KUCHING: Recent amendments to the Sarawak Labour Ordinance, which came into force on May 1, have drawn mixed reactions from the business community.
While aimed at strengthening worker protection and aligning Sarawak with global labour standards, the changes also raise concerns over increasing compliance costs, especially among small and medium-sized enterprises (SMEs).
“The recent amendments to the Sarawak Labour Ordinance, effective May 1, 2025, mark a significant shift in employment regulations, but they also come with increased compliance costs for businesses operating in the state,” said Datuk Sim Kiang Chiok, advisor to the Sarawak Housing and Real Estate Developers’ Association (SHEDA) in a statement on Friday.
Among the major changes are the reduction in maximum weekly working hours from 48 to 45 and the extension of maternity leave from 60 to 98 days.
“While these measures aim to improve employee welfare and align Sarawak with international labor standards, they present substantial cost implications for employers,” Sim noted.
“For small and medium-sized enterprises (SMEs) in particular, these new requirements add to an already growing list of business obligations.”
Citing the recent hike in the minimum wage from RM1,500 to RM1,700, Sim explained that employers are now shouldering significantly higher fixed costs.
“This wage hike, coupled with the reduction in permissible working hours, means businesses are expected to pay more for less output unless they invest in automation or absorb the productivity losses,” he added.
Beyond the immediate labour reforms, he noted a looming challenge, which is the federal government’s plan to implement mandatory e-invoicing for all businesses by 2026.
“Many small traders and businesses, especially in semi-urban and rural Sarawak, lack the technical capacity and resources to adapt quickly to digital invoicing systems.
“Compliance will require investment in new technologies and training, creating a burden for already overstretched micro and small business owners,” he lamented.
While recognising the intent behind the amendments, he warned of their potential side effects.
“Taken together, these changes may unintentionally dampen the entrepreneurial spirit in Sarawak.
“While the objective is to modernise labour practices and ensure fair treatment, the cumulative effect of increased compliance costs could discourage business startups or expansion, reduce job creation, and shift focus away from growth and innovation,” he said.
He urged policymakers to consider ground-level realities as they pursue reform.
“For sustainable development, it is crucial that policy reforms consider the operational realities faced by local businesses,” he concluded.
