FMM urges "evidence-based, gradual, and consultative" approach to Malaysia’s minimum wage review

The federation said the current proposed increase from RM1,700 to RM3,100 should be considered alongside productivity, business costs, competitiveness, and its wider impact on wages and employment.

The Federation of Malaysian Manufacturing (FMM) has backed efforts to raise workers’ incomes but said the Malaysian Trades Union Congress’ (MTUC) proposal to increase Malaysia’s minimum wage from RM1,700 to RM3,100 is excessive and disproportionate to current economic and business conditions.

The proposed RM1,400 increase, equivalent to 82.4%, should not be considered in isolation from factors including productivity growth, business affordability, Malaysia’s competitiveness, inflation, and employment opportunities, FMM said in a statement on 24 August 2026.

It said the increase would be unprecedented compared with previous adjustments to Malaysia’s statutory minimum wage.

Since the minimum wage was introduced in 2013, rates have increased progressively from RM900 in Peninsular Malaysia and RM800 in Sabah and Sarawak, reaching RM1,700 in 2025. The current rate was only fully implemented across all employers in August 2025, the federation noted.

An immediate increase to RM3,100 would therefore represent a significant change to businesses’ labour costs and the wider wage structure, it added.

Wider impact on wage structures

FMM said the impact would extend beyond workers currently earning the minimum wage. At RM3,100, the proposed wage floor would be close to the median monthly wage of RM3,167 for formal-sector employees in December 2025. This, it cautioned, could compress wage differentials between entry-level employees and workers in roles requiring greater skills, experience and responsibility.

Employers could consequently face pressure to raise salaries across subsequent wage bands, including for operators, supervisors, technicians and skilled workers – which could then result in a larger increase in overall payroll costs than the direct adjustment to the statutory minimum wage, FMM said.

The impact could be particularly significant for SMEs and labour-intensive industries operating on thinner margins, with limited ability to pass higher costs on to customers.

According to FMM, a sharp rise in payroll costs could affect business viability, investment and expansion decisions, while potentially accelerating the relocation or outsourcing of operations and reducing entry-level employment opportunities. It also warned that businesses may seek to recover higher labour costs through increased prices.

FMM calls for sectoral assessment

While Malaysia’s recent economic and productivity indicators have been positive, FMM said these gains have not been uniform across sectors and companies – highlighting that businesses continue to contend with higher energy and input costs, taxation and compliance costs, geopolitical and global trade uncertainties, regional competition, and uneven market demand.

To that effect, it has called on the National Wages Consultative Council (NWCC) to undertake a comprehensive sectoral assessment of the potential impact of any minimum wage increase, including direct and indirect payroll costs across different industries and company sizes.

The assessment should consider factors including cost of living, inflation, median wages, labour productivity, unemployment and employment conditions, sectoral performance, employers’ financial capacity, and Malaysia’s international competitiveness.

FMM also pointed to minimum wage levels across competing ASEAN manufacturing markets. Based on 2026 rates it cited, minimum wages range from approximately RM570 to RM820 a month in Vietnam, RM1,080 to RM1,280 in Thailand, and around RM560 to RM1,390 across Indonesia, depending on location. The prevailing non-agricultural minimum wage in Metro Manila is approximately RM1,300 a month, based on 26 working days.

Against this backdrop, FMM said a RM3,100 wage floor would be more than twice the minimum wage in many competing ASEAN manufacturing locations, potentially affecting Malaysia’s cost competitiveness in labour-intensive and internationally contestable manufacturing activities.

It acknowledged that exchange-rate comparisons alone should not determine minimum wage policy, with factors such as productivity, skills, cost of living, statutory contributions, overtime, allowances, and total labour costs also needing to be considered.

Calls for gradual wage growth

In view of the above, FMM has called for the minimum wage review to remain within the NWCC’s established tripartite process, with meaningful consultation between employers and workers.

If evidence supports a further increase, it should be “moderate, gradual, and predictable”, giving businesses sufficient time to plan, improve productivity, and restructure operations, the federation said.

It also said wage progression should be supported by skills upgrading, structured career pathways, and productivity-linked remuneration. "Where companies perform well, employees can benefit through better bonuses, incentives and wage progression that recognise productivity, skills and individual contribution, rather than relying solely on a very large uniform increase in the statutory wage floor."

At the same time, FMM called on the Government to create conditions that would enable businesses to sustainably pay higher wages.

Under its Budget 2027 proposals, the federation has advocated greater fiscal space for productive businesses, particularly SMEs, to invest in automation, smart manufacturing, digitalisation, artificial intelligence, R&D, workforce development, and higher-value activities.

It has also called for a more competitive SME tax framework, reduced tax cascading and regulatory burdens, accessible grants and financing, and stronger incentives for technology adoption, innovation, and skills development.

"The objective should be to create a virtuous cycle in which higher retained earnings support greater productive investment, leading to higher productivity, stronger business performance, better wages and more highly skilled and higher-value jobs. Wage increases that are not supported by corresponding improvements in productivity and value creation risk increasing prices and weakening competitiveness without delivering a sustainable improvement in workers’ real purchasing power", it said.

The federation added: "The sustainable path towards better wages is through productivity, skills, investment, innovation, and profitable business growth. A balanced and evidence-based approach will protect workers’ welfare while ensuring that businesses retain the capacity to invest, grow and continue creating quality employment for Malaysians."

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