If your business still budgets payroll around RM1,500, you’re behind. Malaysia’s minimum wage moved to RM1,700 a month back in 2025, and as of 1 August 2025, every employer in the country has to pay it, including micro businesses with fewer than 5 staff. There’s no more grace period.
For SME owners running payroll manually or through an outdated system, this is worth double-checking today. Underpaying minimum wage isn’t a paperwork slip, it’s a compliance breach with real fines attached.
What Is Malaysia’s Minimum Wage in 2026?
The minimum wage in Malaysia is RM1,700 per month, which works out to:
- RM8.72 per hour
- Roughly RM65 per day (based on a 26-day working month)
This rate applies nationwide. Peninsular Malaysia, Sabah, Sarawak, and Labuan all follow the same figure. There’s no longer a lower rate for smaller states or micro companies.
Who This Applies To
The minimum wage now covers:
- All Malaysian citizens and permanent residents in the private sector
- Foreign workers
- Part-time and contract employees (paid proportionally by hours worked)
- Companies of every size, including micro-SMEs with fewer than 5 employees
The main exemption that remains is domestic workers (maids, drivers, gardeners hired for a household), though this is under ongoing government review and could change in a future order.
This is where a lot of employers trip up: assuming their small headcount still qualifies for a delay. That grace period ended in August 2025. If you run a 3-person shop or a 300-person company, the same RM1,700 floor applies to both.
The Rule Most Employers Get Wrong: Basic Wage Only
This is the single most common compliance mistake we see. The RM1,700 minimum applies strictly to basic salary, not total take-home pay.
That means an employee earning RM1,400 basic salary plus RM300 transport allowance is not compliant, even though their total pay reaches RM1,700. Allowances, bonuses, commissions, overtime, and benefits-in-kind cannot be counted toward the minimum.
If your payroll structure blends basic pay with a mix of allowances to “make up” the number, this is worth reviewing properly before an inspection catches it, not after.
Penalties for Non-Compliance
Employers who pay below minimum wage face:
- Fines of up to RM10,000 per employee, per offence
- Higher penalties for repeat or wilful violations
- Labour Department orders to pay back wages with interest
Employees are also legally protected from retaliation for reporting underpayment, so this isn’t a risk that quietly goes away over time.
Commission and Piece-Rate Workers
If your staff are paid by trip, tonnage, piece rate, or commission rather than a fixed basic wage, the rule still applies: their total monthly earnings must equal or exceed RM1,700. This matters for businesses in delivery, sales, and logistics where pay structures are often commission-heavy.
What Employers Should Do Now
- Audit basic salaries across your payroll, not total pay, just the basic component, to confirm every employee clears RM1,700
- Review allowance structures to make sure they’re not propping up an under-RM1,700 basic wage
- Update employment contracts and offer letters if your basic pay figures are outdated
- Recalculate part-time and hourly pay against the RM8.72/hour floor
This is exactly the kind of detail that’s easy to miss when payroll is handled in-house alongside a dozen other responsibilities, and it’s one of the areas where getting it wrong is expensive.
Frequently Asked Questions
What is the minimum wage in Malaysia for 2026?
RM1,700 per month, or RM8.72 per hour, applying nationwide since 1 August 2025.
Does minimum wage apply to small businesses in Malaysia?
Yes. The exemption for companies with fewer than 5 employees ended in August 2025. All employers must now pay RM1,700 minimum, regardless of size.
Can allowances count toward the RM1,700 minimum wage?
No. Only basic salary counts. Allowances, bonuses, commissions, and overtime are excluded from the minimum wage calculation.
What happens if an employer pays below minimum wage?
Fines of up to RM10,000 per employee per offence, with the Labour Department able to order back payment with interest.
Does the minimum wage apply to foreign workers?
Yes, foreign workers are covered under the same RM1,700 minimum as Malaysian employees, with domestic workers currently the main exemption.
Related Reading
- HR & Payroll Compliance Checklist for Malaysian SMEs
- Employment Act Malaysia: Key Updates Employers Need to Know
Getting Payroll Compliance Right, Every Month
Minimum wage is just one of several statutory numbers that shift year to year. EPF, SOCSO, and EIS rates move too, and missing an update can mean underpaying or overpaying without realising it. If you’d rather have this checked and applied correctly every payroll cycle, talk to Righthouse’s payroll outsourcing team, we keep your payroll aligned with the latest Malaysian statutory requirements so you don’t have to track every gazette update yourself.
