Minimum wage RM2,000 from June 2027: who must pay it, who is exempt, and what it costs

Budget 2027, tabled on 9 October 2026, raises the minimum wage from RM1,700 to RM2,000 a month from June 2027. The government says more than four million workers will be covered. It also says businesses with annual sales below RM50 million will be exempt, at least for a while.

That exemption means many small companies will not have to pay RM2,000 in June 2027. It does not mean they can ignore it. Here is what has been announced, what is still unclear, and what the increase costs an employer for each worker.

What has been announced

• The minimum wage rises from RM1,700 to RM2,000 a month from June 2027.
• Businesses with annual sales below RM50 million are exempt, to give them time to adjust.
• The government wants a starting salary of RM2,500 for graduates and semi-skilled workers.
• The labour departments in Peninsular Malaysia, Sabah and Sarawak will enforce the new rate under the National Wages Consultative Council Act 2011. Employers who break it face fines or imprisonment.

The new rate takes effect through a new Minimum Wages Order. We found no report that it had been gazetted as of 29 October 2026. The order should set the exact start date and the terms of the exemption.

Who is exempt, and what is still unclear

The Prime Minister and the Economy Minister both gave the test as annual sales below RM50 million. The reason given was to limit retrenchments and contain costs while businesses adjust. SME Corp has called it a short-term adjustment period.

Several things have not been explained yet:

• How long the exemption lasts. No end date has been given.
• How sales are measured. For example, which financial year counts, and whether group companies are added together.
• Whether the test is the same as the official SME definition. That definition uses sales and number of employees, with different limits for manufacturing and services. The announcements mention sales only.
• What exempt employers must pay. The reports do not say so directly, but the current RM1,700 order is in force until it is replaced.

Until the order is gazetted, do not assume your company is exempt. Check the order when it is published, and keep your latest audited sales figure to hand.

The RM2,500 starting salary is a guideline for now

The RM2,500 figure for graduates and semi-skilled workers is not a legal minimum yet. The Human Resources Ministry said on 16 October that starting salaries by qualification will first be issued as guidelines. Making them compulsory would need a change to the National Wages Consultative Council Act. The ministry plans to publish the guidelines with the new order in June 2027.

What RM2,000 costs per worker

The increase is not just RM300. The employer's EPF, SOCSO and EIS contributions rise with the wage. For a Malaysian employee under 60, using the official contribution tables now in force:

At RM1,700 a month:

• Salary: RM1,700.00
• Employer EPF: RM221.00
• Employer SOCSO: RM28.85
• Employer EIS: RM3.30
• Total cost to the employer: RM1,953.15

At RM2,000 a month:

• Salary: RM2,000.00
• Employer EPF: RM260.00
• Employer SOCSO: RM34.15
• Employer EIS: RM3.90
• Total cost to the employer: RM2,298.05

That is RM344.90 more a month for each worker on the minimum wage, or RM4,138.80 a year. A business with ten such workers pays about RM41,400 more a year.

The worker's take-home pay rises by less than RM300, because their own EPF, SOCSO and EIS deductions also rise. On RM2,000, an employee under 60 has RM233.65 deducted, against RM198.55 on RM1,700.

You can check the figures for your own staff, including foreign workers and staff aged 60 and over, with our free contribution calculator at /contribution-calculator.

There may be knock-on costs too. Staff earning a little above RM2,000 today may expect a rise to keep the gap with newer staff. Overtime, which is worked out from the basic wage, will also cost more.

Why exempt businesses should still plan

• The exemption is temporary. When it ends, the cost arrives in full.
• Workers can move. Once larger employers pay RM2,000, staff on RM1,700 have a reason to leave.
• Graduates will compare offers against the RM2,500 guideline.
• The ministry is also working on an electronic wage-monitoring module. It has only been proposed so far, but it would make wage records easier to check.

What to do now

• List every employee whose basic wage is below RM2,000.
• Work out the extra cost per month and per year, including EPF, SOCSO and EIS.
• Check your annual sales against RM50 million, using your latest audited accounts.
• Watch for the gazetted Minimum Wages Order and the starting salary guidelines.
• Build the higher cost into your 2027 budget and pricing, even if you expect to be exempt.

Our view: raise pay and skills together

Workers deserve wages that keep up with the cost of living, and a minimum wage protects the lowest paid. But how often and how far the floor moves matters as much as the level. Here is our view as a firm that runs payroll for small businesses.

The increases are getting bigger and closer together. The minimum wage started at RM900 in 2013 (RM800 in Sabah, Sarawak and Labuan). It went to RM1,000 in 2016, RM1,100 in 2019, RM1,500 in 2022 and RM1,700 in 2025. The move to RM2,000 comes about two years after RM1,700 applied to every employer, and it is a 17.6% rise. Each quarter of 2025, labour productivity per hour grew by between 2.2% and 4.9% (DOSM). When wages are raised by law much faster than output per worker, the gap is paid by the employer, through prices or through fewer jobs.

Bank Negara has flagged the same risk. In July 2026 Assistant Governor Datuk Fraziali Ismail put Malaysia's minimum wage at about 0.58 of the median wage. He called 0.55 to 0.6 "a sweet spot" and said that above it the ratio becomes "punitive to the economy". He also said the minimum wage has had "no cascading effect" on higher salaries, and that the next task is to raise median pay through better jobs and skills: "we have built a good floor… let's build the staircase." For a rough comparison, RM2,000 against DOSM's 2025 median salary of RM2,940 gives about 0.68. Bank Negara's method differs and the median will have grown by 2027, but the direction is clear.

Smaller, regular and predictable steps tied to productivity would let businesses plan. Large jumps announced in a budget speech, with the terms to follow, do not.

If the government sets the price of labour, it should also help raise its value. Today the main skills tool is the HRD Corp levy: employers with ten or more Malaysian staff pay 1% of wages and can claim training back. Nothing requires a worker to train, and small employers below the threshold are mostly outside the system. Singapore takes a different approach. Under its Progressive Wage Model, pay in sectors such as retail and food services rises along a ladder, and workers must complete approved training modules to move up it, with the government co-funding part of the wage increases.

We would like to see the same balance here: a minimum number of certified training hours a year for workers covered by the minimum wage, paid for by HRD Corp or a direct subsidy for small employers, and pay steps above the minimum linked to skills gained. The Human Resources Ministry's plan for starting salaries by qualification and its Progressive Wage Policy point that way. Skill and reward should move together.

Working time is part of the cost too. Malaysia's statutory annual leave, 8 to 16 days depending on service, is close to Singapore's 7 to 14. Public holidays are where Malaysia stands out: 14 federal holidays in 2023, plus state holidays, against Singapore's 11. On top of these come holidays declared at short notice under section 8 of the Holidays Act 1951. The Malaysian Employers Federation estimated that one extra holiday in September 2025 could cost employers over RM1 billion, and SME groups have asked the government to review that power. If labour is going to cost more, fewer surprise holidays, announced well ahead, would help businesses absorb it.

None of this argues against paying people fairly. It argues for a wage policy that also builds skills and productivity, so that higher pay can last.

All of this rests on announcements made in October 2026. The order and the guidelines can still change the details, and we will update this guide when they are published.