Minimum wages for employees in Malaysia’s towns and cities will soon change: make sure your payroll is ready.

After debate in the Malaysian government, on 10 January 2020, the Human Resources Ministry announced an anticipated increase in the minimum wage for employees working in the country’s 56 city and municipal council areas. The rise is intended to address high living costs in Malaysia’s towns and cities and is in line with the commitment from the Pakatan Harapan political coalition to deliver a RM1,500 minimum wage target within the first five years of its administration.

Minimum Wage Increase

The minimum wage increase has been gazetted and will come into effect on 1 February 2020. Wages will change for city and municipal council employees in the following ways:

  • Minimum monthly wage will be RM1,200.00
  • Minimum hourly wage will be RM5.77
  • Daily minimum wage rates will depend on the number of days in a work week:

6 working days = RM46.15

5 working days = RM55.38

4 working days = RM69.23

Outside those 56 city and municipal councils:

  • Minimum monthly wage will be RM1,100
  • Minimum hourly wage will be RM5.29
  • Daily minimum wage rates will depend on the number of days in a work week:

6 working days = RM42.31

5 working days = RM50.77

4 working days = RM63.46

All minimum wage rate categories also apply to employees who are not earning hourly, weekly, or monthly wages. That means employees who are paid on a piece rate, by tonnage, task, trip, or commission, must be paid the equivalent of the minimum wage.

The minimum wage rates do not apply to employees who are classed as ‘domestic servants’ under the relevant section of Employment Act 1955.

Industry Reaction

While the increase in minimum wage in towns and cities reflects the higher cost of living in those areas, some industry observers have commented that it could drive up the cost of production for employers. In turn, that trend may tighten profit margins, encourage layoffs, and reduce the attractiveness of Malaysia to foreign investors.

Samsudin Baradan, executive director of the Malaysian Employers Federation, commented that the “sluggish global economy” and “high number of retrenchments” across the country showed that the wage rise was ill-judged and would end up with employers having the shoulder the burden.

Baradan also warned of “discriminatory practices” by employers, pointing out that the area-based wage rise would cause a discrepancy between employees in rural locations who may be paid less for doing the same job as their counterparts in urban locations. Employers in Malaysia’s oil palm industry, for example, have many locations within the 57 towns and cities affected by the wage rise and many outside those areas.

What Should Employers Do Now?

In order to establish whether the 2020 minimum wage rates apply to their businesses, employers must check whether they are located within one of the 56 relevant council areas. Those areas are defined under Section 2 of the Employment Act 1995 (Act 265), the Sabah Labour Ordinance (Chapter 67) and the Sarawak Labour Ordinance (Chapter 76).

Those areas are as follows:

City councils: Kuala Lumpur, Shah Alam, Petaling Jaya, Kuala Terengganu, Kuching Utara, Kuching Selatan, Miri, Kota Kinabalu, Seremban, Johor Bahru, Iskandar Puteri, Alor Setar, Melaka Bersejarah, Pulau Pinang, Seberang Perai, and Ipoh.

Municipal councils:

Sandakan, Tawau, Putrajaya, Batu Pahat, Kluang, Kulai, Muar, Segamat, Pasir Gudang, Kulim, Sungai Petani, Langkawi, Kubang Pasu, Kota Bharu, Alor Gajah, Jasin, Hang Tuah Jaya, Port Dickson, Jempol, Kuantan, Temerloh, Bentong, Manjung, Kuala Kangsar, Taiping, Teluk Intan, Kangar, Ampang Jaya, Kajang, Klang, Selayang, Subang Jaya, Sepang, Kemaman, Dungun, Padawan, Sibu, Kota Samarahan, Bintulu, and Labuan.

Learn more about Malaysian payroll with the activpayroll Malaysia Global Insight Guide, which contains information on the country’s employment laws, business practices, and tax and social security systems.

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