In February 2025, the Malaysian government announced the new Minimum Wage Order, which took effect immediately, increasing the national minimum wage from RM1,500 to RM1,700. While this may seem modest in absolute numbers, an RM200 rise, the ripple effects across industries, especially among SMEs and labour-intensive sectors, could be significant and it’s already making waves across boardrooms, HR departments, and kopitiam tables alike.

On paper, it’s a small step.
But for many businesses, especially those still catching their breath post-COVID and juggling inflation, labour shortages, and digitalisation, this isn’t just an increment—it’s a decision point.

This moment invites us to pause and ask: Are we ready to see this wage increase not just as a cost, but as a catalyst for transformation?

Sectoral Pressure Points: Who Feels It Most?
Let’s say you run a mid-sized logistics company. You’ve got 100 employees, most earning just above minimum wage. An RM200 hike per employee, every month, adds RM20,000 to your monthly payroll that’s easily RM240,000 a year. Now ask yourself: Will your profit margin stretch that far?

For many SMEs and startups, the answer is: “Not without trade-offs.” But here’s the real kicker: This isn’t just about money. It’s about managing morale, avoiding wage compression, and keeping your best people from quietly walking out the door.

That’s why, the impact of the RM1,700 wage hike will differ across sectors:
SMEs & Startups: Operating on razor-thin margins, many may need to rethink their hiring timelines or restructure operational costs. The challenge lies in managing payroll without stalling growth or innovation.

Manufacturing, Retail, and Logistics: With large entry-level workforces, these industries will bear the brunt of cumulative monthly payroll increases. F&B and Hospitality: Traditionally reliant on low-wage staff, these sectors may also explore flexible scheduling, productivity-linked incentives, or automation to remain cost-efficient while complying with employment regulations and maintaining workforce appeal and welfare.

The Internal Equity Puzzle: When Fairness Feels Fragile
While the headlines often focus on costs and compliance, the more silent disruptor within any wage hike is internal equity and it’s most visible through the lens of wage compression. When new hires enter at the updated RM1,700 minimum, existing employees who’ve spent years inching toward that figure may feel blindsided. “Why am I earning the same as someone who just joined?” becomes an uncomfortable but valid question. Across industries, such wage compression risks have led to morale issues and higher turnover among experienced workers, especially when not accompanied by transparent pay grading or reskilling initiatives. From a global standpoint, wage compression has been a pain point in countries like the U.S., the U.K., and parts of Europe where minimum wage hikes, while well-intentioned, created unintended ripple effects for middle-income brackets. The lesson? Fair pay is not just about numbers, it’s about perception.

This is where proactive HR strategy becomes critical. At Maslow Trainers & Consultants, we’ve worked with clients navigating this exact storm. The solution isn’t to avoid the hike, it’s to absorb it with intention. We often recommend skills-based pay structures that reward competencies, certifications, and on-the-job contributions and not just years served. This maintains differentiation and gives ambitious employees a reason to grow. Coupled with transparent job grading and career pathing, employees can clearly see a journey beyond RM1,700, reinforcing a sense of direction and progress. Globally, forward-thinking firms, from Scandinavian public institutions to Southeast Asian tech startups, have shifted from tenure-based models to performance-led frameworks with remarkable impact on retention and employee satisfaction.

Actionable Steps: From Compliance to Competitive Advantage
Beyond pay structure, the upcoming transition offers a moment to rethink workforce design altogether. Could low-cost automation or digital tools ease the reliance on manual processes? Could scenario planning between HR and finance teams reveal productivity gains that offset payroll hikes? These aren't just survival strategies, they're smart business decisions. And perhaps most importantly, communication. Employees are more likely to stay committed when they understand the bigger picture. Position this change not as a top-down policy shift, but as part of a deeper organisational promise toward fair, future-ready compensation. In a world where talent is increasingly mobile and values-driven, how companies respond to this moment may well define their employer brand for years to come.

A Step Forward—But Are We Walking the Same Path?
The RM1,700 minimum wage is more than a regulatory update. It is a litmus test of how Malaysian businesses balance profitability and people, cost and culture, compliance and compassion. As the global economy shifts and talent becomes more mobile, wage structures become strategic tools. Those who approach this challenge with innovation, empathy, and agility will not just survive this transition, they’ll emerge stronger.

At Maslow, we’re committed to helping organisations chart this course, Not just to stay compliant but to build fairer structures, retain key talent and align pay practices with long-term business goals.