THE recent increase in the minimum wage to RM1,700 is significantly impacting business operations, particularly in urban areas, prompting many employers to revise their business models to remain sustainable, according to the Malaysian Employers Federation (MEF).
In a statement, MEF said the rising operational costs have led companies to adopt a range of strategies to preserve competitiveness, including automation, price adjustments and restructuring of their workforce.
“While these measures offer opportunities to enhance workforce quality and employee satisfaction, they also present challenges to profit margins, especially for small and medium-sized enterprises,” MEF noted.
The federation highlighted a growing reliance on technology and automation across sectors such as retail, food and beverage, and logistics, in efforts to reduce dependence on low-skilled labour performing repetitive tasks.
“Initiatives such as the use of self-service kiosks, automated ordering systems and warehouse automation solutions are becoming increasingly widespread as businesses aim to boost operational efficiency,” it said.
Workforce restructuring is also taking place, with companies introducing part-time shifts and multi-skilling among employees to raise productivity and allow more flexible staffing in line with operational demands.
For sectors that do not require a full-time workforce, outsourcing is also gaining traction.
“For example, gig economy platforms are being increasingly used for delivery and logistics operations, helping employers cut back on the need for permanent staff,” MEF said.
The federation also observed that some businesses are innovating by offering premium products with higher profit margins to help offset rising labour costs.
“However, price increases could affect competitiveness, especially for smaller enterprises that face intense price competition,” it warned.
MEF acknowledged that large corporations are generally better equipped to absorb the impact of wage increases, while small and medium enterprises (SMEs) are more exposed to financial strain.
“In this context, many SMEs may be forced to downsize their workforce or suspend new hiring to contain operating expenses,” it said.
“The increase in minimum wage will continue to influence hiring, employee retention and business competitiveness in Malaysia’s urban centres. The overall impact varies by sector, company size and how well businesses adapt,” MEF added. - May 5, 2025
