The New Minimum Wage in Malaysia: Extra Insights and Q&A Employers Need to Know

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The New Minimum Wage in Malaysia:
Extra Insights and Q&A Employers Need to Know

February 2025
One Asia Lawyers Group
Yuki Hashimoto
Lawyer(Japan)
Najad Zulkipli
Lawyer(Malaysia)

1. Introduction

The Minimum Wages Order 2024 [P.U.(A) 376/2024] (“MWO 2024”) was officially gazetted in the last 4th December 2024, with the implementation set in two stages.

First Stage: As of 1st February 2025, the new minimum wage applies to employers with five (5) or more employees and those involved in professional activities as defined by the Malaysia Standard Classification of Occupations 2020 (“MASCO”), regardless of the number of employees. Under MASCO, there are ten (10) categories of major groups, namely: Major Group 1: Managers, Major Group 2: Professionals, Major Group 3: Technicians and Associate Professionals, Major Group 4: Clerical Support Workers, Major Group 5: Service and Sales Workers, Major Group 6: Skilled Agricultural, Forestry, Livestock and Fishery Workers, Major Group 7: Craft and Related Trades Workers, Major Group 8: Plant and Machine Operators and Assemblers Major Group 9: Elementary Occupations, Major Group 0: Armed Forces[1].

Second Stage: Starting August 1, 2025, the minimum wage will extend to all employers, regardless of the number of employees they have.

This recent introduction of Malaysia’s new minimum wage has garnered significant attention, and you may have several questions regarding its implications. To provide clarity and address any uncertainties, we have compiled a Q&A outlining the key details you need to know.

2. Q&A

2.1  What constitute “wage” and what exactly is the New Minimum Wage?

The definition of “wage” is provided under Section 2 of the National Wages Consultative Council Act 2011 (Act 732) which further refers to the definition provided under Section 2 of Employment Act 1955 (Act 265), Section 2 of the Sabah Labour Ordinance [Cap. 67] or Section 2 of the Sarawak Labour Ordinance [Cap. 76]. Based on these sources, wage is defined as the basic salary[2]. It does not include allowances, commissions, incentives, or any additional payments made to the employee.

The breakdown of the minimum wage rates by monthly rate, daily rate and hourly rate based on the MWO 2024 is as follows:

In relation to an employee who is not paid basic wages but is paid wages based only on piece rate, tonnage, task, trip or commission, the rate of monthly wages payable to that employee with effect from 1 February 2025 shall not be less than RM1,700.00.

The above rate applies to employers with more than five employees. Employers with fewer than five (5) employees, excluding MASCO Employers, may continue to pay the minimum monthly wage of RM 1,500 until 1st August 2025.

2.2  Are employees who are employed on a daily basis required to receive a minimum salary of RM1,700?

No, employees employed on a daily basis are not required to receive RM1,700 as a monthly salary. The minimum wage for daily employees is based on the daily rate, which is determined by the number of days worked in a week. The daily rate does not necessarily equate to RM1,700 per month.

According to the MWO 2024, the daily rate for employees is calculated based on the number of days they work in a week. For instance, if an employee works 6 days a week, the daily rate will be RM65.38. Therefore, the minimum salary for daily employees follows the daily rate corresponding to the number of days worked, rather than the fixed monthly RM1,700.

2.3  What is the legal implication to existing Employment Agreement and Trade Union Collective Agreement?

(i) The Minimum Wage Order 2022 (“MWO 2022”) is revoked. However, any legal proceedings, prosecutions, or investigations conducted under MWO 2022 will continue until completion; and
(ii) all employment contracts and collective agreements must consider all provisions in the MWO 2024 and shall be revised accordingly.

2.4  Does this apply to foreign workers?

Yes. This new minimum wage applies to all workers including non-citizens in the private sector except for domestic workers and apprenticeship contracts. As outlined in the frequently asked questions (FAQ) provided by the National Wages Consultative Council Secretariat, the minimum wage policy is designed to ensure equal treatment of all workers, regardless of nationality.

This approach aligns with the International Labour Organization (ILO) Equal Remuneration Convention (No. 100), which Malaysia ratified in 1997.

Additionally, Section 69F of the Employment Act 1955, Section 118B of the Sabah Labour Ordinance (Chapter 67), and Section 119B of the Sarawak Labour Ordinance (Chapter 76) explicitly prohibit any form of discrimination between local and foreign workers.

2.5  Can an employer pay a lower basic salary than the minimum wage if agreed upon by the employee?

No, this is not allowed as it constitutes an offense under Section 43[3] of the National Wages Consultative Council Act 2011 (Act 732). Employers are required to pay the minimum wage rate to employees, even if the employee agrees to a basic salary lower than the minimum wage. Furthermore, if the employer is convicted under Section 43 of the Act 732, the court may order the employer to pay:

(a) the difference between the minimum wage rate specified in the Minimum Wages Order and the basic wages actually paid to the employee, including any outstanding amounts; and
(b) any additional payments due, calculated based on the basic wages, in accordance with the minimum wage rates outlined in the Minimum Wages Order.

2.6  Should salary increments be granted to all employees, including those already earning the minimum wage or above?

No, the salary increment under MWO 2024 applies only to employees earning below RM1,700 per month. Employers are not obligated to increase the salaries of employees not affected by this change, although they are not prohibited from doing so at their discretion.

2.7  Can the salary increase under MWO 2024 be considered part of the annual increment outlined in the Trade Union Collective Agreement?

No. The increase required to comply with MWO 2024 is a statutory increment and may not be considered part of the annual increment specified in the collective agreement, assuming such annual increment in the collective agreement shall be made based on the employees’ performance. Employees are entitled to both the statutory minimum wage increase and the annual increment as outlined in the agreement. However, the increment rate may be based on the basic salary payable during the year in which the annual increment is due.

2.8  What actions can be taken against an employer who fails to comply with the MWO 2024?

Section 43, 45, 46 and 47 of National Wages Consultative Council Act 2011 (Act 732) stipulates that employers who fail to comply with the Minimum Wage Order (MWO), if found guilty, may be subjected to the following penalties:

(i) Penalty for first offense: A fine not exceeding RM10,000 for each employee;
(ii) General penalty: A fine not exceeding RM10,000 for each offense where a specific penalty is not stated;
(iii) Penalty for continuing offense: A fine not exceeding RM1,000 for each day the offense continues after conviction; and
(iv) Penalty for repeated offenses: A fine not exceeding RM20,000 or imprisonment for a term not exceeding 5 years.

3. Remarks

The Ministry of Human Resources (MOHR) has clarified that the minimum wage is merely a baseline for minimum salary but should not be viewed as a benchmark for entry-level salaries, especially for graduates and skilled workers, who should be compensated according to their qualifications and expertise.

The new minimum wage aims to help employers attract talent while ensuring that businesses, particularly SMEs, can adapt to these changes without facing undue financial strain. The Malaysian Employers Federation (MEF) emphasizes the importance of a balanced implementation approach to support both workers and employers in this transition.

If you have any questions regarding employment issues or need further assistance, please do not hesitate to contact us.

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[1] MASCO details out the classification of each major group of occupation based on specific criteria such as education level, task included, and others.
[2] Definition of “wage” is provided under the FAQ issued by the National Wage Consultative Council, Monostry of Human Resources which can be accessed here https://www.mohr.gov.my/pdf/FAQ%202024.pdf
[3] Section 43 of the National Wages Consultative Council Act 2011 (Act 732) provides that an employer who fails to pay the basic wages as specified in the minimum wages order to his employees commits an offence and shall, on conviction, be liable to a fine of not more than ten thousand ringgit for each employee.