PETALING JAYA: Employer groups have broadly welcomed the government’s move to raise the minimum wage to RM2,000, but warned that businesses will need productivity support, clear rules and transition measures to manage higher labour costs.
The Malaysian Employers Federation (MEF), Small and Medium Enterprises Association (Samenta) and the Malaysian Industrial Commercial Service Employers Association (MICSEA) said the June 2027 timeline and exemption for micro, small and medium enterprises (MSMEs) with annual sales below RM50 million would help cushion the impact on smaller firms.
Samenta national president Datuk William Ng said the increase from RM1,700 to RM2,000 was not the only cost pressure facing businesses, especially labour-intensive sectors such as manufacturing, food and beverage, and construction.
He said companies were already dealing with higher utility tariffs, supply uncertainties and compliance overheads, while the revised wage floor would create a ripple effect as supervisory and technical workers would also expect pay adjustments.
“In labour-intensive factories, payroll costs could account for between 20% and 30% of total production costs.
“At typical net margins of between 5% and 7%, the increment will wipe out the profits unless the manufacturer increases costs to compensate for the increment,” he told SunBiz.
Ng said the impact would be particularly challenging for contract manufacturers, as payroll costs usually do not qualify for pricing variations.
For F&B operators, he said price adjustments would be inevitable, although the SME exemption would cushion the full impact.
Ng said the turnover exemption below RM50 million was sensible and pragmatic, as seven in 10 SMEs had less than six months of cash reserves.
However, he said Samenta hoped the SME definition would be reviewed soon, with the threshold raised to RM100 million so high-growth SMEs would not limit their expansion to remain below the current RM50 million cap.
Ng said the proposed RM2,500 starting baseline for graduates and semi-skilled workers was positive in curbing regional brain drain and drawing young talent out of gig work, but productivity remained the missing link.
Meanwhile, MEF senior adviser for government, media and international engagement Datuk Dr Syed Hussain Syed Husman said the federation welcomed the proposed RM2,000 minimum wage as part of broader efforts to improve workers’ incomes.
“A minimum wage must provide a better livelihood for workers without placing the livelihoods of other workers at risk.
“For employers, a wage increase is not simply an adjustment to the basic salary. It also affects statutory contributions, overtime payments and other employment-related costs,” he said.
Syed Hussain said employers should be given clear eligibility criteria and implementation guidelines, including how the RM50 million annual sales threshold would be assessed.
He said sustainable wage growth should also be supported by stronger productivity, skills development, digitalisation and measures to reduce the cost of doing business, particularly for MSMEs.
Echoing the sentiment, MICSEA president YK Lai said the association supported efforts to improve workers’ income, but warned that MSMEs face different financial realities than large companies.
“A stronger must be supported by a stronger and sustainable employer,” he said.
MISCSEA said the exemption for firms below RM50 million turnover was an important safety net, but warned of a possible “cliff-edge” effect for companies just above the threshold.
It proposed a temporary wage-related tax rebate or wage offset in the first year of implementation for firms with turnover of RM50 million to RM100 million.
MICSEA also called for a 1:1 matching grant for productivity and automation, covering AI-powered systems, digital accounting and payroll, automated point-of-sale systems, self-service technologies and workforce management platforms.
MICSEA said the proposed RM2,500 starting salary for graduates and semi-skilled workers should be linked to job complexity, TVET or skills certification and actual productivity, instead of being applied as a blanket requirement across all positions.
Prime Minister Datuk Seri Anwar Ibrahim, when tabling Budget 2027 yesterday, announced that the minimum wage would increase from RM1,700 to RM2,000 effective June 2027.
He said MSMEs with annual sales below RM50 million would be exempted from the new rate to allow them time to adjust their business models.
Anwar also announced a RM2,500 minimum monthly wage for semi-skilled workers and graduates as part of reforms to the workers’ income framework.
