Employer groups warn RM3,100 minimum wage could put MSMEs under pressure

Employer groups have cautioned against a proposal to use RM3,100 (US$767.12) as Malaysia’s new statutory minimum wage, warning that a sharp increase in labour costs could put micro, small and medium enterprises (MSMEs) under pressure and lead to weaker hiring.

The Malaysian Trade Union Congress (MTUC) proposed RM3,100 as a reference point for the new minimum wage, citing the rising cost of living.

Malaysian Employers Federation (MEF) president Datuk Dr Syed Hussain Syed Husman said that while ensuring employees earned a decent income was a legitimate objective, applying the RM3,100 benchmark across the private sector could have significant implications for businesses, particularly MSMEs. He stressed that a “living wage” benchmark and a “legal minimum wage” served different purposes. While a living wage is intended to cover basic living costs, the statutory minimum wage represents the lowest level of pay required by law.

Malaysia’s current statutory minimum wage is RM1,700 (US$420.68).

Syed Hussain noted that participating government-linked organisations (GLCs) and government-linked investment organisations (GLICs) had adopted RM3,100 as a living wage benchmark. “These two concepts should not be treated as automatically interchangeable,” he said.

For employers currently paying employees below RM3,100, a significant increase in the statutory minimum could also create wage compression as organisations seek to maintain salary differentials across their workforce.

“This creates a multiplier effect across the entire payroll rather than affecting only the lowest-paid employees,” he said.

Many MSMEs were already operating on thin margins amid rising utility, financing and logistics costs, he added. A sharp increase in labour costs could therefore lead employers to freeze recruitment, reduce overtime, delay expansion, or accelerate automation as cost-management measures.

Syed Hussain also said policies designed for GLCs and GLICs, which operate under different financial structures, should not automatically be applied to the wider private sector. MEF supports progressive and productivity-driven wage growth, he said, adding that the National Wages Consultative Council remained the appropriate forum for determining minimum wage policy.

READ MORE: Malaysia reviews RM1,700 minimum wage as cost-of-living mount

SME Association of Malaysia president Dr Chin Chee Seong similarly warned that raising the minimum wage benchmark to RM3,100 would be financially unsustainable for many SMEs. He noted that organisations were still adjusting to the recent increase in the minimum wage to RM1,700 while facing higher costs for raw materials, rental and taxes.

Moving from RM1,700 to RM3,100 would represent an increase of more than 80%, while employees earning between RM2,000 and RM3,000 could also expect their salaries to be adjusted upwards, he said.

“The total impact on an SME’s payroll could be very substantial,” Chin said.

He warned that higher labour costs could force organisations to downsize or freeze hiring, with young and lower-skilled employees potentially among those most affected. Instead, the government should support SMEs in improving productivity through digitalisation, AI adoption and access to affordable financing, Chin said.

“We need sustainable wage growth, not wage increases that could ultimately result in fewer jobs, higher prices and more SMEs struggling to survive,” he said, reported New Straits Times.