By: Dr Khairunneezam Mohd Noor
UNDERPAYMENT of employees remains a significant challenge in Malaysia, particularly among foreign workers who form a substantial part of the workforce in sectors such as construction, plantation, and domestic services. Despite Malaysia’s strides in economic development, this issue underscores a gap in labor rights enforcement and equitable wage distribution.
Recent statistics from the Malaysian Employers Federation (MEF) reveal that as of 2023, nearly 35% of foreign workers in Malaysia are paid below the national minimum wage of RM1,500. This issue is more pronounced in informal sectors where labor regulations are difficult to enforce. A 2020 study by the International Labour Organization (ILO) indicated that nearly 60% of foreign workers globally experience wage discrepancies, with Malaysia ranking among the countries where such practices are prevalent.
The underpayment problem is multifaceted. Employers often justify low wages by citing high operational costs and the workers’ lack of bargaining power. Furthermore, foreign workers are more vulnerable due to language barriers, limited awareness of their rights, and fear of job termination or deportation. These factors create an environment where exploitation thrives.
A prominent case in 2018 involved a plantation in Sabah where workers were paid as low as RM900 monthly—far below the minimum wage at the time. The incident drew attention to the enforcement gap in labor laws. Despite legislative provisions such as the Employment Act 1955 and the Minimum Wages Order, enforcement remains inconsistent, particularly in rural areas.
In 2024, the government further increased the minimum wage to RM1,700 per month for employers with five or more employees and those in professional activities. This increase came into effect on February 1, 2025. For employers with fewer than five employees, the RM1,500 minimum wage remained in effect until August 1, 2025, when it was also raised to RM1,700.
The government’s efforts to increase the minimum wage are part of a broader strategy to improve the well-being of Malaysian workers and reduce income inequality. By raising the minimum wage, the government hopes to ensure that all workers receive a fair wage for their labor and can afford a decent standard of living.
Nonetheless, the consequences of underpayment extend beyond financial hardship. Workers face difficulties accessing basic needs, sending remittances home, and saving for the future. This often results in a demotivated workforce, reduced productivity, and an overall decline in job satisfaction. In the long term, such practices tarnish Malaysia’s image as a fair labor market and may deter foreign investment.
To address this issue, experts suggest stricter enforcement of labor laws, increased inspections, and the implementation of digital payroll systems to ensure wage transparency. Collaboration between government bodies, employers, and NGOs is essential to create a robust mechanism for reporting and addressing underpayment cases.
The underpayment of workers, particularly foreign laborers, is a reminder that economic progress must go hand-in-hand with social justice. As Malaysia aspires to become a high-income nation, ensuring fair wages for all workers should be a cornerstone of its labor policies.
The writer is Senior Lecturer, Faculty of Leadership and Management, Universiti Sains Islam Malaysia.
