SIBU: Any move by the federal government to push for stronger wage growth under Budget 2027 should be accompanied by targeted support for small and medium-sized enterprises (SMEs), particularly those operating on tighter margins, said Sarawak United People’s Party (SUPP) Youth Chief.
Councillor Kevin Lau Kor Jie said while efforts to ensure workers received fairer wages were important, the government should also recognise that wages constitute a significant share of operating costs for many SMEs.
He proposed that the government consider targeted wage subsidies for SMEs if businesses are required to raise employee salaries, describing such assistance as a practical way to cushion the immediate financial impact while allowing workers to benefit from higher incomes.
“If the government requires SMEs to increase their employees’ wages, it could consider providing wage subsidies to help businesses absorb part of the additional cost,” he said in a statement today (Sept 27).
Lau, who is also SUPP Bawang Assan Branch chairman, said SMEs formed the backbone of Malaysia’s business landscape, with the latest data from the Department of Statistics Malaysia (DOSM) showing that micro, small and medium enterprises (MSMEs) accounted for 96.2 per cent of all establishments in 2025.
The sector also contributed 39.7 per cent of Malaysia’s gross domestic product (GDP) and accounted for 48.7 per cent of total employment, involving about 8.09 million workers.
“Therefore, any wage policy must take into account the capacity of SMEs to absorb higher labour costs while ensuring that employment opportunities are not adversely affected,” he said.
Lau’s comments come after Prime Minister Datuk Seri Anwar Ibrahim signalled that the government would introduce more decisive measures to address wage levels under Budget 2027, which is scheduled to be tabled on Oct 9.
Anwar said the government remained concerned that wage growth had not kept pace with productivity growth, and indicated that stronger measures would be introduced to ensure graduates obtained jobs matching their qualifications and received fair wages.
Lau said any new wage measures should therefore be introduced through a structured and phased approach, rather than imposing an immediate and uniform cost burden on businesses.
He said SMEs were already operating in an environment affected by higher input costs, elevated energy prices, global economic uncertainty and other pressures, making sufficient adjustment time essential.
“The government should have an overall system and gradual approach before implementing any new measures, especially if private companies are expected to adjust their salary structures,” he said.
Lau also raised the question of whether stronger wage measures would eventually be accompanied by another increase in the minimum wage.
“If the policy includes a further increase in the minimum wage, SMEs would inevitably face another round of pressure,” he said.
Beyond wage subsidies, Lau suggested that the federal government could consider tax relief or tax incentives for SMEs that comply with wage adjustments, allowing businesses greater room to absorb higher employment costs while maintaining their operations.
He stressed that government assistance should not be viewed merely as compensation for higher wages, but as part of a broader strategy to help businesses adjust to a changing labour market.
Lau said a comprehensive assessment should be carried out before any policy is implemented, with sufficient transition time given to private businesses, particularly SMEs, to review their finances, adjust salary structures and plan for additional manpower costs.
The latest official data indicates that micro, small, and medium enterprises (MSMEs) remained a major component of Malaysia’s economy in 2025, with their GDP growing 5.7 per cent to RM689.8 billion, while MSME employment reached 8.09 million persons. MSME labour productivity also increased by 4.1 per cent to RM85,299 per person.
Lau said these figures highlighted why wage reform and SME sustainability needed to be addressed together.
“Workers should benefit from productivity and economic growth, but businesses must also be given the support and time needed to make the transition sustainable,” he said.
Anwar had said the government could not simply rely on legislation to force companies to raise wages, noting that negotiations with the private sector would be necessary to align wages more closely with productivity.
With Budget 2027 approaching, Lau said the focus should therefore be on striking a workable balance between improving workers’ incomes and protecting the ability of SMEs to remain viable, retain employees and continue creating jobs.
