Micro, small, and medium enterprises (MSMEs) in Malaysia will be exempt from the upcoming minimum wage increase, following a decision by the Cabinet aimed at balancing wage growth with the economic capacity of these businesses. Entrepreneur Development and Cooperatives Minister Steven Sim stated that while wage increases are necessary to improve workers’ livelihoods, the government acknowledges the challenges MSMEs face amid rising operating costs and broader economic uncertainties.

“The Cabinet agreed that MSMEs will be exempted from the new minimum wage increase for now,” Sim said, emphasizing that alternative measures would be used to support wage growth in this sector. These include wage subsidies under the Progressive Wage Policy, where salary increments are linked to productivity improvements to ensure sustainable wage growth without overburdening employers.

Sim highlighted the government's objective to protect workers’ welfare by ensuring reasonable wages while maintaining the competitiveness of MSMEs, which play a key role in job creation and economic development. He cautioned against imposing wage hikes beyond what businesses can sustain, warning that drastic increases without corresponding productivity gains could lead to higher consumer prices or business closures.

The exact new minimum wage rate has not yet been announced. Human Resources Minister Datuk Seri R. Ramanan remarked that claims suggesting an increase to RM2,000, RM2,100, or RM2,200 were premature. He noted that proposals from various groups, including unions and non-governmental organizations, have ranged as high as RM3,000 to RM4,000 monthly. However, any adjustment will require a formula-based approach and a comprehensive study of potential impacts, such as inflation.

Malaysia’s current nationwide minimum wage stands at RM1,700 and has been in place since February last year for employers with five or more employees; it was extended to smaller employers from August. The national minimum wage was first introduced in 2013, with gradual increments over the years, including regional variations and adjustments for major cities.

Sim reiterated that the government should assist employers, particularly MSMEs, in improving productivity and efficiency to support wage increases, rather than leaving businesses to absorb the full cost. He cited the Progressive Wage Policy, implemented during his tenure as Human Resources Minister, as a successful example of shared cost burden between the government and employers, where the government subsidizes part of wage increases in exchange for voluntary employer participation.

This approach aims to strike a balance between raising wages to attract and retain talent and avoiding negative effects on business sustainability and inflation. Sim underscored that without productivity growth, wage hikes might push up prices, while stagnant wages risk losing skilled workers. The government’s current stance reflects an attempt to navigate these competing priorities amid evolving economic conditions.