MSMEs exempted from further minimum wage increases for now

KUALA LUMPUR, Sept 30 — The ACCCIM has welcomed the government's decision to temporarily exempt micro, small and medium enterprises (MSMEs) from an upcoming minimum wage increase, providing relief to approximately 1.3 million businesses. ACCCIM president Datuk Ng Yih Pyng highlighted that MSMEs have faced multiple cost hikes in recent years against a backdrop of a challenging business environment and increased competition from foreign firms. The exemption will offer timely financial relief to these 1.3 million MSMEs, Ng stated.

The Cabinet agreed to this exemption, as announced by Entrepreneur and Cooperatives Development Minister Steven Sim during a recent cabinet meeting. Ng emphasized the importance of balancing worker income improvements with the viability of smaller businesses, warning that a one-size-fits-all wage increase could lead to staff cuts or closures for some small enterprises. He advocated for a wage system that considers productivity, performance, sector-specific financial capacity, and broader economic conditions.

ACCCIM also endorsed a productivity-linked wage system, which ties worker pay more closely to output, performance, or company profits, rewarding productivity and aligning employee incomes with company profitability. The chamber further supports the government's consideration of additional wage-raising methods for MSME workers, such as subsidies under the Progressive Wage System (PWS).

The PWS, a voluntary incentive-based program, has already benefited 51,363 workers, exceeding its initial target of 50,000 workers, with over RM73 million disbursed, primarily to entry-level and non-entry-level employees.

ACCCIM reiterated its call for a tiered regional minimum wage system instead of a single nationwide rate, arguing that wage levels should account for regional differences in living costs, socioeconomic conditions, and economic development. A regional approach could allow for higher wages in more expensive areas while alleviating pressure on low-margin businesses in economically weaker regions.

Currently, Malaysia's minimum wage is RM1,700 a month, introduced on February 1, 2025 for businesses with five or more employees and taken full effect for all employers by August 1, 2025.