In light of the recent announcement during the 2025 Budget last week regarding the new minimum wage increase to RM1,700, concerns have been raised by employers in several Malaysian states.
They are particularly worried about their readiness to comply with the new requirements.
The states of Kelantan, Perlis, and Sabah appear to be the most affected, as many business owners fear that the rise in overhead costs could jeopardise their operations.
According to a report by Utusan, in partnership with the Chamber of Commerce and Industry, these states encounter distinct challenges stemming from their smaller economic market sizes and relatively lower cost of living, as highlighted by The Vocket.
With the implementation of the new minimum wage set to begin on February 1, 2025, the pressure is mounting on employers to adapt quickly to these changes.
The situation is particularly dire in Sabah, where businesses are grappling with higher raw material costs, compounding the difficulties of meeting the new wage requirements.
Furthermore, the median monthly salary in these regions remains significantly lower than in other states.
As of March 2024, Kelantan’s average wage stands at RM1,645, Perlis at RM1,682, and Sabah at RM1,882.
This puts employers in a precarious position as they navigate the transition to a higher minimum wage.
In contrast, urban workers and university graduates tend to start with salaries ranging from RM2,000 to over RM3,000.
This discrepancy highlights the stark difference in earning potential between urban and rural areas, further complicating the matter for employers in less developed regions.
With many businesses already operating on tight margins, the new minimum wage law is expected to create additional strain.
Employers fear that the increase will lead to higher prices for goods and services, potentially reducing their customer base and overall revenue.
This scenario could result in difficult decisions regarding staffing levels, with some businesses considering layoffs or reductions in hours to manage the increased payroll costs.
Despite the government’s efforts to raise the minimum wage, it is clear that a one-size-fits-all approach may not be suitable for every state.
The diverse economic landscapes of Kelantan, Perlis, and Sabah necessitate tailored support and resources to help employers transition to the new wage structure without jeopardising their businesses.
In conclusion, while the intention behind the RM1,700 minimum wage is to improve the living standards of workers, it is essential for the government to recognise the challenges faced by employers in these states.
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