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Does the Minimum Wage Order apply to migrant workers?

Updated: Jun 18, 2023

The short answer is, yes.


The Minimum Wage Order


In Malaysia, the minimum wage is reviewed by the Minimum Wage Consultative Council from time to time acting under statutorily conferred powers. Through a process of consultation with stakeholders and benchmarking with minimum wage internationally, the Council makes recommendations to the government on what the new minimum wage should be. Recently, the new Minimum Wage Order dated 27 April 2022 ("Minimum Wage Order 2022") was issued. Similar to the Minimum Wage Orders of 2012 and 2020, the new Minimum Wage Order 2022 does not distinguish between foreign and Malaysian employees. Hence, by default the new minimum wage applies to both.


Who is an employee?


The definition of "employee" under the Employment Act 1955 does not distinguish between foreign and Malaysian employees. The Courts in Malaysia have also consistently support the view that foreign employees should be treated equally to Malaysian employees. This means all protections conferred on Malaysian employees under the Employment Act 1955 and other relevant legislation should also apply equally to foreign employees.


Non-application to domestic workers


However, the Minimum Wage Order 2022 does explicitly exclude domestic servants as defined under Subsection 2(1) of the Employment Act 1955, Subsection 2(1) of the Sabah Labour Ordinance and Subsection 2(1) of the Sarawak Labour Ordinance. Therefore, the Minimum Wage Order does not apply to domestic workers, both foreign and Malaysian. In Malaysia, more than 90% of domestic workers are foreigners, majority hailing from Indonesia. Recently, the Indonesian government and the Malaysian government have signed an MOU to improve the protection regulations for domestic workers. One of the key terms negotiated was for Indonesian domestic workers to be paid a minimum of RM1500. Filipino domestic workers on the other hand are guaranteed a minimum of $USD400 monthly salary in accordance with the Philippines Overseas Employment Administration (POEA) Employment Contract, a standard form contract for the employment of Filipino Overseas Foreign Workers (OFW).


Conclusion


From May 1, 2021, the Minimum Wage Order comes into full force. Only companies with less than 5 employees are given an exemption to comply by Jan 1, 2023. The new minimum wage is a 25% increase from the 2020 minimum wage. This change impacts 40% of the workforce in some industries, and is likely to have an impact on overall supply chains. Complying with the Minimum Wage Order is mandatory for the legal employment of both foreign and Malaysian employees in Malaysia.


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