Budget 2027, tabled on 9 October 2026, announced that Malaysia's minimum wage will rise from RM1,700 to RM2,000 a month from June 2027. The government expects the change to reach more than 4 million workers.
For SME owners, the headline hides the part that matters most. The same announcement exempts most smaller businesses, at least at the start. Whether the RM2,000 minimum wage applies to your SME depends mainly on your annual revenue, and several details have not yet been published.
This guide explains who pays RM2,000, who stays on RM1,700 for now, what it costs and what is still unsettled. For the wider Budget, see our summary of Budget 2027 for SMEs.
The quick answer: Most SMEs in Malaysia do not have to pay the RM2,000 minimum wage from June 2027. Budget 2027 exempts micro, small and medium enterprises (MSMEs) with annual revenue below RM50 million, so they stay on RM1,700 a month. Employers with revenue of RM50 million or more are expected to pay RM2,000 once a new Minimum Wages Order is gazetted.
1. What is the minimum wage in Malaysia, and what is changing in June 2027?
The minimum wage in Malaysia is currently RM1,700 a month nationwide, and Budget 2027 announced an increase to RM2,000 a month from June 2027 for employers that are not exempt.
The minimum wage is the lowest wage an employer may legally pay an employee for a month's work. People often search for it as gaji minimum, and the rate itself as kadar gaji minimum.
The current rate comes from the Minimum Wages Order 2024, which also sets hourly and daily rates. The table below compares the current rate with the announced one.
| Current rate (Minimum Wages Order 2024) | Announced rate (Budget 2027) | |
|---|---|---|
| Monthly | RM1,700 | RM2,000 |
| Hourly | RM8.72 | Not yet set (our estimate: about RM10.26) |
| Daily, 5-day week | RM78.46 | Not yet set (our estimate: about RM92.31) |
| Implementation date | In force now | June 2027, once gazetted |
| Who must pay | All employers covered by the Order | Employers not exempt (see section 2) |
Our estimates use the formula that produces the current Order's figures. The new Order may set different numbers, so use them for planning only.
The RM2,000 rate needs a new Order before it becomes law. A Minimum Wages Order is the gazetted order that sets the minimum wage rates.
The Budget also announced a minimum wage of RM2,500 a month for semi-skilled workers and graduates, as the start of a reformed income framework for workers. No implementation date, job list or legal mechanism has been announced, so nothing changes for your payroll yet.
2. Does the RM2,000 minimum wage apply to your SME?
For most SMEs in Malaysia, no: the RM2,000 minimum wage does not apply at the start. The Budget 2027 speech, published by the Ministry of Finance or Kementerian Kewangan Malaysia (MOF), exempts MSMEs with annual sales below RM50 million, "to provide room for adjustment to business models".
An MSME is a micro, small or medium enterprise. The Budget uses a single test: annual revenue below RM50 million (the Budget calls it annual sales). If your company falls within the exemption, you still have to pay at least the current RM1,700 a month. The exemption only spares you the increase, not the minimum wage itself.
If your annual revenue is RM50 million or more, plan on paying at least RM2,000 a month from June 2027, once the new Order is gazetted.
What has not been announced yet
Be careful about treating the exemption as settled. These points have not been confirmed in any official document:
- How long the exemption lasts. The Budget speech gives no end date.
- How annual revenue is measured. There is no guidance yet on which financial year, which accounts or which figure counts.
- Groups of companies. Malaysia's official SME definition caps services companies at RM20 million in revenue (or 75 full-time staff) and manufacturers at RM50 million (or 200 staff). It also excludes subsidiaries of listed companies, multinationals and government-linked companies. The Budget's single RM50 million test does not say whether these limits apply.
- Foreign workers. Whether the RM2,000 Order covers foreign workers has not been stated.
The new Minimum Wages Order should answer these questions. Until it is gazetted, we would not rely on any firmer answer.
3. What does a RM2,000 minimum wage cost your payroll?
Raising one Malaysian employee from RM1,700 to RM2,000 costs an employer about RM345 a month, or about RM4,140 a year, once statutory contributions are included.
The extra cost goes beyond the RM300 rise, because contributions to the Employees Provident Fund or Kumpulan Wang Simpanan Pekerja (EPF) and the Social Security Organisation or Pertubuhan Keselamatan Sosial (SOCSO) are worked out on wages. The EPF employer rate for Malaysian employees under 60 earning RM5,000 or less is 13%, and the employee pays 11%. SOCSO is about 1.75% for the employer, and the Employment Insurance System or Sistem Insurans Pekerjaan (EIS) is about 0.2%.
Our guide to EPF contribution rates explains how these amounts are calculated.
The table below shows the approximate monthly employer cost for one full-time Malaysian employee under 60, paid wage only. Actual contributions come from the official contribution tables, so treat these figures as approximate.
| Item (RM a month) | At RM1,700 | At RM2,000 | Change |
|---|---|---|---|
| Wage | 1,700 | 2,000 | +300 |
| Employer EPF (13%) | about 221 | about 260 | about +39 |
| Employer SOCSO (about 1.75%) | about 30 | about 35 | about +5 |
| Employer EIS (about 0.2%) | about 3 | about 4 | about +1 |
| Total employer cost | about 1,954 | about 2,299 | about +345 |
The employee's own EPF deduction also rises, from about RM187 to about RM220 a month, so their take-home pay grows by less than RM300.
For a team of five staff all moving from RM1,700 to RM2,000, the extra cost is about RM1,725 a month, or about RM20,700 a year.
If you run payroll yourself, check that your system can apply the new rate only to the right employees and recalculate contributions correctly. A payroll management service can take this on each month.
4. If your company is exempt, should you still plan for RM2,000?
Yes. The exemption has no announced end date, so it makes sense to work out now what RM2,000 would cost your business.
- The exemption may be temporary. The Budget describes it as room to adjust business models, and no end date has been published.
- Pay compression. If you raise anyone to RM2,000, staff just above that level may expect an increase too.
- Hiring and keeping staff. Larger employers will pay at least RM2,000, and workers may compare offers.
You do not have to raise pay in June 2027. Knowing the cost now gives you time to decide what to do once the rules are confirmed.
5. What happens if you pay below the minimum wage?
Paying below the minimum wage that applies to you is an offence under National Wages Consultative Council Act 2011, with a fine of up to RM10,000 for each employee underpaid.
The court can also order you to pay the wage arrears to each affected employee. A repeat offence can bring a fine of up to RM20,000 or up to five years' imprisonment, and a continuing offence after conviction adds a daily fine of up to RM1,000.
For exempt companies, the RM1,700 minimum still applies, so underpaying against that rate carries the same risk. Accurate payroll records are your main protection if the Ministry of Human Resources or Kementerian Sumber Manusia (KESUMA) asks you to show what you paid.
Frequently asked questions
When does the RM2,000 minimum wage start in Malaysia? Budget 2027 announced the RM2,000 minimum wage from June 2027. The new rate takes legal effect only once a new Minimum Wages Order is gazetted.
Are SMEs exempt from the RM2,000 minimum wage in Malaysia? Yes, most SMEs in Malaysia are exempt at the start. Budget 2027 exempts micro, small and medium enterprises with annual revenue below RM50 million, and these businesses must still pay at least RM1,700 a month. How long the exemption lasts and how revenue is measured have not been announced.
What is the penalty for paying below the minimum wage in Malaysia? Under the National Wages Consultative Council Act 2011, an employer can be fined up to RM10,000 for each employee paid below the minimum wage. The court can also order the employer to pay the arrears owed.
Get your payroll ready for the change
Whether your company stays on RM1,700 for now or must move to RM2,000 from June 2027, the minimum wage you pay has to be right for every employee, along with the EPF, SOCSO and EIS that follow from it. Centry runs monthly payroll and statutory contributions for its clients. Get in touch with us to keep your books up to date to get your payroll compliance in order.
