The Malaysian Industrial Commercial Service Employers Association (MICSEA) has welcomed the increase in Malaysia’s minimum wage to RM2,000 from RM1,700 effective June 2027, but cautioned that smaller businesses will need targeted support to prevent higher labour costs from leading to job cuts, business closures or price increases.
MICSEA President YK Lai said the association supports efforts under Budget 2027 to raise workers’ incomes and strengthen social protection, but stressed that micro, small and medium enterprises operate with significantly tighter margins than larger corporations.
“A stronger worker must be supported by a stronger and sustainable employer,” he said.
MICSEA welcomed the exemption from the RM2,000 minimum wage for MSMEs with annual turnover below RM50 million, but warned of a potential “cliff-edge” effect for companies just above the threshold.
It proposed a temporary wage-related tax rebate or wage offset for businesses with annual turnover of between RM50 million and RM100 million during the first year of implementation.
The association also called for a 1:1 matching grant for productivity and automation investments, covering areas such as AI-enabled business systems, workflow automation, digital accounting and payroll, automated point-of-sale systems and workforce management platforms.
MICSEA said higher wages would be more sustainable if accompanied by productivity improvements rather than forcing businesses to raise prices or reduce staffing.
It also supported efforts to raise starting salaries for graduates and semi-skilled workers, but said any RM2,500 starting salary framework should be tied to skills, qualifications, job complexity and productivity, rather than applied uniformly across all positions.
Lai warned that sharply raising entry-level salaries without similar adjustments elsewhere could also lead to wage compression within smaller companies.
MICSEA further called for simplified e-KYC banking arrangements for legal foreign workers and more consistent social protection requirements across the gig economy to avoid placing conventional employers at a competitive disadvantage.
The association also welcomed Budget 2027 tax relief measures, saying higher disposable income can improve employee welfare without placing the entire burden of income growth on employers.
Lai said the period before the new minimum wage takes effect should be used for further engagement between the government, employers and workers, with clear implementation guidelines and transitional measures.
“Our message to the Government is not ‘do not increase wages’. It is ‘help MSMEs increase productivity so that higher wages become sustainable’,” he said.
