Employers in Malaysia who don't adhere to new RM1.7k minimum wage face up to RM10k fine, except for these exemptions
Prime Minister Datuk Seri Anwar Ibrahim tabled Budget 2025 in the Dewan Rakyat on 18 October 2024, which included many bold new policies such as subsidy cuts for the yet-to-be-defined “T15” group, a new 2 per cent tax for dividend income over RM100,000 and increased excise duty on sugary drinks.
Besides that, one new policy change that may have the biggest impact has got to be the increase of minimum wage in Malaysia from RM1,500 to RM1,700 starting 1 February 2025. While some praised the move as something long overdue for workers’ welfare, others saw the change as the start of a domino effect that would increase the prices of goods and services in our country.
Regardless, barring a monumental ‘U-turn’ by the Federal Government, the new minimum wage is here to stay, so how will it be implemented? Is the new minimum wage applicable to all workers in Malaysia? What actions do employers who don’t comply with the new regulation face?
Well, join us as we delve into the matter in depth below.
The National Wages Consultative Council
The implementation of the minimum wage policy in Malaysia is under the purview of the National Wages Consultative Council, which was formed under the National Wages Consultative Council Act 2011.
According to Section 4 of the aforementioned Act, among the functions of the Council are:
To advise the Government on all matters relating to minimum wages, including its development at the international level
To make recommendations to the Government on the minimum wage rates and coverage according to sectors, types of employment and regional areas, and other matters relating to minimum wages and wages
To consult the public on the minimum wage rates and coverage
To collect and analyse data and information and to conduct research on wages and socioeconomic indicators
To coordinate, supervise, and evaluate the impact of the implementation of minimum wages
To review the minimum wage order
To deliberate on all matters relating to minimum wages
To disseminate information and analysis on wages
To carry out any other functions as it deems fit to enable it to perform its functions effectively or which are incidental to the performance of its functions
Furthermore, with the inclusion of the new RM1,700 minimum wage this 1 February, Malaysia has introduced six different Minimum Wages Orders, the latest of which would be named the Minimum Wages Order 2024. Do note that as of the time of writing, this subsidiary legislation, which will be done through an amendment, has yet to be introduced.
However, the National Wages Consultative Council has already released a frequently asked question (FAQ) about the upcoming Minimum Wages Order, which details how the new RM1,700 will be implemented.
The new RM1,700 minimum wage and how it will be implemented
Section 2 of the National Wages Consultative Council Act 2011 defines “minimum wages” as basic wages, which the council further expands in its FAQ to mean not inclusive of allowances, incentives and other additional payments made to the employee.
Moreover, the National Wages Consultative Council clarified that the new RM1,700 minimum wage will be implemented starting 1 February 2025 and will apply to:
Employers who employ five workers or more
Employers who carry out a professional activity classified under the Malaysia Standard Classification of Occupation (MASCO) as published officially by the Ministry of Human Resources (Kesuma), regardless of the number of employees employed
About the latter, the professional activities classified by MASCO are:
Science and engineering professional
Health professional
Teaching professional
Business and administration professional
Information and communication technology professional
Legal professional
Hospitality and related professional
Social and cultural professional
Regulatory body professional
Furthermore, the new RM1,700 minimum wage will be enforced to employers with less than five workers starting 1 August 2025.
However, the new minimum wage will not apply to domestic employees and those under apprenticeship contracts.
For the removal of doubt, Section 2 of the Employment Act 1955 defines domestic employees as below:
Meanwhile, an apprenticeship contract is defined as:
Besides that, the new minimum wage applies to all workers, including non-citizens in the private sector, other than domestic workers and apprentices.
Here’s the breakdown of how the monthly, weekly, daily and hourly rates under the new minimum wage:
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.
Punishment for employers who don’t adhere to the new minimum wage order
According to Section 43 of the National Wages Consultative Council Act 2011 below, an employer who fails to pay the basic wages as specified in the Minimum Wages Order may face a fine of up to RM10,000 for each employee.
Meanwhile, Section 44 of the Act prescribes that when an employer has been convicted of an offence under Section 43, the Court may order the employer to pay the difference between the minimum wage rate and the basic wages paid by the employer to the employee, including the outstanding differences, and other payments accrued from the calculation of wages based on the basic wages according to the minimum wages rates listed above.
Should the employer fail to comply with an order under Section 44(1), the Court may issue a warrant to levy the employer’s property for the differences and other payments accrued.
Furthermore, Section 46 of the Act below prescribes that a convicted employer may face a daily fine of up to RM1,000 for each day the offence continues after conviction.
Besides that, Section 47 below prescribes that for repeat offences, an employer may face a fine of up to RM20,000 or up to 5 years of imprisonment.
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