Malaysia Minimum Wage 2026: Which Employers Must Pay RM1,700 and What Counts as Basic Pay?

The RM1,700 minimum wage that took effect on 1 February 2025 remains the wage floor that employers in Malaysia must honour throughout 2026. Yet most compliance questions we field are less about the rate itself than about where allowances, overtime and deductions sit against it.

In this blog, we discuss the Malaysia minimum wage 2026 position. We cover which employers must pay RM1,700 and what counts as basic pay. We also explain daily and hourly rates and the payroll filings that follow from remuneration.

What Is the Minimum Wage in Malaysia in 2026?

The statutory minimum wage stands at RM1,700 per month nationwide, held at the rate set by the Minimum Wages Order 2024 and effective since 1 February 2025.

The rate of RM1,700 per month was prescribed by the Minimum Wages Order 2024, which came into force on 1 February 2025 and remains the operative wage floor for 2026. The Order is made under the National Wages Consultative Council Act 2011, and the Ministry of Human Resources (KESUMA) oversees compliance through the Labour Department.

There is no regional split. The same RM1,700 applies across Peninsular Malaysia, Sabah, Sarawak and Labuan. The National Wages Consultative Council reviews the rate periodically. Employers should check the Minimum Wages Order and the latest Ministry, LHDN, KWSP and PERKESO payroll and filing guidance before each payroll cycle. This avoids relying on older contracts or staff handbooks.

The table below sets out the key figures every payroll in Malaysia should be built around.

Which Employers Must Pay the RM1,700 Wage Floor?

Employers with five or more employees, and those conducting specified professional activities, were covered from 1 February 2025. Other employers with fewer than five employees followed on 1 August 2025. Domestic employees are excluded.

The Order attaches to the employment relationship, not to the entity type. The Order covers different entity types when they employ workers under a contract of service. These include sole proprietorships, partnerships, an incorporated company in Malaysia and local arms of multinational companies in Malaysia.

The only variable has been timing, and that transition period has now closed.

1. Employers covered since 1 February 2025

Employers with five or more employees have owed the RM1,700 floor since the Order came into force. Employers conducting professional activities classified under MASCO were also covered, regardless of their employee count. Coverage spans sectors including manufacturing, services, retail, hospitality and plantation work.

2. Micro employers and the 1 August 2025 transition

Employers with fewer than five employees were generally given a transition window until 1 August 2025. Those conducting specified professional activities were covered from 1 February 2025 instead. The transition has expired, so a founder starting a home based business in Malaysia must cost covered hires at the current floor.

3. Workers outside the Order's scope

The Order excludes domestic employees. Apprenticeship contracts may be excluded, while a student's status depends on the arrangement. Part-time and piece-rate workers remain covered, subject to the applicable rates.

What Counts as Basic Pay Under the Minimum Wages Order?

Basic pay is the fixed ordinary wage payable under the contract of service. For employees paid a basic wage, allowances and other additional payments do not count towards the applicable minimum; workers paid solely by piece rate, task, trip, tonnage or commission must receive at least RM1,700 per month.

This is where most employers slip. A package of RM1,900 does not comply if it is made up of:

• RM1,500 base salary
• RM200 transport allowance
• RM200 fixed shift allowance

The basic wage never reaches the floor.

Allowances cannot be folded into basic pay to satisfy the Order. The distinction between the base salary and the additions around it is summarised in the table below.

1. Payments included in basic pay

For employees paid a basic wage, only the basic wage counts towards the applicable minimum; a separate RM1,700 monthly minimum applies to employees paid solely by piece rate, task, trip, tonnage or commission. For a salaried worker, that is the contracted base salary before any allowance, premium or variable payment is layered on top.

2. Payments excluded from basic pay

For the basic-wage minimum, allowances and additional payments do not count; ordinary basic wages continued during paid leave remain part of the employee's wages.

• overtime pay
• transport and travel allowances
• additional payments for annual and sick leave
• additional maternity and paternity benefits
• incentive or bonus payments

Ordinary wages paid during annual, sick, maternity or paternity leave are the employee's normal wages for leave days, not an extra amount that can be counted towards the RM1,700 floor. Variable performance pay does not lift a low base salary to the RM1,700 threshold.

3. Deductions that cannot breach the floor

An employer cannot recover its own statutory costs — such as its contribution shares — from the employee's wage, nor offset recruitment or levies against basic pay. Unpaid absence is deducted using the applicable incomplete-month wage formula for the month in question, not the 26-day divisor used for overtime.

How Are Daily, Hourly and Overtime Rates Calculated on RM1,700?

The RM1,700 floor remains a monthly minimum. In Peninsular Malaysia and Labuan, the Employment Act 1955 uses a 26-day divisor to calculate the ordinary daily rate for monthly-rated employees. An 8-hour normal day derives an ordinary hourly rate. Eligible employees receive at least 1.5 times that rate for overtime on a normal working day.

The 26-day divisor is an Employment Act 1955 ordinary-rate formula for monthly-rated employees, not part of the Minimum Wages Order 2024. The Order prescribes RM1,700 as the monthly minimum. For employees paid by the day, the daily minimum varies with the working days in the week. The Order also prescribes RM8.72 as the hourly minimum for employees paid by the hour.

For employees paid hourly, RM8.72 is the scheduled minimum under the Order, not the ordinary hourly rate used for overtime. For monthly-rated employees, the ordinary hourly rate used for premium pay is RM65.38 ÷ 8 = RM8.17, based on a normal eight-hour day. The 26-day divisor derives the RM65.38 ordinary daily rate for a monthly-rated employee, regardless of whether the working week has six days. Unpaid absence follows the incomplete-month formula for the relevant month. The three-step calculation below shows how the floor converts into the figures a payslip actually uses.

Step 1: Convert the monthly wage to a daily rate

For a monthly-rated employee, RM1,700 ÷ 26 = RM65.38 as the ordinary daily rate. The same divisor is used to price work on rest days; unpaid leave is calculated using the incomplete-month formula for the relevant month.

Step 2: Derive the hourly rate

RM65.38 ÷ 8 = RM8.17 per ordinary hour, based on a normal 8-hour workday. This is the Employment Act ordinary hourly rate used for premium and overtime computations, rounded to the nearest sen.

Step 3: Apply the overtime multiplier

RM8.17 × 1.5 = RM12.26 per overtime hour. For eligible employees under the Employment Act 1955, rest-day and paid public-holiday pay depends on the hours worked and the basis of pay. For overtime beyond normal hours, the minimum is generally 2 times the ordinary hourly rate on a rest day and 3 times on a paid public holiday. Sabah and Sarawak employers should check the applicable labour ordinances.

What Payroll and Filing Obligations Follow the Wage Floor?

MTD, EPF, SOCSO and EIS are due by the 15th of the following month. For 2025 remuneration, Form EA was due by 28 February 2026. Form E was due by 31 March 2026.

Every ringgit of basic pay flows downstream into statutory deductions. For an employee below age 60 on the standard EPF schedule, a RM1,700 wage carries an 11% employee EPF share (RM187) and a 13% employer share (RM221), with 12% applying to wages above RM5,000. SOCSO and EIS contributions follow their own schedules.

Monthly Tax Deduction (MTD or PCB) must also be recalculated as remuneration rises. LHDN publishes a computerised Monthly Tax Deduction (MTD) specification each year, and the 2026 edition confirms a flat 30% deduction for non-resident employees.

Remuneration reporting completes the cycle. Form EA must reach each employee by 28 February 2026, and Form E must be e-filed by 31 March 2026, with the e-filing grace running to 30 April 2026. Getting these right keeps each worker's personal income tax position clean.

Directors should not forget corporate filings either. The annual return owed to the Companies Commission of Malaysia (SSM) falls due within 30 days of each incorporation anniversary. Form C falls due within seven months of the accounting period end. The filing calendar is set out in the table below.

What Happens If You Pay Below the RM1,700 Floor?

Underpayment exposes an employer to fines under the National Wages Consultative Council Act 2011, on top of arrears owed back to every affected employee.

Labour Department officers may inspect payroll records and order the shortfall restored, and repeated offences attract heavier penalties. Directors should treat wage compliance as a payroll and filing issue, not only an HR matter.

In practice, we help clients remediate in four moves:

1. Audit the payroll ledger to confirm every basic wage meets RM1,700.
2. Recompute ordinary daily and hourly rates for monthly-rated employees and check applicable overtime and minimum rates.
3. Update contracts, payslips and handbooks to the current wage floor.
4. Re-run statutory deductions and refile any shortfalls with LHDN, KWSP and PERKESO.

We help clients re-run payroll calculations and statutory deduction schedules whenever the wage rate changes, so year-end employer forms reconcile cleanly.

Conclusion

The rules start with RM1,700 as basic pay. Employers must also check daily and hourly rates and their contribution and filing calendar. Basic pay must stand at the floor on its own, with allowances, incentives and premium pay kept outside the computation.

For employers still catching up from the 1 August 2025 micro-employer transition, the priority is a payroll audit, corrected contracts and reconciled statutory deductions before the next LHDN cycle.

As a Corporate Services Provider, 3E Accounting Malaysia helps startups, SMEs and multinational employers align payroll with the rules. We also provide company incorporation, corporate secretarial, tax and business advisory support. Contact our team to review your payroll before your next payment run.

Frequently Asked Questions