The much-anticipated minimum wage hike is taking effect in two phases in 2025, directly impacting millions of workers and employers:
- New Minimum Wage: RM1,700 per month (previously RM1,500)
- Implementation Dates:
- 1 February 2025: For employers with five or more employees, and for all employers involved in professional services under the Malaysia Standard Classification of Occupations (MASCO), regardless of number of employees.
- 1 August 2025: For all remaining employers, including those with fewer than five employees.
This phased approach provides smaller businesses with additional time to adjust to the new requirement and avoids abrupt operational disruptions.
Will the minimum wage increase affect everyone?
Over 4.3 million workers are expected to see a direct pay increase. All private sector employees, including both local and non-citizen workers, except domestic workers and apprenticeship contracts, will benefit from the new wage floor.
Rationale and Implications
The policy aims to:
- Address rising living costs, especially in urban areas.
- Support economic and wage growth in tandem with government initiatives such as the Progressive Wage Policy.
- Ensure Malaysia’s workforce receives fair remuneration, thus motivating employee retention and improving job performance.
Address rising living costs, especially in urban areas.
For businesses, particularly SMEs - the wage hike represents both an added cost and a potential opportunity to attract and retain skilled workers. While some employers may need to review budgets and restructure payroll, compliance is mandatory under the National Wages Consultative Council Act 2011. The government warns of legal consequences for non-compliance.
Calculating the New Minimum Wage
- Monthly: RM1,700
- Daily & Hourly: The new minimum translates to RM8.72 per hour, irrespective of workweek length (for 4–6-day workweeks).
| Workweek |
Daily Minimum |
Hourly Rate |
| 6 Days |
RM65.38 |
RM8.72 |
| 5 Days |
RM78.46 |
RM8.72 |
| 4 Days |
RM98.08 |
RM8.72 |
Key Considerations for Employers
- Budget Review: Adjust internal budgets and prepare for increased labour costs in 2025.
- Payroll Compliance: Ensure all employee salaries match or exceed the minimum wage on time to avoid penalties.
- Communication: Notify staff of wage adjustments and consult, as needed, on contract changes and allowances pursuant to employment law.
- SME Transition: Small businesses (under five employees) should use the six-month grace period to plan for compliance before the August 2025 deadline.
Final Thoughts: Navigating Payroll Changes in Malaysia 2025
The minimum wage increase marks a significant investment by the Malaysian government in worker welfare and economic inclusivity. While employers face an extra financial burden, the policy is designed to elevate the quality of life for lower-income workers and boost workplace productivity, a forward-looking move aligning with Malaysia’s long-term growth goals.
Employers and employees alike should stay informed of wage guidelines and seek advice if needed to ensure a smooth transition to the new standard.
Malaysia – Global Insights
For further detailed guidance on payroll, employment law, and compliance in Malaysia, visit our Malaysia Global Insight page on the activpayroll website. You can also explore broader regional updates and expertise in the APAC Global Expertise web section.
Next Steps
If you have any questions or need tailored advice, we encourage customers and potential clients to get in touch. Please complete our Contact Us form, and a member of our team will be happy to assist with your queries.
