KUALA LUMPUR (Oct 18): The Malaysian Employers Federation (MEF) has cautioned employers against using the revised minimum wage policy of RM1,700 as an excuse to offer only the base pay to their workers.

MEF president Datuk Dr Syed Hussain Syed Husman said in a statement on Friday following the policy’s announcement in Budget 2025 that the new minimum wage should be regarded as a starting point rather than a benchmark.

“The MEF urges employers which can afford higher salaries to pay above the minimum wage. No one should use the minimum wage as an excuse to pay based on the minimum wage,” Syed Hussain said.

“It is only ethical and good practice for employers to remunerate their employees based on their employees’ and their businesses’ performances,” Syed Hussain added.

Prime Minister Datuk Seri Anwar Ibrahim, who is also the finance minister, said in his speech during the tabling of Budget 2025 on Friday that the revised minimum wage policy is set to come into effect on Feb 1, 2025, and will apply to employers with at least five employees.

Smaller businesses, or micro-enterprises with fewer than five employees, meanwhile, will be granted a grace period of six months to implement the new minimum wage.

Anwar added that the Ministry of Human Resources will issue guidelines on the minimum wage for all employment sectors to ensure clarity and compliance.

Notably, the last adjustment to the minimum wage was made on May 1, 2022, raising the rate to RM1,500 for most employers, except micro-businesses. For the smaller entities, the implementation was deferred to Jan 1, 2023, at which point the RM1,500 minimum wage became applicable nationwide.

SMEs fear revised minimum wage will strain operations

In a separate statement, the Small and Medium Enterprises Association (Samenta) Malaysia said the revised minimum wage could “badly affected” the business of micro, small, and medium enterprises (MSMEs), which are already dealing with compressed margins.

Samenta said the wage hike could disrupt business operations, especially in less developed regions like Sabah and Sarawak, potentially leading to job losses. The association urges the government to consider regional wage variations or even “to do away” with the minimum wage for certain states to accommodate differing economic conditions.

“In urban centres, such as the Klang Valley, southern Johor and Penang, median wages are already far higher than even the RM1,700 announced. Beyond job loss, we will see further wage compression among the middle 40% income group (M40), with foreign workers being the biggest beneficiary of the revised minimum wage,” Samenta said.

In addition, Samenta also noted that automation is not an “automatic answer for SMEs coping with severe margin compression”, which will now be made worse by the minimum wage increment.

The association said most multinational companies outsource labour-intensive tasks, such as cleaning, maintenance and logistics, to SMEs, where headcount reductions are not easily achievable.

Moreover, over 80% of SMEs operate in the services sector, including retail and food and beverage, where digitalisation has limited the capacity to replace workers.

“While we can understand the need to raise more revenue for the government, the 2% tax on dividends will hurt SME owners disproportionately,” Samenta said, referring to the 2% dividend tax introduced in the budget for the year of assessment 2025 on annual dividend income exceeding RM100,000 received by an individual shareholder.

“We must remember that in SMEs, the bulk of dividends go to the owners, not some silent or random investors as in the case of listed companies,” the association added.