KUALA LUMPUR – Micro, small and medium enterprises (MSMEs) will be temporarily exempted from any new minimum wage increase after the Cabinet agreed to consider the financial challenges faced by smaller businesses.
Entrepreneur and Cooperatives Development Minister Steven Sim Chee Keong said the decision was made after taking into account rising operating costs and economic pressures affecting local businesses.
“I raised the issue of minimum wages at today’s Cabinet meeting.
“The Cabinet agreed that workers’ wages need to continue to be increased. However, we also need to protect local businesses, particularly micro, small and medium enterprises (MSMEs) that are currently facing operating cost pressures and economic challenges,” he said in a statement today.
Sim said the Government would focus on alternative measures to improve wages among MSME workers, including providing wage subsidies under the Progressive Wage Policy.
“Taking into consideration the capacity of this sector, the Cabinet has agreed that MSMEs will be exempted from the new minimum wage increase for the time being,” he added.
He said the approach would allow wage growth to be aligned with improvements in productivity, while ensuring MSMEs remain competitive.
“The Government will adopt other approaches to help increase workers’ wages in the MSME sector, including support through wage subsidies under the Progressive Wage Policy, so that wage increases move in tandem with increased productivity,” he said.
Sim said the Government aimed to strike a balance between protecting workers’ welfare and ensuring the sustainability of local businesses.
“Our goal is clear: to safeguard workers’ welfare by ensuring fairer wages, while enabling MSMEs to remain competitive, continue to grow and create employment opportunities,” he added.
The Cabinet’s decision comes as the Government continues its review of the current RM1,700 minimum wage, which came into effect in February 2025 and became mandatory for all employers in August 2025.
Human Resources Minister Datuk Seri R. Ramanan Ramakrishnan previously said the review would consider factors including the Poverty Line Income, median wages, Consumer Price Index, labour productivity and unemployment rate.
The review followed calls from labour groups for wages to better reflect the increasing cost of living.
UNI-Malaysia Labour Centre (UNI-MLC) president Datuk Mohamed Shafie BP Mammal said rising expenses for essentials such as food, housing, transport and education had placed greater pressure on workers, especially those from lower-income groups.
However, employers have cautioned against a significant increase in the wage floor.
Federation of Malaysian Manufacturers (FMM) president Jacob Lee Chor Kok rejected the Malaysian Trades Union Congress’ proposal to raise the minimum wage to RM3,100, saying the proposed increase of more than 80% from the current rate could place particular strain on small and medium enterprises.
FMM said any adjustment to the minimum wage should take into account factors such as productivity, employers’ ability to pay, export competitiveness and inflation.
The federation also warned that a sharp increase without corresponding productivity gains could affect Malaysia’s competitiveness, particularly among labour-intensive industries.
Under the National Wages Consultative Council Act, the next mandatory minimum wage review is due in February 2027. - September 30, 2026
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