HIGHER labour costs could put jobs at risk in the micro, small and medium enterprise (MSME) sector if they rise faster than productivity and business capacity, the Malaysian Employers Federation (MEF) said in backing a reprieve from any further increase in the RM1,700 minimum wage.
MEF senior adviser for government, media and international engagement Datuk Dr Syed Hussain Syed Husman said keeping the current rate unchanged for MSMEs for now would give smaller businesses more room to absorb rising operating costs while protecting employment.
“MEF supports the government decision to give MSME a reprieve from further increase in the RM1,700 minimum wage at this stage.
“This is a responsible and pragmatic approach that recognises the realities faced by smaller businesses while safeguarding employment opportunities.”
Syed Hussain said higher labour costs could result in reduced hiring, business contraction, increased automation or business closures if they outpaced productivity and business capacity.
“Protecting MSME therefore also means protecting jobs.”
However, he said the final decision on the minimum wage review, including any new rate and possible exemption for MSMEs, should await Prime Minister Datuk Seri Anwar Ibrahim's announcement when Budget 2027 is tabled on Oct 9.
Syed Hussain said wage subsidies under the Progressive Wage Policy (PWP) could provide an alternative means of raising workers' incomes without immediately increasing statutory labour costs across the board.
“The important principle is that wages should rise together with productivity, skills and value creation.”
The RM1,700 minimum wage has been fully applicable nationwide since Aug 1, 2025, following the end of a six-month deferment for employers with fewer than five workers.
MEF said the focus should now be on raising wages through productivity gains, skills development, technology adoption and the creation of higher-quality jobs.
It also backed continued implementation of the PWP, which links wage progression to productivity, skills and workers' contributions.
Syed Hussain said the government should continue engaging employers and workers through the established tripartite process when reviewing future wage policies.
“For now, MEF believes that it is important for all stakeholders to await the detailed announcement by the prime minister on the minimum wage review and the specific treatment of MSME when Budget 2027 is tabled.”
On Wednesday, Anwar said the government would consider the cost pressures and competitiveness challenges faced by small businesses in formulating Budget 2027.
He said the issues were raised during a Budget 2027 engagement session with representatives of Bumiputera contractor associations and companies.
“One of the issues raised was the difficulties faced by small businesses across various industries, particularly in dealing with procurement and operating cost pressures arising from the global supply crisis.”
Anwar said the government had taken note of views and suggestions concerning cost pressures, access to opportunities and efforts to strengthen business competitiveness.
He added that the Madani government would ensure Budget 2027 created wider opportunities for people and businesses to build their capabilities. - October 2, 2026
