Malaysia RM2,000 Minimum Wage: SME Exemption and Budgeting

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The short answer: Malaysia's 2027 budget raises the national minimum wage from RM1,700 to RM2,000 a month from June 2027. Micro, small and medium enterprises (MSMEs) with sales below RM50 million are exempt. The Star reported on October 16 that the human resources minister said companies within a group will be assessed on the group's consolidated sales. The length of the exemption and how eligibility will be tested are still to be set out in a new minimum wages order. If you can't confirm that you're exempt, budget for RM2,000.

Key takeaways

• Start date: June 2027, subject to the 2027 minimum wages order published in the Gazette. RM1,700 applies until then.
• Exemption threshold: MSMEs with sales below RM50 million. Subsidiaries reportedly count group consolidated sales.
• Still unclear: which year's sales count, whether headcount matters, how long the exemption lasts and how to prove it.
• Budgeting: 2027 has only seven affected months. Employer cost rises by about RM345 a month per local worker and about RM310 per foreign worker.
• Related measures: RM2,500 starting pay is guidance only for now, and the e-Wages monitoring system launches in June 2027.

Malaysia RM2,000 minimum wage at a glance (as of October 20, 2026)

1. Minimum wage and exemption: paragraph 32 of the Budget 2027 speech raises the minimum wage from RM1,700 to RM2,000 from June 2027 and exempts MSMEs with sales below RM50 million. Ministry of Finance: Budget 2027 speech (in Malay)
2. Group assessment: the minister was reported as saying businesses would be assessed at group level, with subsidiaries judged on group consolidated turnover. The Star (October 16, 2026)
3. RM2,500 starting pay: to be issued as guidance first. Making it mandatory would require amending the National Wages Consultative Council Act 2011. The Star (October 17, 2026)
4. Tax deduction condition: companies other than MSMEs must pay wages through a bank account to claim a tax deduction (Budget 2027 speech, paragraph 33).

These points come from the budget speech and ministerial remarks. The minimum wages order and official guidelines, once published, will be final.

1. When does RM2,000 take effect?

Malaysia's minimum wage is set by the government on the advice of the National Wages Consultative Council and published in the Gazette as a minimum wages order. The 2027 budget says the new rate takes effect in June 2027.

The current order converts the monthly rate to daily and hourly rates as monthly pay × 12 ÷ 52 ÷ working days per week. On that basis, RM2,000 works out to about RM76.92 a day (six-day week), RM92.31 a day (five-day week) or RM9.62 an hour. The new order will set the official daily and hourly rates.

2. How does the exemption work?

The MSME exemption announced in Budget 2027 means that micro, small and medium enterprises with sales below RM50 million won't have to pay the new RM2,000 rate. The aim is to give them time to adjust their business models.

Based on what's been announced so far, you can work through it in three steps:

1. Check group consolidated sales. According to The Star's report, the minister said businesses will be assessed at group level, with subsidiaries judged on group consolidated turnover. If you're the Malaysian subsidiary of a foreign group with consolidated sales above RM50 million, you're unlikely to qualify.
2. Check whether you're an MSME. The budget uses the term PMKS (MSME). SME Corporation Malaysia's current definition looks at both sales and headcount, and it isn't yet clear whether the minimum wages order will follow it.
3. Read the minimum wages order. The exemption will ultimately depend on the order published in the Gazette.

The minister also encouraged businesses below the threshold to pay RM2,000 voluntarily.

3. What's still unclear about the exemption?

The Malaysian Employers Federation (MEF) and SME associations have publicly called for clear criteria. Until the rules are published, don't assume you're exempt. Under current law, underpaying the minimum wage can lead to a fine of up to RM10,000 per employee.

4. How should you budget for 2027?

1. Plan by scenario

2. Pro-rate for 2027

Only June to December 2027, seven months in total, are affected. Your 2027 cost will be about 7/12 of the full-year impact, and from 2028 you'll carry the full annual cost.

3. A worked example

Take a non-exempt business with 60 employees: 30 local staff on RM1,700, 20 local staff on RM1,900 and 10 foreign workers on RM1,700.

That comes to about RM110,194 in 2027 (seven months) and about RM188,904 for the full year 2028. SOCSO and EIS actually follow banded contribution tables, so these figures use approximate rates.

5. What other costs should you plan for?

1. Pay compression: staff earning around RM2,000 to RM2,300 will be much closer to new hires on the minimum wage. You may need to adjust their pay too, so set aside a separate amount.
2. Overtime: overtime is a multiple of the daily or hourly rate, so it rises in step for minimum-wage staff.
3. Paying through a bank: companies other than MSMEs must pay wages through a bank account to claim a tax deduction. If you still pay in cash, you'll need to change.
4. The e-Wages system: the Ministry of Human Resources plans to launch it in June 2027 to monitor in real time whether employers pay local and foreign workers on time and in full. Details of how employers will use it haven't been published.
5. RM2,500 starting pay guidance: this covers graduates and semi-skilled workers and is guidance only for now. It's a useful benchmark when hiring for those roles, but it isn't a legal minimum.

6. The bottom line

Malaysia's minimum wage rises to RM2,000 in June 2027. MSMEs with sales below RM50 million are exempt, group companies are reportedly assessed on consolidated sales, and the detailed rules are still to come. To prepare:

1. Check your group's consolidated sales. If you can't confirm you're exempt, budget for RM2,000.
2. Model seven months for 2027 and a full year for 2028, with a separate line for pay compression.
3. Watch for the minimum wages order and exemption rules, and settle your pay plan by the first quarter of 2027.

7. About Knit People

Knit People was founded in Canada in 2015 and began as a global payroll provider. It runs four operations centers, in Canada, China, the Philippines and Europe, and holds a government-registered MSB license. Its core services are employer of record (EOR), professional employer organization (PEO), global payroll and contractor of record (COR). It also offers recruitment, entity setup, tax compliance, benefits administration and work visa support. Knit People combines regional operations centers with in-country experts. It covers 172 countries and regions, has served more than 4,000 companies and 12,000 employees, and processes over RMB 4 billion in payroll a year.

8. FAQ

Q1：When does Malaysia's RM2,000 minimum wage take effect?

Under Budget 2027, the minimum wage rises from RM1,700 to RM2,000 a month from June 2027, subject to the 2027 minimum wages order published in the Gazette. RM1,700 continues to apply until then.

Q2：Which businesses are exempt from the RM2,000 minimum wage?

The budget exempts MSMEs with sales below RM50 million. The human resources minister was reported as saying companies would be assessed at group level, with subsidiaries judged on group consolidated turnover. Detailed criteria have not yet been published.

Q3：Is the Malaysian subsidiary of a foreign group exempt?

It depends on group consolidated sales. If subsidiaries are assessed at group level, as the minister was reported to have said, a subsidiary of a group with consolidated sales above RM50 million is unlikely to qualify and should budget for RM2,000.

Q4：What minimum wage will exempt businesses have to pay?

There's no official guidance yet. RM1,700 is expected to continue, but neither that nor the length of the exemption has been confirmed. The 2027 minimum wages order will decide.

Q5：Is RM2,500 a mandatory minimum wage?

Not at this stage. RM2,500 starting pay for graduates and semi-skilled workers will be issued as guidance first. Making it mandatory would require amending the National Wages Consultative Council Act 2011, and there's no timetable for that.

9. Sources

1. Ministry of Finance Malaysia: Ucapan Bajet 2027 (Budget 2027 speech, in Malay) (accessed October 20, 2026)
2. The Star: New e-wages system to help implement minimum wage increase from June next year, says Ramanan (October 16, 2026) (accessed October 20, 2026)
3. The Star: Bosses: RM2,500 pay should be a guide (October 17, 2026) (accessed October 20, 2026)
4. Media Selangor: Clear guidelines needed for MSME minimum wage exemption (October 12, 2026) (accessed October 20, 2026)
5. The Edge Malaysia: Minimum wage goes up to RM2,000 from June 2027, MSMEs with below RM50m revenue exempted (October 9, 2026) (accessed October 20, 2026)

Update log

• October 27, 2026: First published

Disclaimer: This article is based on Malaysia's Budget 2027 speech, public ministerial statements and media reports. It is for general information only and is not legal, tax or payroll advice. The minimum wage and exemption will be governed by the 2027 minimum wages order published in the Gazette. Cost examples use approximate contribution rates.