The exemption of MSMEs from implementing proposed new minimum wage rate provides a timely relief to MSMEs.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) welcome the Minister of Entrepreneur and Cooperatives Development’s announcement that micro, small, and medium enterprises (MSMEs) will be exempted from upcoming minimum wage increases for the time being. The Cabinet agreed on the exemption to protect smaller businesses from rising operating costs.
President of ACCCIM, Datuk Ng Yih Pyng said the exemption will provide a timely and much-needed financial relief to about 1.3 million MSMEs, which have already been inundated with multiple cost increases in past two years amid a challenging business environment and rising competition from foreign businesses.
Datuk Ng said that an appropriate level of minimum wage must balance an improvement of the worker’s income against the operational survival of MSMEs. A one-size-fits-all approach to minimum wage hikes often risks forcing small businesses to reduce staff or close down. Hence, linking wage increases to productivity and performance, sector-specific financial capacity, and broader economic and business conditions offer a sustainable path forward.
ACCCIM supports a productivity-linked wage system ties a worker’s pay directly to their output, performance, or company profits. For employees, it rewards productivity driven performance, boosts their income growing with the company’s profitability, and improves overall quality of life. The employers motivate staff, increase business competitiveness, and align labor costs with actual company revenue.
The chamber also welcomes the Government’s decision to consider other approaches to help increase the wages of employees working in the MSMEs, including the wage subsidies under the Progressive Wage System (PWS) — a voluntary, incentive-based program designed to raise workers’ salaries in line with productivity and skills training. PWS has benefited 51,363 workers, exceeding the initial target of 50,000 workers. More than RM73 million has been disbursed, including about RM10.2 million for entry-level workers and RM62.9 million for non-entry-level workers.
ACCCIM is of the view that the Government can consider to explore the implementation of a tiered regional minimum wage system rather than a uniform national policy. A uniform national minimum wage cannot be one-size-fits-all. It needs to consider regional cost of living differences, socio-economic factors, economic and business development of different states.
The cost of living, prices of goods and services can differ substantially between states/regions as well as differences in the labour market conditions, with better economic and business activities and low unemployment in some states, while some states have experienced weaker business conditions with higher unemployment. This disparity can lead to issues such as businesses in low-wage states struggling with increased labor costs, while workers in high-cost states may find the minimum wage still unable to cover basic expenses.

A tiered approach, with minimum wages calibrated to regional cost-of-living differences, is a potential solution to better support livelihoods without unduly burdening businesses in economically weaker regions. Regional tiering reflects local realities as high-cost cities require higher wages for meeting higher living expenses compared to rural areas, protects low-margin businesses against unsustainable labor cost spikes, and prevents job losses in weaker business conditions states.