The Minimum Wages Order 2020 (‘2020 Order’) was gazetted on 10 January 2020 and will come into operation on 1 February 2020.
When the 2020 Order comes into force, two different sets of minimum wage rates will apply in Malaysia.
For an employee whose place of employment is in any of the 16 City Council areas or the 40 Municipal Council areas specified in the Schedule to the 2020 Order, the minimum wage rates are as follows–
For an employee whose place of employment in Malaysia is in any area other than the City Council areas or Municipal Council areas specified in the Schedule to the 2020 Order, the minimum wage rates are as follows –
The minimum wage rates specified in the 2020 order do not apply to a ‘domestic servant’ as defined in subsection 2(1) of the Employment Act 1955, subsection 2(1) of the Sabah Labour Ordinance [Cap. 67] or subsection 2(1) of the Sarawak Labour Ordinance [Cap. 76].
The Minimum Wages Order 2018 [P.U.(A)265/2018] which stipulates a minimum monthly wage rate of RM1,050.00 and correspondingly lower daily and hourly wage rates will be revoked when the 2020 Order comes into operation.
The increase in the minimum monthly wage under the 2020 Order to RM1,200 per month in major cities in Malaysia was announced during the 2020 Malaysian Budget. In addition, the 2020 Order increases the minimum monthly wage for the other parts of the country by RM50 to RM1,100.
Although the increase in minimum wage rates seeks to assist workers to cope with the high cost of living in Malaysia, the increase may also drive up the cost of production and indirectly result in an increase in the cost of living and reduce the attractiveness of the country to foreign investors. The rationale for the different wage rates based on the locality of the place of employment is to account for the difference in cost of living between the localities set out in the Schedule to the 2020 Order and the other locations in Malaysia.
The adoption of different minimum wage rates based on the place of employment of an employee may have an anomalous effect on an employer who has places of business within and outside the localities set out in the Schedule to the 2020 Order. For example, if an employer has a manufacturing facility located within one of the localities set out in the Schedule to the 2020 Order, and another located outside those localities, the employer will be required to apply different minimum wage rates to its employees who carry out the same job functions merely by reason that they are employed at different localities.