PETALING JAYA: The move to exempt smaller businesses from the RM2,000 minimum wage could help ease financial pressure on employers, but improving productivity remains crucial to ensuring workers eventually benefit from higher wages, economists say.
They said the exemption would give smaller businesses time to adjust their operations without compromising jobs, although annual sales alone may not accurately reflect an employer’s financial capacity.
Economist Prof Emeritus Dr Barjoyai Bardai said smaller businesses, particularly those in retail, food and beverage, and traditional manufacturing, often operated on narrow profit margins.
“The exemption gives eligible smaller businesses additional room to adjust their pricing, improve productivity, reorganise operations and review their business models,” he said.
He said the additional costs could be substantial, citing a small restaurant employing 10 workers earning RM1,700 each.
Raising their salaries to RM2,000 would increase its wage bill by RM3,000 monthly, or RM36,000 annually, excluding additional employer contributions, he added.
However, Barjoyai stressed that annual sales did not necessarily reflect profitability, as businesses with similar revenue could have vastly different operating expenses.
“A company with RM10mil in annual sales may have very low profit margins, while another company with the same sales may be highly profitable.”
He said higher wages could stimulate domestic consumption, particularly as lower-income workers tended to spend additional earnings on daily necessities.
Nevertheless, he said businesses would need support through affordable financing, digitalisation and training to improve productivity and sustain higher wages.
During Friday’s Budget 2027 tabling, Prime Minister Datuk Seri Anwar Ibrahim announced that the minimum wage would increase from RM1,700 to RM2,000 beginning in June next year, benefiting more than four million workers.
However, micro, small and medium enterprises with annual sales below RM50mil would be exempted to allow them time to adjust their business models.
Meanwhile, Centre for Market Education chief executive officer Dr Carmelo Ferlito said the exemption would help smaller businesses manage their costs, although it would not necessarily improve their productivity.
He said smaller businesses could still face pressure to raise wages to retain workers attracted by higher salaries at larger companies.
“The pressure on MSMEs is reduced, not eliminated,” he said.
Ferlito also questioned the use of annual sales as the determining factor, adding that businesses with high turnover could still operate on thin margins.
He cautioned that the RM50mil threshold could discourage business expansion or encourage companies to restructure to remain eligible for the exemption.
