The Small and Medium Enterprises Association of Malaysia warns that an across-the-board minimum wage increase could significantly compress SMEs’ profit margins.
The Small and Medium Enterprises Association of Malaysia (Samenta) says that rather than imposing an across-the-board increase, the government could base the wage hike on business size and geographical location.
Meanwhile, the Malaysian Employers Federation (MEF) wants any increase to be linked to productivity.
On Tuesday, human resources minister R Ramanan said the government was reviewing a proposal to raise the minimum wage from its current level of RM1,700 per month.
However, he said a final decision on whether to maintain or raise the amount would be made by the National Wages Consultative Council.
Samenta president William Ng said an across-the-board wage increase would significantly squeeze SMEs’ profit margins.
He said small businesses would struggle to absorb the increase in operational costs.
“Larger companies, MNCs, GLCs and SMEs in the Klang Valley will be able to absorb the increase easily, as the median wage for larger companies and SMEs in market centres is already far higher than the current minimum wage,” he told FMT.
“But micro-enterprises and businesses operating in smaller towns or rural areas, where the cost of living and business volumes are vastly different, will be severely hit.”
Ng said that in the medium term, businesses would be forced to pass the cost of the wage increase on to consumers. This would fuel inflation, counteracting the government’s efforts to mitigate it.
He said that if a wage increase was necessary, the government should help SMEs lower other operating costs by reducing regulatory fees or offering targeted rebates on utility tariffs.
In his announcement on Tuesday, Ramanan said the review would take into consideration factors such as the poverty line and median wage.
He said this was to gauge the basic needs of workers and the financial capacity of employers, as well as inflation, labour productivity and the unemployment rate.
The minimum wage was raised to its current level in August 2025, up from RM1,500 previously. It applies to all workers in Malaysia, except domestic workers.
MEF president Syed Hussain Syed Husman said that while they fully supported raising workers’ incomes, such increases must be sustainable.
A wage that employers cannot afford to sustain will ultimately threaten the very jobs it is intended to improve, he told FMT.
“The government, employers and employees should therefore work towards a productivity-driven wage system, where businesses become more productive, workers acquire higher-value skills, and higher productivity translates into higher and more sustainable wages,” he said. - FMT
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