Exempt From the RM2,000 Minimum Wage, Small Firms May Still Have to Pay Up to Keep Workers

Small businesses may be exempt from the new RM2,000 minimum wage, but that does not mean they can ignore it. That was the message from Calvin Kwan, northern region chairman of the Small and Medium Enterprises Association of Malaysia (Samenta), in a report by The Star on 17 October 2026.

The exemption and its limits

Under Budget 2027, the national minimum wage will rise from RM1,700 to RM2,000 a month in June 2027. Businesses with annual sales below RM50 million are exempted to give them time to adjust.

Kwan said the exemption would not shield SMEs from competition for workers. He expects job seekers to start treating RM2,000 as the starting point when looking for work, which would make hiring harder for smaller firms. Existing workers may also ask for higher pay or leave for companies offering more.

Who feels the pressure most

According to Kwan, the challenge could be particularly hard for manufacturers, printers and packaging companies that depend on production workers, machine operators and technicians. These businesses often operate on thin margins and compete directly with larger firms for the same pool of workers.

What SMEs are asking for

Kwan called on the government to help small businesses improve productivity so they can afford higher wages. His suggestions, as reported, include:

• More grants for automation, machinery and staff training
• Apprenticeship and skills certification programmes
• Help with rising energy, transport and equipment costs
• Easier access to grants and financing, with simpler applications, faster approvals and clearer rules

He also said the one-percentage-point corporate tax cut in Budget 2027 would help profitable businesses but offer little relief to firms with low earnings or cash flow problems. Larger financing allocations would mean little if small businesses could not qualify, he added.

Key takeaway: for many SMEs, the real deadline is not a legal one. It is the moment their best workers get a RM2,000 offer elsewhere.

Measuring success differently

Kwan said the government should judge its measures by how many businesses actually received help and whether their productivity improved, rather than by how much money was allocated. This echoes calls from other SME groups for outcome-based support, which we covered in our report on SME Association's Budget 2027 requests.

What it means for Malaysians

For workers and business owners, the wage change has practical implications:

1. Workers in SMEs may gain bargaining power, as RM2,000 becomes a common benchmark even at exempt firms.
2. SME owners should start planning now: review pay structures, productivity and pricing well before June 2027.
3. Productivity investments such as simple automation, better scheduling and staff training can help offset higher wage costs.
4. Consumers may see some price adjustments as businesses pass on part of their higher costs.

Small business owners can explore the financing and digitalisation support in Budget 2027, including the KUSKOP PowerUp 10k initiative covered in our PowerUp 10k report.

What to watch

Watch for the detailed Minimum Wages Order, any productivity grants aimed at SMEs and how quickly larger firms adjust pay. Labour market data in 2027 will show whether smaller firms are losing workers to bigger employers.