Sim: Measure will keep businesses competitive while protecting workers
KUALA LUMPUR: Micro, small and medium enterprises (MSMEs) will be exempted from the new minimum wage rate for now following a Cabinet decision.
Entrepreneur Development and Cooperatives Minister Steven Sim (pic) said the Cabinet agreed that wages in Malaysia needed to continue rising, while taking into account the ability of local businesses, particularly MSMEs, to cope with higher operating costs and current economic challenges.
“Taking into account the capacity of this sector, the Cabinet agreed that MSMEs will be exempted from the new minimum wage increase for now,” he said in a statement yesterday.
Sim said the government would instead use other measures to help raise wages for workers in the MSME sector.
These include wage subsidies under the Progressive Wage Policy, with wage increases tied to improvements in productivity.
“Our goal is clear: workers’ welfare is protected through more reasonable wages while MSMEs remain competitive so they can continue to grow and create jobs,” he said.
The new minimum wage rate has yet to be announced.
Human Resources Minister Datuk Seri R. Ramanan said on Tuesday that claims it would be raised to RM2,000, RM2,100 or RM2,200 were premature.
Ramanan said various groups, including unions and non-governmental organisations, had proposed rates as high as RM3,000 or RM4,000.
However, he said any adjustment would require a formula and a comprehensive study of its impact, including on inflation.
“Even an increase of RM10 has an impact,” he said.
The current nationwide minimum wage of RM1,700 took effect on Feb 1 last year for employers with five or more workers.
It was extended to employers with fewer than five workers from Aug 1 last year.
Malaysia introduced its national minimum wage in 2013 at RM900 a month in Peninsular Malaysia and RM800 in Sabah, Sarawak and Labuan.
It was raised to RM1,000 in the peninsula and RM920 in Sabah, Sarawak and Labuan in 2016 before a nationwide rate of RM1,100 was introduced in 2019.
The minimum wage rose to RM1,200 in major cities in 2020 and RM1,500 nationwide in May 2022.
Earlier, Sim had said businesses should not be left to shoulder the cost of higher wages alone and that the government should help employers, particularly MSMEs, improve efficiency and even receive wage subsidies so they could afford to pay workers more.
He said Malaysia needed higher wages to attract and retain talent but warned against legislating increases beyond what businesses could bear.
“If we push the market beyond its capacity, businesses may go out of business,” he said at the EY Entrepreneur Of The Year 2026 Malaysia Top Nominees Announcement on Tuesday.
“If wages rise without productivity gains, businesses will eventually pass the higher costs on to consumers, and that leads to inflation.
“But if productivity rises and wages do not follow, then we will lose talent,” he said.
Sim cited the Progressive Wage Policy, introduced during his tenure as Human Resources Minister, as an example of the government and employers sharing the cost of raising wages.
Under the policy, participating employers voluntarily raised salaries while the government subsidised part of the increase.
