RM1,500 Minimum Wage Does Not Include OT and Allowances

Human Resources Minister Datuk Seri M. Saravanan said the monthly minimum wage of RM1,500 is specifically for the fundamental wage and doesn’t include allowances and overtime pay.

"(It is the) basic," he said when asked by The Star on whether or not overtime pay and different allowances are taken under consideration.

New minimum wage is equal to RM7.21 per hour

The new minimum wage is set at RM7.21 per hour. As for daily salary, it is RM57.69 for a six-day workweek, RM69.23 for a five-day workweek and RM86.54 for a four-day workweek.

The new minimum wage applies to those who hire five or more employees and for jobs classified under Human Resources Ministry's Malaysia Standard Classification of Occupations (Masco). 

Companies other than those classified under Masco and that hire fewer than five employees will not need to pay the new rate this year and will only be applicable to them starting Jan 1, 2023.

The minimum wage also applies to employees who are paid based on "piece rate, tonnage, task, trip or commission", provided that the company hires five or more workers.

Last week, the new order signed by Saravanan was gazetted, which means that the former order stipulating an RM1,200 minimum wage has been revoked.

For employees hired by companies in areas under municipal councils or city councils with fewer than five employees, the minimum salary rate will stay at RM1,200 until Dec 31, 2022.

The municipal and city council areas refer to those that come under the Local Government Act, Local Government Ordinance 1961 [Sabah No. 11 of 1961] or Local Authorities Ordinance 1996, including Putrajaya and Labuan.

Over 90% of Malaysians employed by SMEs are already receiving RM1,500 including allowances

Ding Hong Sing, the president of the SME Association of Malaysia, said that more than 90% of Malaysians hired by small and medium enterprises (SMEs) have already been receiving RM1,500 or extra month-to-month if allowances and other incentives are taken into consideration. 

He said employers may resort to slashing their employees' allowances after the fundamental salary had been increased. He added that if the fundamental salary is RM1,500, then the bosses would need to cut the allowances as this was a type of incentive due to their low salary rate.

But, Ding said employers would not mind increasing the wage rate, including allowances and other incentives of up to RM2,500 if they can afford it and the employees perform well. 

"Foreign workers are getting RM1,200 because we have to provide them with accommodation, pay the levy and Foreign Workers’ Medical Examination Screening System medical check-ups. When you include all that, it is more than RM1,500," he said.

Price increase due to new minimum wage?

Ding said the new minimum wage enforcement would lead to an increase in the prices of goods and services since employers’ costs would increase.

"Prices of goods will increase by 15% to 30%," he stated, anticipating another round of price hikes in May.

"There is no choice because the salary has increased by 25% while in rural areas it is 36%," he added. He also stated that companies that could not afford to pay their workers a basic salary of RM1,500 might resort to downsizing their manpower or closing shop.

"Those who can survive will increase the prices of their goods," he said.