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New Minimum Wage to Benefit 1.28 Million Workers

Last update: 11/01/2019
Enforcement of new minimum wage of RM1,100 a month or RM5.29 an hour takes effect Jan 1.
By Sakini Mohd Said

KUALA LUMPUR (Bernama) -- The new year has brought some cheer to private-sector blue-collar workers and employees in the lower salary scales with the enforcement of the higher minimum wage of RM1,100 a month or RM5.29 an hour starting Jan 1.

Announced by Finance Minister Lim Guan Eng during the tabling of Budget 2019 on Nov 2, the new minimum wage will benefit some 1.28 million workers or 18.1 percent of the 7.05 million workforce in the private sector that work at least six hours a day or 20 days a month. (These statistics are based on the Department of Statistics Malaysia's 2017 Salaries and Wages Survey Report.)

This is also the first time the minimum wage is being standardised for the peninsula and Sabah, Sarawak and Labuan.

Setting up a uniform minimum wage across the board will help reduce the wage and socio-economic gap between Sabah and Sarawak and the peninsular, which is in keeping with a pledge made by the Pakatan Harapan (PH) government in its 2018 election manifesto.

Malaysia introduced its minimum wage policy in 2012 after the National Wages Consultative Council Act 2011 was passed by Parliament. Under this law, the National Wages Consultative Council (NWCC) was set up to set the framework for the establishment of minimum wages in Malaysia.

Under NWCC's Minimum Wages Order 2012, which was enforced on Jan 1, 2013, the minimum wage was fixed at RM900 a month for the peninsula, and RM800 for Sabah, Sarawak and Labuan.

Starting July 1, 2016, as per the Minimum Wages Order 2016, the minimum wage was raised to RM1,000 a month in the peninsula, and RM920 in Sabah, Sarawak and Labuan.


The RM100 hike in the minimum wage may seem small to many but for private-sector employees like Mohd Izzat, 25, whose salary scales are at the lower end, any rise in income is helpful.

"It may seem like a small amount but it will come in handy for us, together with the other aid the government is extending to the B40 group, such as the electricity subsidy," he said, adding that the RON95 petrol subsidy for motorcycle owners would also help to ease his financial burden as he goes to and fro work by motorcycle.

Mohd Izzat, who is single and has two brothers who are still in school, also hoped the government would fulfil its election pledge by raising the minimum wage to RM1,500 a month due to the rising cost of living.

Last September, the Prime Minister's Department announced in a statement that a standardised minimum wage would be implemented from Jan 1, 2019, at RM1,050 a month or RM5.05 per hour.

However, following protests by the Malaysian Trades Union Congress (MTUC) and other non-governmental organisations, the government decided to review the RM1,050 minimum wage before raising it to RM1,100.


In its election manifesto, PH had pledged to raise the minimum wage to RM1,500 across the nation. Last August, Human Resources Minister M. Kula Segaran said the proposal to increase the minimum wage to RM1,500 would be done in stages over five years as a lot of companies would face financial difficulties or go bankrupt if it was implemented in one go.

When deciding the minimum wage, the government has to take into consideration various factors such as the nation's economic and financial standing and employers' financial capacity.

Malaysia's economy recorded a lower growth rate of 4.5 percent in the second quarter of 2018, compared to 5.4 percent in the first quarter. Foreign direct investments also slowed down in the second quarter to RM2.8 billion, compared to RM12 billion in the first quarter.

Commenting on the implementation of the RM1,100 minimum wage, Universiti Malaya economics lecturer Prof Dr Fatimah Kari said although the quantum of increase was relatively small especially in terms of the high cost of living, it was reasonable in view of the existing economic climate.

"The implementation of a minimum wage for all workers in Malaysia is in line with the nation's aspirations towards attaining developed nation status. It also elevates the status of the working class," she said.

Fatimah added that besides getting higher overtime rates, the new minimum wage would also enable workers to enjoy better financial security in the long term as they would have higher savings in the Employees Provident Fund (EPF).

Last month, EPF chief executive officer Tunku Alizakri Alias said in a statement that the minimum contribution of employees and employers to the fund would be aligned with the Minimum Wages Order (Amendment) 2018 of RM1,100 for Peninsular Malaysia, and Sabah and Sarawak.

He said EPF members who earned monthly wages would be expected to contribute a minimum of RM264 to the fund.

However, the minimum contribution may be different for members who are paid on a weekly, daily or hourly basis.


MTUC president Datuk Abdul Halim Mansor, meanwhile, said the congress agreed to the RM1,100 minimum wage on the basis that the government would fulfil its pledge to increase it to RM1,500 within the next five years.

"We understand that a sharp rise (in the minimum wage) may be detrimental. We have to understand that the minimum wage must be able to generate space for more jobs," he said, adding that a steep increase in the minimum wage may discourage employers from hiring new workers.

He said with the increase in the minimum wage to RM1,100, the overtime rates for workers would go up as well, thus enhancing their purchasing power.

On employers' concern that the minimum wage would force some of them to fold up due to higher operating costs, Abdul Halim said the implementation of the earlier minimum wage orders did not lead to any company going bankrupt.

In fact, he pointed out, studies have shown that the minimum wage has led to higher productivity mainly because the workforce felt more appreciated. Hence, in the long run, it would have a positive impact on a company's profits.

"When the minimum wage was implemented for the first time in 2013 (RM900 in Peninsular Malaysia and RM800 in Sabah and Sarawak), it reflected an almost 100 percent increase in wages (for some companies) but none of them went bankrupt due to the minimum wage.

"Employers must understand that when they set up a company they cannot expect to make 100 percent profit. They also have an obligation to develop their manpower and technology," he said.

He added that the higher minimum wage would also lure more Malaysians to work in sectors that were dominated by foreign workers.

Translated by Rema Nambiar


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