Retrenched workers amid RM2,000 minimum wage hike eligible for EIS, says Akmal

KUALA LUMPUR, 13 OCTOBER 2026 —

KUALA LUMPUR — Workers who lose their employment due to corporate restructuring triggered by the upcoming increase in the national minimum wage to RM2,000 will remain eligible for benefits under the Employment Insurance System (EIS), Economy Minister Akmal Nasrullah Mohd Nasir confirmed in the Dewan Rakyat on Tuesday.

Akmal stated that the EIS coverage includes a job-search allowance payable for a period of up to six months, providing a financial bridge for displaced workers while they seek new employment.

The minister made these remarks while responding to a question from Datuk Aminolhuda Hassan, the Member of Parliament for Sri Gading and a member of the Pakatan Harapan coalition. Aminolhuda had pressed the government on specific mechanisms to prevent the minimum wage increase from resulting in job cuts, inflationary pressures, and unsustainable operating costs for small businesses.

The exchange highlighted the delicate balance the government must strike between improving worker livelihoods and maintaining economic stability for employers.

Under the provisions of Budget 2027, the national minimum wage is set to rise from the current level of RM1,700 to RM2,000. The policy is expected to directly benefit more than four million workers across the country. However, to prevent a disproportionate burden on smaller economic players, the government has introduced a targeted exemption for micro, small, and medium enterprises (MSMEs). Businesses with annual sales below RM50 million will be exempted from the new order.

Akmal explained that this exemption is designed to help smaller employers maintain their operations without resorting to drastic measures, such as retrenching staff, which could otherwise destabilize the local labor market.

The enforcement of the new minimum wage order will be carried out by the labour departments in Peninsular Malaysia, Sabah, and Sarawak, operating under the National Wages Consultative Council Act. Akmal emphasized that the legal framework is robust, noting that workers have the right to lodge complaints regarding non-compliance with the new wage order.

Conversely, employers who breach the law face the prospect of legal action, ensuring that the mandate is not merely advisory but enforceable through existing regulatory channels.

Beyond labor law enforcement, the government has outlined a multi-pronged strategy to contain potential price increases that could accompany higher wage costs. Akmal stated that the government would step up enforcement under the Price Control and Anti-Profiteering Act to prevent opportunistic pricing by suppliers and retailers. To further stabilize the cost of living, the government has allocated specific funds for consumer assistance programs.

For the coming year, RM700 million has been set aside for 30,000 Jualan Rahmah Madani programmes, while an additional RM50 million is allocated for 5,000 Jualan Agro Madani programmes. These initiatives are intended to keep essential goods affordable and mitigate the impact of any supply-side cost increases on household budgets.

During a supplementary question, Aminolhuda raised concerns that employers might circumvent the higher wage costs by reducing graduate recruitment or altering job requirements to avoid hiring at the new minimum wage level. In response, Akmal argued that wage increases must be accompanied by corresponding improvements in productivity. He highlighted the need for better worker skills, the adoption of new technologies, and continuous training programs to ensure that higher wages are supported by higher output.

The minister also acknowledged the economic risk of wage compression, a phenomenon where increases in the minimum wage are not matched by proportionate salary rises for more skilled or qualified workers, thereby narrowing the wage gap between entry-level and experienced staff. To address this, the government is exploring ways to improve wage progression across the economy.

A key measure involves raising the living-wage benchmark for government-linked investment companies and government-linked companies from RM3,100 to RM3,400 next year. This adjustment aims to create a clearer hierarchy in compensation and ensure that skilled workers see tangible benefits from the broader wage policy.

In another supplementary response, Akmal provided data on the effectiveness of the Progressive Wage Policy, a program designed to incentivize employers to raise wages for their workers. He noted that nearly 51,000 workers had benefited from the policy, exceeding its initial target of 50,000 beneficiaries. More than 4,000 employers have participated in the scheme, which provides financial incentives to companies that commit to raising their workers' wages.

The program is scheduled to run until 2027, after which the government plans to review its effectiveness and determine the next steps for wage policy.

The broader strategic goal of these measures is to shift the distribution of national income toward workers. Akmal stated that the government aims to increase the employee compensation share of the economy from its current level of approximately 33.9% to 40% by 2030. This long-term target underscores the administration's commitment to ensuring that economic growth translates into higher incomes for the workforce, rather than being captured primarily by capital.

The parliamentary debate reflects a broader regional trend where governments are grappling with the trade-offs between labor rights and business competitiveness. As Malaysia moves toward the RM2,000 minimum wage, the interplay between enforcement mechanisms, MSME exemptions, and productivity initiatives will be critical in determining the policy's success.

The allocation of funds for affordable goods programs and the expansion of wage progression benchmarks signal a comprehensive approach that seeks to address both the immediate financial impact on workers and the structural challenges facing the labor market.

The minister’s comments serve as a definitive statement on the government’s stance, moving beyond general assurances to specific legal and financial mechanisms. By linking the minimum wage hike to existing social safety nets like the EIS and tying it to productivity goals, the government attempts to frame the policy as a balanced adjustment rather than a unilateral cost increase.

The upcoming enforcement by labour departments across all states will be the first major test of this framework, with the potential for legal actions against non-compliant employers and support for compliant businesses through the MSME exemption.

The focus on the living-wage benchmark for government-linked companies also sets a precedent for the private sector, suggesting that higher wage standards are expected to cascade through the economy. With the Progressive Wage Policy already exceeding its participation targets, the government appears confident in its ability to drive wage growth through incentives rather than coercion alone.

The review of this policy in 2027 will be a key milestone, providing data on whether the combination of minimum wage increases and productivity improvements has achieved the desired outcome of a higher employee compensation share.

For the four million workers set to benefit from the RM2,000 minimum wage, the immediate concern is the stability of their employment. The assurance of EIS benefits for those who may be retrenched provides a crucial layer of protection, reducing the fear of job loss that often accompanies significant wage policy changes.

Meanwhile, the enforcement of price control laws and the rollout of affordable goods programs aim to ensure that the purchasing power of these workers is not eroded by inflation.

The government’s strategy relies on a coordinated effort across multiple ministries and agencies, from the labour departments enforcing wage orders to the agencies managing price controls and consumer programs. This holistic approach is designed to address the complex economic realities of a growing economy where labor costs are a significant factor in business operations.

By providing clear guidelines, exemptions for smaller businesses, and support for workers, the government seeks to implement the minimum wage increase in a manner that is both socially responsible and economically sustainable.

As the policy moves toward implementation, the attention will turn to the practical aspects of enforcement and compliance. The legal actions available to workers and the penalties for employers create a strong incentive for adherence to the new wage standards. The productivity initiatives, including skills training and technology adoption, are expected to play a vital role in helping businesses absorb the higher wage costs.

The long-term goal of increasing the employee compensation share to 40% by 2030 provides a clear metric for success, guiding policy decisions in the years to come.

The parliamentary exchange on Tuesday marks a significant step in the legislative process, with the government providing detailed answers to the concerns raised by opposition MPs. The clarity on EIS eligibility, MSME exemptions, and enforcement mechanisms helps to reduce uncertainty for both workers and employers. As the minimum wage increase approaches, the focus will shift to the ground-level implementation, where the effectiveness of these policies will be truly tested.

The government’s commitment to balancing worker welfare with business viability will be closely watched by markets and the public alike.