The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) has welcomed the Government’s decision to temporarily exempt micro, small and medium enterprises (MSMEs) from the upcoming minimum wage increase.
The Cabinet agreed to the exemption on 30 September, with Entrepreneur Development and Cooperatives Minister Steven Sim Chee Keong saying the decision took into account the operating cost pressures and current economic challenges faced by MSMEs. The Government said it would consider other approaches to raising wages in the sector, including wage subsidy support under the Progressive Wage Policy.
ACCCIM President Datuk Ng Yih Pyng said the exemption would provide timely financial relief to about 1.3 million MSMEs, which have faced multiple cost increases over the past two years amid a challenging business environment and growing competition from foreign businesses.
Balancing Wages and Business Costs
Ng said an appropriate minimum wage should balance improvements in workers’ incomes with the operational viability of MSMEs.
According to ACCCIM, a one-size-fits-all approach to minimum wage increases could place additional pressure on smaller businesses, potentially leading some to reduce their workforce or close down.
The chamber said wage increases should instead take into account productivity and performance, the financial capacity of different sectors, as well as broader economic and business conditions.
ACCCIM therefore supports a productivity-linked wage system, where workers’ pay is more closely tied to output, performance or company profits.
The chamber said such a system could reward productivity-driven performance and allow employees’ incomes to grow alongside company profitability, while encouraging employers to improve competitiveness and align labour costs more closely with actual business revenue.
Progressive Wage System Offers Another Approach
ACCCIM also welcomed the Government’s consideration of other measures to increase wages for MSME employees, including wage subsidies under the Progressive Wage System (PWS).
The voluntary, incentive-based programme is designed to raise workers’ salaries in line with productivity and skills training. According to ACCCIM, the PWS has benefited 51,363 workers, exceeding its initial target of 50,000.
More than RM73 million has been disbursed under the programme, including about RM10.2 million for entry-level workers and RM62.9 million for non-entry-level workers.
The Government has similarly said wage subsidy support under the Progressive Wage Policy is intended to ensure wage increases move alongside productivity growth.
ACCCIM Calls for Regional Minimum Wage Approach
Beyond productivity-linked wages, ACCCIM has called on the Government to consider a tiered regional minimum wage system instead of a uniform national rate.
Ng said a national minimum wage should take into account differences in regional cost of living, socio-economic conditions and levels of economic and business development between states.
The chamber noted that the cost of living, prices of goods and services and labour market conditions can vary substantially across Malaysia. Some states have stronger economic activity and lower unemployment, while others face weaker business conditions and higher unemployment.
According to ACCCIM, these differences can create challenges for both employers and workers. Businesses in lower-wage states could face difficulties absorbing higher labour costs, while workers in higher-cost areas may find that a uniform minimum wage remains insufficient to cover basic expenses.
Calibrating Wages to Local Conditions
ACCCIM said a tiered approach, with minimum wages calibrated to regional cost-of-living differences, could better reflect local economic conditions.
The chamber said higher-cost cities could support higher minimum wages to account for greater living expenses, while regional tiering could help protect low-margin businesses in economically weaker areas from unsustainable increases in labour costs.
The proposal comes as Malaysia reviews its minimum wage framework. The current minimum wage is RM1,700, while the Government has said MSMEs will be temporarily exempted from the upcoming increase as it considers their operating costs and economic conditions.
For ACCCIM, the focus is therefore on finding a balance between improving workers’ incomes and maintaining the competitiveness and sustainability of Malaysia’s MSMEs.
