Cabinet exempts MSMEs from new minimum wage hike, for now

Micro, small and medium enterprises (MSMEs) will be exempted from the new minimum wage increase for the time being, following a cabinet decision on the matter today.

Entrepreneur Development and Cooperatives Minister Steven Sim said the government would instead take other approaches to help raise workers’ wages in the MSMEs.

These include wage subsidy support under the progressive wage policy, which is to ensure wage increases move in tandem with productivity gains.

"The cabinet agreed that workers’ wages need to continue increasing. However, we also need to protect local businesses, particularly MSMEs, which are facing pressure from operating costs and prevailing economic challenges.

"Our goal is clear: to safeguard workers’ welfare through fairer wages, while ensuring that MSMEs remain competitive so they can continue to grow and generate employment opportunities," Sim said.

Addressing a post-cabinet meeting press conference, government spokesperson Fahmi Fadzil (below) said Prime Minister Anwar Ibrahim had requested that several aspects of the minimum wage increase be studied more thoroughly.

This, the communications minister said, is because Putrajaya wants to ensure comprehensive evaluation across timeframes, groups, and sectors prior to the rule’s implementation.

He added that a likely date for further announcements on the matter would be on Oct 9 when the Budget 2027 is tabled in Parliament.

Exclude migrant workers

Yesterday, former finance minister Lim Guan Eng said the government is expected to announce an increase in the RM1,700 minimum wage when Budget 2027 is tabled, citing the need to address a gap between workers’ wages, productivity, and corporate profits.

He said the prospect of a higher minimum wage raised concerns among local businesses, particularly MSMEs, which already face competition from cheaper overseas manufacturers, as well as higher taxes and compliance costs amid a relatively sluggish economic environment.

In his Facebook statement, Lim (below) then repeated his call to exclude migrant workers from any minimum wage increase, arguing that this would protect Malaysian workers and businesses.

He also called for abolishing the two percent Employees Provident Fund (EPF) contribution for migrant workers, arguing it placed an additional burden on local employers and MSMEs.

Union slams Guan Eng’s ‘idiotic’ wage, EPF call

Earlier, Sarawak Bank Employees' Union (SBEU) branded Lim's call as “idiotic”, with chief executive officer Andrew Lo saying it would effectively encourage employers to stop hiring locals and instead employ lower-paid foreign workers.

"If Lim really wants to help businesses, he should push for higher wages so that it will in turn push investments in technology and higher production instead of being forever addicted to a low-wage economic model.

"Higher wages will lead to an increase in domestic consumption and more business for employers," Lo, who is also the deputy president of the Learning Resources Association (LLRC), said.

"SBEU, Labour Solidarity and Learning Resources Association (LLRC) say that it is idiotic for Lim to call for excluding foreign workers from an increase in minimum wage," he added.

Lo (below) said that employers must also "stop being cry babies" every time minimum wages are reviewed.

He also took a swipe at a call made by Sarawak United Peoples' Party's Batu Kitang secretary Amy Tnay for asking the government to first strengthen the economy and ensure businesses are capable of raising wages sustainably before imposing further pressure on wages.

"Increasing wages will boost the economy, and that is because workers spend 100 percent of what they earn. Profits of business are not fully taxable with all sorts of exemptions and they may be invested in non-productive and speculative sectors or may even be invested overseas," Lo said in response.

PSM deputy chairperson S Arutchelvan meanwhile said workers deserved a living wage, arguing that warnings that higher minimum wages would cause businesses to collapse or relocate had been repeatedly made whenever wages were increased.

Echoing Lo, he said this could create a “race to the bottom” by incentivising employers to hire cheaper foreign labour. Arutchelvan argued that this would then weaken the bargaining power of both Malaysian and migrant workers rather than protect local workers.

"How many times must workers hear that businesses will collapse whenever their wages are increased? This is becoming another case of crying wolf. The economy cannot be built on the assumption that workers must remain cheap in order for businesses to survive.

"Workers should not be divided by nationality and then made to compete against one another for cheap wages," he added.

MTUC: It's discrimination

Similarly, the Penang chapter of the Malaysian Trades Union Congress (MTUC) also criticised Lim's call, saying it amounted to discriminatory treatment of migrant workers.

In a statement, its representative K Veeriah cited Article 8(1) of the Federal Constitution, as well as a Federal Court ruling which affirmed that workers should be treated fairly and equally regardless of whether they are Malaysians or foreigners.

He also pointed to provisions under the Employment Act 1955 and Industrial Relations Act 1967, saying existing laws provide protection against discrimination and recognise collective agreements covering migrant workers.

"From the Universal Declaration Of Human Rights, to the International Covenant on Economic, Social and Cultural Rights to the Convention on Elimination Of All Forms Of Discrimination Against Women one fact stands unchallenged - there is no room for any form of discriminatory employment practices against migrant workers! Full stop! Period!" Veeriah (above) said.

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