KUALA LUMPUR: Exempting micro, small and medium enterprises (MSMEs) from the RM2,000 minimum wage requirement is necessary to ease cost pressures and preserve their capacity to invest, automate and expand.
Small and Medium Enterprises Association of Malaysia (Samenta) president Datuk William Ng said businesses had faced mounting cost pressures over the past two years, even before the latest energy crisis, squeezing profit margins despite higher sales.
"You may have nice gross domestic product numbers, you may have SMEs reporting higher sales figures.
"But when it comes to the bottom line, things are not looking very good," he said during a panel session at a post-2027 debate today.
Ng said the association supported the government's decision to exempt MSMEs from the latest minimum wage increase, as higher labour costs could further strain businesses already facing tight margins.
He said the concern was not widespread business closures, but the potential loss of funds SMEs needed for productivity improvements and expansion.
"Our fear was that if you impose a higher wage at a time when there is severe marginal compression, you wipe out whatever spare or extra income that the SME has that are supposedly earmarked for automation, for buying new machinery, for growth," he said.
He added that the funds were also needed for compliance with new environmental, social and governance (ESG) requirements, the Carbon Border Adjustment Mechanism and other obligations.
Ng said many SMEs in the Klang Valley already paid wages above RM2,000, but the impact could differ for smaller businesses in other parts of the country.
He cited a small food stall operator in Kota Bharu who employed a neighbour with limited education and skills, saying an additional RM300 in monthly wages could determine whether the worker retained his job.
"That RM300 extra that it comes through would have made a difference in whether I might still hire this neighbour, because I don't really need him.
"I just want to help out so that, you know, he gets some income," he added.
Ng said some businesses might respond to higher labour costs by reducing hiring or passing additional costs to consumers, rather than shutting down.
He also acknowledged concerns that the exemption could create a two-tier minimum wage system, with workers at larger companies receiving higher minimum pay than those employed by smaller businesses.
"Of course, the fact that now you have got two tiers of minimum wage doesn't help because we do want to equalise that eventually. But it is what it is," he said.
Ng said SMEs employed about half of the country's workforce, while workers in smaller businesses generally had lower education and skill levels than those employed by government-linked companies and multinational corporations.
For these workers, he said, retaining employment was also an important consideration alongside efforts to improve wages.
"Of course minimum wage is important, but the job itself is even more important," added Ng.
When tabling the 2027 Budget last Friday, Prime Minister Datuk Seri Anwar Ibrahim announced that loan facilities and financing guarantees for MSMEs would increase to RM57 billion in 2027, up from RM50 billion.
He also announced a one-percentage-point reduction in corporate income tax rates for MSMEs.
The minimum wage will rise from RM1,700 to RM2,000 effective June 2027.
MSMEs recording annual sales below RM50 million are exempted from implementing the revised rate to give them time to adjust their business models.
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