By MR. YK LAI, MHRM | TTT President Malaysian Industrial Commercial Service Employers Association (MICSEA)
KUALA LUMPUR, 9 OCTOBER 2026 – The Malaysian Industrial Commercial Service Employers Association (MICSEA) welcomes Belanjawan MADANI 2027, themed “Menggapai di Langit, Mengakar di Bumi”, and its increase in the national minimum wage from RM1,700 to RM2,000, effective June 2027. MICSEA commends the Government for balancing worker welfare, fiscal responsibility and sustainable growth, and urges targeted support so that higher wages do not result in business closures, job cuts or price increases.
MICSEA President Mr YK Lai said: “MICSEA supports the Government’s direction to improve workers’ income and strengthen social protection. At the same time, we must recognise that MSMEs operate under very different financial realities from large corporations. Many run on thin margins, face rising costs and cannot immediately pass additional labour costs on to customers. A stronger worker must be supported by a stronger and sustainable employer.”
Five measures MICSEA is calling for
1. A transitional wage rebate for firms with turnover of RM50 million to RM100 million
MICSEA welcomes the exemption from the RM2,000 minimum wage for MSMEs with annual turnover below RM50 million, calling it an important safety net for smaller firms with limited cash reserves.
However, it warns of a “cliff-edge” effect. A company with RM49 million in turnover and one with RM51 million may have similar workforces, margins and business models, yet face very different regulatory obligations. MICSEA proposes a temporary wage-related tax rebate or wage offset in the first year of implementation for firms in the RM50 million to RM100 million range.
“The objective is not to delay compliance,” the association said. “The objective is to prevent the transition from becoming a penalty for businesses that have successfully grown beyond the MSME threshold.”
2. A 1:1 matching grant for productivity and automation
Without productivity gains, MICSEA says MSMEs face three choices: raise prices, cut manpower or automate. It wants the Government to help businesses choose automation by expanding digitalisation incentives and introducing a 1:1 matching grant for eligible MSMEs. Support should cover AI-powered business systems, workflow automation, digital accounting and payroll, automated POS, self-service technologies, workforce management platforms and AI-enabled customer service.
3. A skills- and productivity-linked RM2,500 starting salary
MICSEA supports raising starting salaries for graduates and semi-skilled workers, but says the RM2,500 framework should not be a blanket requirement across all positions. It recommends linking the framework to Malaysian Standard Classification of Occupations (MASCO) classifications, TVET qualifications, SKM Level 4 and 5 competencies, job complexity, professional certification and demonstrable productivity.
The association warns that in MSMEs, where pay gaps between junior staff, supervisors and middle managers are often narrow, a sharp rise in entry-level pay could cause wage compression, with experienced employees expecting matching increases.
4. Simplified e-KYC banking for legal foreign workers
MICSEA supports payroll formalisation, saying it creates a level playing field between compliant employers and those relying on informal or illegal labour. But it wants MOF, KESUMA, Bank Negara Malaysia and financial institutions to establish a simplified e-KYC onboarding mechanism for legal foreign workers, and to give employers clear guidance where legally recognised digital payment channels are permitted.
“Employers should not be penalised for banking and administrative obstacles that are outside their control,” it said.
5. Consistent social protection across the gig economy
MICSEA welcomes stronger social protection for gig workers, but notes that retailers, restaurants, logistics operators, small manufacturers and facility operators increasingly compete with platform-based work for the same pool of workers. It calls for obligations to be applied consistently, with platform operators contributing appropriately, so that MSME employers are not placed at a structural disadvantage.
Tax Relief Welcomed
MICSEA also welcomed the increase in individual tax relief from RM9,000 to RM12,000, along with reductions in selected middle-income tax rates and expanded eligible reliefs.
“From an employer perspective, employee welfare is not solely about gross salary. What ultimately matters to employees is their disposable income,” the association said, adding that expanded tax relief raises take-home pay without placing the entire burden on employers.
What Happens Next
MICSEA is calling for continued tripartite engagement among the Government, employers and workers before the 2027 reforms take effect, and for the period up to June 2027 to be used to issue clear implementation guidelines, transitional mechanisms and practical compliance solutions.
Mr YK Lai added: “Belanjawan MADANI 2027 has taken an important step towards raising the income floor of Malaysian workers, and we welcome that direction. But wage policy cannot operate in isolation. Our message to the Government is not ‘do not increase wages’. It is ‘help MSMEs increase productivity so that higher wages become sustainable’. MSMEs are the backbone of Malaysia’s economy and a major source of employment. We believe Malaysia can achieve better wages, stronger MSMEs and better jobs at the same time, but only through a carefully calibrated transition.”
