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The latest Budget sets out a higher minimum wage, RM3bn for HRD Corp training opportunities, and expanded support for gig workers, alongside measures to encourage workforce development and business growth.
Malaysia’s Fifth MADANI Budget has placed wages, skills development, and worker protection among its key priorities, with measures that could shape employers’ workforce planning, training investments, and employment costs in 2027.
Tabled by Prime Minister and Finance Minister Anwar Ibrahim in the Dewan Rakyat on Friday (9 October 2026), the Budget proposes to raise the minimum wage, expand access to skills training and strengthen social protection for gig workers. It also sets out incentives intended to encourage businesses to invest in talent development and support workers’ income growth.
Here are the key employment-related updates to note.
1. Minimum wage to rise to RM2,000 from June 2027
The Government will raise Malaysia’s minimum wage from RM1,700 to RM2,000 a month from June 2027. The increase is expected to benefit more than 4mn workers. Micro, small and medium-sized enterprises (MSMEs) with annual sales below RM50mn will be exempted from the new minimum wage requirement, giving them more room to adjust their business models.
Beyond the minimum wage, the Government plans to reform the workers’ income framework, beginning with a minimum wage of RM2,500 a month for semi-skilled workers and graduates.
The Budget also welcomed commitments by government-linked investment companies (GLICs) and government-linked companies (GLCs) to raise their living wage benchmark from RM3,100 to RM3,400 a month. The initiative is expected to benefit approximately 230,000 workers.
PM Anwar noted that Malaysia’s labour compensation share of gross domestic product remains relatively low at 33.9%, and called on private-sector employers to play their part in ensuring fairer remuneration.
2. HRD Corp receives RM3bn for 3mn training opportunities
Skills development is another major focus, with RM8bn allocated to technical and vocational education and training (TVET).
Separately, HRD Corp will receive RM3bn to provide 3mn training opportunities, including continuing professional development. The Skills Development Fund Corporation (PTPK) will receive RM500mn for training financing.
Under Bakat MADANI, the Government aims to create 30,000 new jobs in 2027. Tax deductions will also be available for companies providing training during the period from 29 June 2026 to 31 December 2030.
Other workforce development measures include:
- The Construction Industry Development Board (CIDB) will train 10,000 individuals in robotics and digital skills.
- MARA will provide training for 1,000 Bumiputera youths in high-growth sectors.
- Automotive training will be provided through ADTEC.
- RM150mn will be allocated through MITRA for training and employment opportunities for Indian youth in areas including industrial automation, technology, and aircraft maintenance.
The Government will also expand access to digital learning. Rakyat Digital will offer free Coursera access covering more than 16,000 courses and professional certificates, while another 100,000 free AI subscriptions will be made available, including ChatGPT.
AI Malaysia Berhad will receive nearly RM15mn, with a target of developing 200,000 AI-skilled workers. Meanwhile, MDEC will allocate RM30mn to help 4,000 MSMEs adopt AI and train and certify 5,000 AI professionals.
3. Expanded protections and support for gig workers
The Budget also outlines measures that aim to improve income security and social protection for Malaysia’s estimated 600,000 e-hailing and p-hailing workers. On this, the Government and Grab Holdings Limited have agreed to share the cost of a RM160mn package, to be implemented from 2027. It will include an increase in minimum income rates, assistance with vehicle maintenance and insurance costs, and contributions to the Social Security Organisation (SOCSO).
Under the package, median net monthly income is expected to rise by up to RM227 for e-hailing drivers and RM100 for p-hailing delivery workers.
The Government will also introduce a 35% matching incentive for SOCSO contributions by e-hailing and p-hailing workers. This will increase to 50% if platform companies also contribute towards workers’ contributions.
The above aside, a 70% matching incentive for SOCSO contributions will also be extended to 200,000 self-employed individuals across 17 sectors where coverage is not mandatory.
Other measures include:
- Expanded tax relief for mandatory contributions under the LINDUNG Kendiri scheme, with additional relief of up to RM150 for voluntary contributions to LINDUNG 24 Jam and LINDUNG Kendiri.
- An EPF matching incentive of up to RM600 a year for e-hailing and p-hailing drivers, subject to a lifetime limit of RM6,000.
- RM270mn in financing facilities from BSN and Agrobank for gig workers seeking to start a business or purchase their first home.
- Comprehensive regulation of the p-hailing sector under the Land Public Transport Agency (APAD) and the Commercial Vehicles Licensing Board (LPKP).
The Government is also working on a minimum income rate or formula and social protection measures through a council, with the process expected to be finalised in early 2027.
Separately, every Malaysian citizen will be automatically registered as an EPF member upon turning 18, allowing retirement savings to begin earlier.
4. Tax changes and incentives relevant to employers and workers
The Budget includes a new condition for tax deductions on wage expenditure. Companies other than MSMEs may claim these deductions only if wages are paid through bank accounts in accordance with the Employment Act 1955. The condition does not apply to tax deductions for other expenditure.
For individuals, the tax relief threshold will increase from RM9,000 to RM12,000. Individual income tax rates will be reduced by one percentage point for those in the RM70,001-RM100,000 income band, to 18%, and the RM100,001-RM150,000 band, to 24%.
Additional tax reliefs will cover postpartum care, all care expenses for parents and grandparents, sports shoes, children’s tuition, and all fields of study, AI subscriptions, and pet vaccination and adoption from registered shelters. The tax rate for income above RM1mn will be adjusted to 30%.
Collectively, the expanded reliefs and reduced individual income tax rates are expected to provide approximately 5mn taxpayers with additional disposable income of up to RM1,600.
5. Support for civil servants, working parents and retirees
The Budget also includes several measures affecting the public-sector workforce and family support.
Civil servants in Grade Premier B and below, including contract appointees, will receive special financial assistance of RM1,500. More than 1mn government retirees, including veterans, will receive RM750. The payments are to be made in two tranches: before Aidilfitri and ahead of the 70th anniversary of Independence.
The Government will increase the total maternity leave entitlement over a civil servant’s service from 360 to 490 days, while retaining a maximum of 98 days for each childbirth. RM20mn will also be allocated for childcare centres at government facilities.
Other measures include RM2.3bn for government quarters and one-off promotions for 12,000 management and professional officers who have been waiting for promotion because of limited posts. The minimum pension will rise from RM1,000 to RM1,350, benefiting nearly 59,000 pensioners.
These measures form part of the Budget’s wider approach to supporting household welfare and public-sector employees.
6. Cost-of-living support and household purchasing power
The Government will allocate RM16bn to Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA), up from RM15bn. SARA support of up to RM150 a month, or RM1,800 a year, will be extended to all STR recipients, potentially reaching up to 9mn people. A separate SARA MADANI payment of RM100 on two occasions will be provided to Malaysians aged 18 and above who do not receive STR, ahead of Aidilfitri and National Day. This could reach up to 13mn people, including those in the M40 income group.
PM Anwar added that SARA can also be used to purchase fresh produce and perishables at 216 FAMA farmers’ markets and tamu.
Meanwhile, the allocation for Jualan Rahmah and Agro programmes will rise from RM630mn to RM750mn, supporting 35,000 programmes – 30,000 Jualan Rahmah programmes and 5,000 Agro programmes. Fresh produce will be offered at prices up to 30% lower.
Overall, subsidies, assistance and incentives will exceed RM80bn, including RM40bn in fuel subsidies and nearly RM3.3bn for the Social Welfare Department.
While these measures are aimed at easing the cost of living, they also form part of the wider economic context in which employers make decisions about wages and employee support.
7. Business financing and support for growth
The total value of loan facilities and financing guarantees will increase from RM50bn to RM57bn in 2027. Bank Negara Malaysia will add RM5bn to its financing facility for SMEs affected by the West Asia conflict, bringing the facility to RM10bn. At the same time, MATRADE will allocate RM60mn to support exporters, while Bank Pembangunan will provide RM1bn in financing to help MSMEs enter export markets.
The Budget also includes up to RM32bn in financing guarantees through SJPP and CGC, with RM1bn in guarantees earmarked to support local companies expanding through mergers and acquisitions.
GLICs will invest RM25bn domestically through GEAR-uP, including in higher-value segments of the local semiconductor industry. A RM50mn university commercialisation fund and RM6.6bn in microfinancing for entrepreneurs are also among the measures announced.
These initiatives are intended to support business expansion, innovation and investment in higher-value activities.
8. Wider economic and policy context
According to PM Anwar, the Government forecasts GDP growth of 4.8% to 5.3% in 2026 and 4.2% to 5.2% in 2027, in line with the Ekonomi MADANI framework and the 13th Malaysia Plan for 2026–2030.
The Budget also addresses several areas beyond employment and skills:
- More than 9,000 contract doctors will be offered permanent posts in 2027.
- The service tax rate for elderly care services will be reduced from 8% to 6% from 1 January 2027, with an exemption for annual fees of up to RM96,000. More than RM40mn will be channelled through HRD Corp to train 8,000 people for employment in elderly care.
- For first-time homebuyers, full stamp duty exemptions will apply to loan agreements and transfer instruments for homes priced up to RM500,000. For homes priced up to RM750,000, the first RM500,000 will be fully exempt and the balance will receive a 50% exemption. These measures will apply to sale and purchase agreements signed from 1 January 2027 to 31 December 2030.
- The Government will also provide RM20bn in housing financing guarantees to support 80,000 first-time buyers, particularly self-employed individuals without fixed incomes.
Budget totals and fiscal outlook
Overall, the Government is looking to mobilise RM510bn in national resources in 2027, up from RM470bn. This comprises RM376.8bn in Federal operating expenditure, RM83bn in development expenditure, RM25bn in GLIC investments, RM11bn in public-private investments, and RM14.2bn in investments by Federal Statutory Bodies and MKD companies.
At the same time, Federal revenue is projected to reach RM380.8bn in 2027. PM Anwar added that the government is targeting a fiscal deficit of 3.3% of GDP in 2027, moving towards 3% in 2028.
Photo / PM Anwar's Facebook
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