The government has announced a significant increase the basic salary in Malaysia raising from RM1,500 to RM1,700 per month effective on February 1, 2025. The government has made this decision as part of the government’s broader economic policy to improve higher living standards for all employees. In this article, we will look into more details about this wage adjustment, its complications for payroll systems and the compliance issue that the employers should be aware of.
Content Outline
Key Summary
New Minimum Wage Increase
Malaysia will raise the minimum wage from RM1,500 to RM1,700 effective February 1, 2025, to support higher living standards.
Special Timeline for Small Businesses
Companies with fewer than five employees have until August 1, 2025, to implement the new wage.
Inclusion and Exemptions
The new wage applies to all private-sector workers, including foreign employees, but excludes domestic and apprentice workers.
Compliance and Penalties
Employers must comply with the new wage laws or face fines of RM1,000 to RM20,000 and imprisonment for up to five years.
Payroll Preparation for Employers
Businesses are advised to update payroll systems and budget plans early to ensure smooth compliance with the wage change.
Key Details Of The Minimum Wage Increase
New Minimum Wage Amount
The new minimum wage for all private sector employees including expatriates will be RM1,700 effective from February 1, 2025. This increase is to support employees battling the increasing living cost and to ensure fair compensation.
Special Timeline for Small Business Owners
For businesses with fewer than five employees, the new minimum wage will be effective on August 1, 2025. This is because the smaller employers will be given a grace period to adapt payroll systems changes accordingly.
Who Does The Minimum Wage Apply To?
Inclusion of All Workers
The RM 1,700 minimum wage applies to all workers in the private sector both full-time and part-time including foreign workers. This inclusive approach helps foster equality in the workforce.
Exclusions from the Policy
However, the new minimum wage policy does not cover domestic workers and employees who are on an apprenticeship contract. This will be important to note for employers when adjusting their payroll structures.
Ensuring Compliance With Payroll Regulations
Non-Discrimination In Wage Payment
The new minimum wage policy is also in line with the ILO Equal Remuneration Convention (No 100) which Malaysia ratified in 1997. Under the convention, all employers are called upon to avoid wage discrimination based on nationality and other factors. It is crucial for payroll departments to monitor full compliance.
Penalty for Non-Compliance
Employers must adhere to the new minimum wage even if workers agree to lower wages. Failure to follow the compliance can result in penalties between RM1,000 and RM20,000, and for serious offenses, an imprisonment for up to five years. Therefore, ensuring accurate payroll practices is vital to avoid legal implications.
Preparing Your Business For The Minimum Wage Change
Updating Payroll Systems
Employers are advised to review and update their payroll systems in advance of the effective date, including recalibration of all salary structures to comply with the new minimum wage requirements.
Planning For Financial Implications
Small and medium-scale enterprises should take advantage of the grace period to accommodate the changes in their budgets and avoid stress from financial constraints. With careful planning, the transition to the new wage standards will be well facilitated.
Get Help For Your Payroll Needs
The upcoming minimum wage increase represents a significant step towards enhancing worker well-being and ensuring fair compensation across sectors in Malaysia. Employers must be proactive in preparing their payroll systems and understanding the implications of this change.
Navigating payroll changes can be complex. Leverage FastLaneRecruit’s expertise in recruitment and compliance to ensure your business meets new payroll requirements while finding the right talent. Contact FastLaneRecruit today!
