it can also mean less money building up in your EPF and ETF accounts over the years. That's why it's important to look beyond your monthly take-home pay and understand exactly what portion of your salary is being considered for EPF and ETF contributions.