The Malaysian government’s Budget 2025 is a forward-looking set of initiatives aimed at improving the welfare of the nation’s workers, encouraging social inclusion, and enhancing the financial security of all citizens, especially in retirement. Among the key highlights, the government has outlined several measures that focus on raising the minimum wage, increasing opportunities for marginalized groups, and boosting retirement savings for individuals outside the formal employment system. In this post, we will take a closer look at these significant measures and their potential impact on workers, businesses, and the Malaysian economy at large.
1. Raising the Minimum Wage: A Critical Step Towards Reducing Income Inequality
One of the most widely anticipated announcements in Budget 2025 is the increase in the national minimum wage, set to rise from RM1,500 to RM1,700 per month. This change, scheduled to take effect on 1 February 2025, reflects the government’s dedication to addressing the growing disparities in income and improving the standard of living for low-income workers.
The decision to raise the minimum wage is part of a broader strategy aimed at ensuring that all Malaysians can earn enough to meet the increasing cost of living. While the hike might seem modest in comparison to some international standards, it is expected to make a meaningful difference in the lives of low-wage workers. By boosting the income of these workers, the government hopes to reduce poverty levels, narrow income inequality, and enhance the purchasing power of the working class.
Recognizing the challenges that small businesses often face in adjusting to wage increases, the government has also introduced a phased implementation for businesses with fewer than five employees. For these businesses, the new wage requirements will be deferred until 1 August 2025, giving them more time to adjust to the new pay scale. This consideration demonstrates a balanced approach that aims to protect the livelihoods of workers without imposing undue financial strain on small businesses, which play a vital role in the Malaysian economy.
2. Promoting Social Inclusion: Employment Incentives for Marginalized Groups
The rationale behind this initiative is twofold. First, it seeks to address the issue of social inclusion by helping individuals who often face significant barriers to employment due to societal stigma or perceptions about their employability. Second, it encourages employers to hire from a more diverse pool of talent, ultimately fostering a more inclusive workforce in Malaysia.
The initiative targets groups that are underrepresented in the job market, such as those with disabilities and ex-convicts. These individuals often find it difficult to secure stable employment, and by providing financial incentives, the government aims to reduce unemployment rates among these vulnerable populations. Moreover, the move reflects a growing global trend where businesses are increasingly held accountable for their role in fostering inclusive work environments.
By creating more inclusive employment opportunities, Malaysia is taking a step toward ensuring that every individual, regardless of their background or abilities, can contribute to the nation’s economic development and benefit from the opportunities available in the job market.
3. Strengthening Retirement Savings: Enhancement of the i-Saraan Program
An essential aspect of Budget 2025 is the enhancement of the Employees Provident Fund (EPF) i-Saraan program, which aims to help self-employed individuals, including those working in the gig economy or freelance professions, save for retirement. For individuals without formal employment contracts, retirement planning can be a significant challenge, as they are not covered by traditional pension systems.
To make it easier for self-employed workers to save for their future, the government has introduced a substantial increase in the matching contribution to the EPF under the i-Saraan program. The government will now match 20% of an individual’s contribution, up from 15%, with a cap of RM500 per year. This enhancement is particularly impactful for gig economy workers and freelancers, many of whom struggle to put aside money for retirement due to inconsistent incomes.
Additionally, the government has introduced a lifetime maximum cap of RM5,000 for this matching contribution. This means that individuals who regularly contribute to their EPF under the i-Saraan program will benefit from greater long-term savings, helping them build a more secure retirement fund. The increase in the matching contribution not only offers financial relief but also encourages self-employed individuals to take a more proactive approach to retirement planning, ensuring a better quality of life in their later years.
This program is particularly important in Malaysia’s growing gig economy, where millions of workers are outside the formal employment framework and may otherwise lack access to the benefits and protections provided to traditional employees.
4. Expanding Social Security: Mandatory EPF Contributions for Non-Malaysian Workers
In a further effort to strengthen the country’s social safety net, Budget 2025 introduces a significant policy change: mandatory EPF contributions for non-Malaysian employees. Historically, only Malaysian citizens were required to contribute to the EPF. However, under the new policy, foreign workers will also be included in the EPF system, ensuring that they have access to retirement savings as well.
The introduction of this policy is expected to have a positive impact on foreign workers, many of whom come to Malaysia for temporary employment and may return to their home countries after their contracts end. By requiring foreign workers to contribute to the EPF, the government is providing them with a financial safety net, ensuring that they have some retirement savings regardless of their home country’s pension system.
The new policy will be implemented in phases, allowing both employers and foreign workers time to adjust to the new requirements. This phased approach is designed to smooth the transition and ensure that all stakeholders, including employers, employees, and the government, are well-prepared for the changes.
Conclusion: A Holistic Approach to Economic Welfare
The key initiatives in Budget 2025 reflect a comprehensive and balanced approach to improving the welfare of workers in Malaysia. From increasing the minimum wage and encouraging inclusive hiring practices to strengthening retirement savings and expanding social security for foreign workers, the government is addressing multiple dimensions of social and economic well-being.
For workers, these measures provide tangible benefits, from higher wages to better access to retirement savings and more inclusive job opportunities. For businesses, especially small and medium-sized enterprises, the phased implementation of wage policies and the support for inclusive hiring will help them adapt to new economic realities without compromising their ability to thrive.
In the long run, these initiatives are expected to contribute significantly to a more inclusive, equitable, and financially secure society in Malaysia. As the nation moves forward into 2025, these policies will likely play a pivotal role in shaping the future of the workforce, helping Malaysia become a more prosperous and socially inclusive nation.
