Brief summary of Minimum Wages Malaysia

Starting with January 2014 Malaysia is implementing the minimum wages policy. All employers are forced to put it in practice from this year on. More than 90% of all countries have minimum wages policies of some sort and Malaysia decided to take this important step ever since 2010.

The minimum wages of Malaysia are supposed to be a safety net for employees. Statistically, a large percentage of all Malaysian employees were paid lower than the Poverty Line Income of RM800. By implementing minimum wages, the government hopes to be able to ensure decent living for everybody. More than that, the minimum wages are also used as a base for calculating other payments, including social security ones or overtime. The bottom line is that this policy is meant to reduce poverty and inequity on the labor force market and to also help businesses to increase their productivity.

Even though the decision of adopting minimum wages was announced in 2010, the Human Resources Minister organized a multitude of consultations and discussions in order to come up with an effective policy. Various employees’ and employers’ organizations, NGOs and international organisms such as the World Bank contributed to create a sound and effective minimum wages policy to be implemented. The National Wages Consultative Council was formed in 2011 in order to research all matters related to minimum wages and to make recommendations to the government.

It was not easy to reach a consensus because the minimum wage was supposed to be high enough to make a difference for the employees, but also not too high so that it wouldn’t destroy the employers. All involved parties were committed to reach a conclusion and it was decided that minimum wage in the Peninsula is going to be RM900 and minimum wage in Labuan, Sarawak and Sabah is going to be RM800.

At first it was announced that all these measures are going to be implemented starting with January 1st 2013. Employers with less than five employees could only comply starting with July 1st 2013. However, the government also allowed employers to apply for deferments in order to have the time to change their business practices. There were indeed lots of deferments and the bottom line is that the minimum wages are mandatory for everybody starting with January 1st 2014.

The Labor Department is going to make sure that the new policies are going to be effective. Even though the government understands that this is a huge change for employers, it urges them to put it in practice right away and to contribute to the national goal of turning the country into a powerful economy. Adjusting to the new policies might indeed be challenging, but the government strongly believes that it is a step in the right direction for Malaysia.

The policy applies to both domestic and foreign employees. There were voices arguing that foreign employees should receive a separate package including other benefits such as accommodation, but they were dismissed. The government does not want to discriminate foreign employees mainly because they have a huge contribution to the Malaysian economy especially in the coming 2015.