Frequently Asked Questions

Frequently Asked Questions
The Ministry of Human Resources recognises that both employers and employees may have questions about the implementation of the Minimum Wages Order 2016. To address these matters, the Ministry has compiled a comprehensive set of Frequently Asked Questions (FAQs) which is produced below.
 
If you have questions that are not answered by the FAQ, you can submit your question to minimumwages[at]mohr[dot]gov[dot]my.


For Employees:
A minimum wages policy helps to ensure wage increases is in line with the cost of living, thereby enabling employees to afford basic necessities such as food, housing and clothing. The implementation of the Minimum Wages Order will simultaneously increase overtime rates, contribution to EPF savings and protection under SOCSO.

For Employers:
A minimum wages policy encourages firms to invest in technology which help firms to move up their value chain, subsequently improving productivity and competitiveness.

For Government:
A minimum wages policy transform the economy from labour intensive to capital intensive through automation and mechanisation and help the nation to become a high income economy by 2020.

The Government determines the minimum wages rate upon the recommendation of the National Wages Consultative Council (NWCC).
 
The Department of Labour is responsible for the enforcement of the law. 
 
The functions and powers of the National Wages Consultative Council (NWCC) are as follows:
 
• Advise the Government on all matters relating to minimum wages including its development at the international level;
• Make recommendations to the Government on the minimum wages rates and coverage according to sectors, types of employment and regional areas, and other matters relating to minimum wages and wages;
• Consult the public on the minimum wages rates and coverage;
• Collect and analyse data and information and conduct research on wages and the socioeconomic indicators;
• Coordinate and supervise, and to evaluate the impact of, the implementation of minimum wages;
• Review the minimum wages order;
• Deliberate on all matters relating to minimum wages;
• Disseminate information and analysis on wages;
• Carry out any other functions as it deems fit to enable it to perform its functions effectively or which are incidental to the performance of its functions.
 
At the same time, the NWCC has also been empowered to do all things incidental to its functions. The Council must also review the Minimum Wages Order at least once in every two years.
 
At present, the Council members are consists of the following representatives appointed by the Minister of Human Resources:
 
• a Chairman, a Deputy Chairman and a Secretary
• six employer representatives
• six employee representatives
• six public sector representatives
• five representatives from other sectors (e.g., academicians, economists and Non-Governmental Organisations)
 
By virtue of Section 5(6) of the National Wages Consultative Council Act 2011 (Act 732), the number of council members shall not exceed 29 members.
 
Currently, the minimum wages rate is determined by five factors:
 
1. Poverty Line Income
2. Employers’ ability to pay wages (the median wages)
3. Consumer Price Index (CPI)
4. Real unemployment rate
5. Productivity growth
 
The formula is given by the following equation:
 
 
where
 
MW = Minimum wages (RM)
PLI = Poverty line income (RM)
P = Productivity growth (%)
CPI =Consumer Price Index (% change)
UE = Unemployment rate (%): actual unemployment rate minus natural unemployment rate (4%)
i = Region
 
MWO 2016 contains provisions that have been improved from MWO 2012 as follows:
 
(i) The new minimum wages rates under MWO 2016 includes monthly, daily and hourly rates;
 
(ii) Minimum wages rates is prescribed for employees who are not paid basic wages but are paid wages based only on piece-rate, tonnage, task, trip or commission;
 
(iii) Minimum wages rates cannot be reduced for employees under probation period;
 
(iv) No provision for negotiation of restructuring of wages; and
 
(v) No provision for deferment of new minimum wages.
 
The approaches that have been taken by the Government in setting minimum wages includes:
 
(i) Balanced approach – taking into consideration the recommendations by the National Wages Consultative Council (NWCC), World Bank, International Labour Organisation (ILO), employers and employees;
 
(ii) Minimum wages rates are set not less than the National Poverty Line Income (PLI);
 
(iii) Reducing gap of minimum wages between regions; and
 
(iv) Increasing of minimum wages rates are reasonable, not disrupting the economy and maintain nation's competitiveness. 
 
Daily rated minimum wages are included in the MWO 2016 to ensure daily rated employees are protected under the Order. It also eliminates confusion among employers and employees in setting daily rated minimum wages. 
 
There is no clause for exemption in the Minimum Wages Order 2016.
 
Clauses on application for deferment and negotiation for restructuring of wages were included in the Minimum Wages Order 2012 to facilitate employers implementing minimum wages for the first time. With regard to reduction of minimum wages rates during probation period, it was decided that this clause be deleted due to misinterpretation among employers and employees. 
 
MWO 2016 is applicable to all employees working in the private sector in Malaysia including employees at child care centre, non-profit organisation or welfare organisation except domestic servant. The minimum wages are implemented on these categories of employees due to following reasons:
 
(i) Provide equal rights to all category of employees;
 
(ii) To achieve the objective of minimum wages among others, to assist and protect vulnerable employees;
 
(iii) Prevent any form of abuse or discrimination; and
 
(iv) Alternatively, employers in these sector can hire part-time employees, or pay their employees according to hourly or daily rates as stated in the MWO 2016.
 
MWO 2016 is applicable to all employees including employees in the micro industries because these group of employees are vulnerable and need to be protected.
 
The Government set the MWO 2016 to cover all local and foreign employees due to reasons as stipulated below:
 
(i) Minimum wages policy should not discriminate any employees due to citizenship, in line with ILO Convention No. 100: Equal Remuneration ratified by Malaysia in 1997; 
 
(ii) It is against Section 60L of Employment Act 1955, Section 118B Sabah Labour Ordinance or Section 119B Sarawak Labour Ordinance where any form of discrimination between local and foreign employees is not allowed; and
 
(iii) To ensure employment opportunities for local employees are not affected. If foreign employees are exempted from minimum wages or paid lower minimum wages, employers will tend to hire foreign employees compared to local employees. This is against one of the objective of minimum wages which is to reduce dependency of employers on low skilled foreign employees.
 

The legal implications when the MWO 2016 is gazetted are as below:

(i) The Minimum Wages Order 2012 is revoked. However, any legal proceedings, prosecutions or investigations under the Minimum Wages Order 2012 are to be continued until they are completed.

(ii) All contracts and collective agreement have to take into consideration all the provisions in the MWO 2016; and

(iii) Employees under probation period have to be paid full minimum wages without any reduction when the MWO 2016 commences.

The Guidelines was produced by the NWCC to facilitate employers and trade unions as well as employees to implement MWO 2012. Some provisions in the Guidelines such as setting of minimum wages rates for daily rated employees and employees paid wages based only on piece-rate, tonnage, task, trip or commission are provided for in Minimum Wages Order 2016 (MWO 2016).  Besides that, provision on restructuring of wages was not provided for in MWO 2016. Hence, the Guidelines is no longer relevant.

‘Wages’ and ‘Minimum Wages’ are described under section 2 of National Wages Consultative Council Act 2011. The ‘wages’ has similar meaning to ‘wages’ in section 2 of the Employment Act 1955 or Sabah Labour Ordinance (Cap.67) and Sarawak Labour Ordinance (Cap.76) whereas the ‘minimum wages’ refers to basic wages only, excluding any allowances or other payments.
 
Minimum wages is basic wages, excluding any allowances or other payments.
 
The Minimum Wages Order 2016 is enforced beginning 1 July 2016.
 
All local and foreign employees who have a contract of service with an employer, shall be entitled to receive minimum wages.
 
• Domestic servants (e.g. maids).
• Apprentices who undergo a training for a period not less than two years.
 
The minimum wages for part-time employees under the Order is RM4.81 per hour in Peninsular Malaysia and RM4.42 in Sabah, Sarawak and Federal Territory of Labuan.
 
 

Regional areas

Minimum wages rates

Monthly

Daily

Hourly

Peninsular Malaysia

RM1,000

Number of working days in a week 

 

 

RM4.81

6

RM38.46

5

RM46.15

4

RM57.69

Sabah, Sarawak and Federal Territory of Labuan

RM920

6

RM35.38

 

RM4.42

5

RM42.46

4

RM53.08

 
This new provision in the MWO 2016 is to ensure all employees enjoy minimum wages rates including employees paid based only on piece-rate, tonnage, task, trip or commission. It also ensures that no exploitations occur to these categories of employees.
 
Penalties for non-compliance as stated below: 
 

OFFENCE

PENALTY

First Offence

Fine of not more than RM10,000 per employee. The court can order the employer to pay each employee the difference between minimum wages rate and the employees' basic wages.

General Penalty

Fine of not more than RM10,000 for each offence where no penalty is provided.

Penalty for Continuing Offence

A daily fine of not more than RM1,000 for continuing offence after conviction.

Penalty for Repeated Offence

A fine of not more than RM20,000 or imprisonment not exceeding 5 years.

 
NO. The Minimum Wages Order will not prevent employers from implementing PLWS.
 
Prison sentences is the necessary action against employers who repeatedly commit an offence.
 
Policy Issues
 
Secretariat
National Wages Consultative Council
Ministry of Human Resources
Level 7, Block D3, Complex D
Federal Government Administrative Centre
62530 PUTRAJAYA
Tel: 03-8886 5156
Fax: 03-8881 0668
E-mail: minimumwages[at]mohr[dot]gov[dot]my
 
Implementation Issues
 
Department of Labour (Peninsular Malaysia and Labuan)
Ministry of Human Resources
Level 5, Block D3, Complex D
Federal Government Administrative Centre
62530 PUTRAJAYA
Tel: 03-88865192
Fax: 03-8889 2368
E-maill: jtksm[at]mohr[dot]gov[dot]my
 
Department of Labour (Sabah)
Level 1, Block C & D,
Bangunan KWSP P/S 14557
88852, Kota Kinabalu, SABAH
Tel: 088-238755/233820
Fax: 088-242445
Email: jtknsabah[at]mohr[dot]gov[dot]my
 
Department of Labour (Sarawak)
Level 13, Bangunan Sultan Iskandar,
Jalan Simpang Tiga,
93532, Kuching, SARAWAK
Tel: 082-242261/414062
Fax: 082-244909
Email: gajimin[at]mohr[dot]gov[dot]my
 
Department of Industrial Relations Malaysia: 
Ministry of Human Resources
Level 9, Block D4, Complex D
Federal Government Administrative Centre
62530 PUTRAJAYA
Tel: 03-88865460
Fax: 03-88892355
Email: jppm[at]mohr[dot]gov[dot]my