Employers in Malaysia may feel the pinch with higher minimum wage kicking in next year

The Prime Minister's Office has announced that, from 1 January 2019, the Malaysian Government will implement a standardised new minimum wage of RM1,050 per month or RM 5.05 per hour (including Sabah and Sarawak). The decision to raise the minimum wage was made after considering the recommendations submitted by the National Wages Consultative Council following its review of the Minimum Wage Order 2016. Pursuant to the Minimum Wage Order 2016, the minimum wage per month in Peninsular Malaysia is RM1,000, while that in Sabah, Sarawak and the Federal Territory of Labuan is RM920.

In its announcement, the PMO explained that the increase in the minimum wage was in line with the economic situation of the country. The PMO also pointed out it would be more appropriate to have a periodic increase - as opposed to a drastic increase - in salary so as not to jeopardise the operations of the business, especially the small and medium enterprise owners, which would eventually lead to retrenchment.

Commentary from Christopher & Lee Ong, a member firm of Rajah & Tann Asia: All employers in Malaysia are advised to adjust their minimum wage to RM1,050 come January 2019 in order to comply with the Minimum Wage Order 2016. Employees in Sabah and Sarawak earning minimum wage will expect to see a more significant increase in their basic salary, although the same cannot be said for employees in Peninsular Malaysia. Be that as it may and while the increase in minimum wage in Peninsular Malaysia of RM50 may seem negligible to many employees, employers - particularly in the manufacturing or plantation industry, with a substantial number of employees who are currently earning minimum wage - will feel the pinch with the increase cost of production.