Lee said the proposed wage floor could substantially compress companies’ existing wage structures, as employers would likely need to adjust salaries for operators, supervisors, technicians, skilled workers and others in higher wage bands.
PETALING JAYA: The proposed RM3,100 minimum wage would represent an 82.4% increase from the current RM1,700 rate and could undermine Malaysia’s competitiveness, hurt labour-intensive industries and place significant financial pressure on businesses, particularly small and medium enterprises (SMEs), says the Federation of Malaysian Manufacturing (FMM).
FMM president Jacob Lee Chor Kok said the federation supported efforts to raise Malaysian workers’ incomes as the country moved towards a high-income economy.
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However, he said the proposed increase must be assessed against productivity, business affordability, inflation, employment opportunities and Malaysia’s regional competitiveness.
He said the RM1,400 increase could not be considered in isolation as its impact would extend beyond workers currently earning the minimum wage.
“The proposed RM3,100 minimum wage would be close to the median monthly wage of RM3,167 earned by formal-sector employees in December 2025,” he said in a statement today.
Lee said the proposed wage floor could substantially compress companies’ existing wage structures, as employers would likely need to adjust salaries for operators, supervisors, technicians, skilled workers and others in higher wage bands.
This would be necessary to maintain meaningful differences based on skills, experience, performance and responsibilities, he said.
“As such, the actual increase in employers’ payroll costs could be considerably greater than the direct adjustment in the minimum wage,” he said.
Lee said SMEs and labour-intensive industries could be particularly affected by higher payroll costs, potentially discouraging investment, reducing job opportunities and pushing up prices as businesses passed on additional costs to consumers.
He also described the proposed increase as unprecedented compared with previous adjustments to Malaysia’s statutory minimum wage.
Since its introduction in 2013, the minimum wage has increased from RM900 in Peninsular Malaysia and RM800 in Sabah and Sarawak to RM1,700 nationwide in 2025.
Lee said businesses were still adjusting to the current rate, which was fully implemented only in August 2025.
He said stronger economic growth did not necessarily mean all businesses, particularly SMEs and labour-intensive firms, could absorb an 82.4% increase amid higher operating costs, regional competition and uneven market demand.
The proposed wage floor would also be significantly higher than minimum wages in several competing ASEAN manufacturing locations, he said.
Lee said Vietnam’s 2026 regional minimum wage ranged from about RM570 to RM820 a month, while Thailand’s minimum wage was approximately RM1,080 to RM1,280 based on 26 working days.
In Indonesia, provincial minimum wages varied from about RM560 in West Java to RM1,390 in Jakarta, while major industrial areas such as Bekasi and Karawang had minimum wages of about RM1,430 to RM1,450.
The prevailing non-agricultural minimum wage in Metro Manila was approximately RM1,300 a month based on 26 working days, with lower rates applying in many other parts of the Philippines, he said.
“Against this regional backdrop, the proposed RM3,100 minimum wage would be more than twice the wage floor in many competing ASEAN manufacturing locations,” Lee said.
He said the wage gap could weaken Malaysia’s competitiveness, particularly in labour-intensive manufacturing.
FMM called for the minimum wage review to remain under the National Wages Consultative Council (NWCC), taking into account the cost of living, inflation, productivity, employment conditions, business capacity and regional competitiveness.
Lee said any further increase, if supported by evidence, should be moderate, gradual and predictable, with sufficient notice for businesses to plan and improve productivity.
He also called for wage growth to be supported by skills development and productivity-linked incentives, while urging the Government to create conditions that would enable businesses to sustainably pay higher wages.
Under its Budget 2027 proposals, FMM had called for greater fiscal space for productive businesses, particularly SMEs, to invest in automation, smart manufacturing, digitalisation, artificial intelligence, research and development, workforce development and higher-value activities.
Lee said a more competitive SME tax framework, reduced regulatory burdens, accessible financing and stronger incentives for technology and skills development would help raise productivity.
“The sustainable path towards better wages is through productivity, skills, investment, innovation and profitable business growth,” he said.
