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The living wage is quickly becoming a critical differentiating factor for businesses seeking sustainable growth. In today’s business environment, where strategic foresight intertwines with profitability, adopting living wage offers tangible economic benefits, including reduced turnover costs, higher productivity level and stronger investor appeal. Living wage also boosts a company’s reputation—drawing in top talents, attracting responsible suppliers and building a loyal customer base—all ingredients of a leader in ethical business conduct.
As we celebrate Labour Day this month, it is timely to explore living wage considerations and how corporate Malaysia can respond. Indeed, a group of six government-linked investment companies (GLICs) in Malaysia including Khazanah Nasional and the Employees’ Provident Fund (EPF), are already taking the lead. On 1 May 2025, the group of GLICs announced that they have collectively implemented the living wage policy for all of their permanent Malaysian employees at a benchmark rate of RM 3,100 per month. It will be interesting to learn more about the details on these wage considerations, including the mechanism and the application of such framework to deliver results.
Beyond mere profitability and reputation, the concept of a living wage takes on deeper significance. The International Labour Organization (ILO) formally defines living wage as the income necessary for workers and their families to enjoy a decent standard of living. Closer to home, Bank Negara Malaysia (BNM) takes this understanding a step further, emphasising the living wage as a means for individuals to fully participate in society—free from severe financial stress and with opportunities for personal and family development. Ultimately, a wage should empower individuals to thrive, not just survive.
Yet, reality suggests that we are not quite there yet.
The current wage landscape: Challenges and progress in ASEAN and Malaysia
Within ASEAN, countries are grappling with the disparity between living wage and minimum wage, which is especially pronounced in urban areas. The long-standing economic impacts brought forth by the COVID-19 pandemic have further exacerbated these challenges, making it harder for wages to keep pace with the rising cost of living. In response, some ASEAN nations such as Thailand, Philippines, Singapore and Malaysia, are taking or planning proactive steps to pay fairer wages.
In the case of Malaysia, the statutory minimum wage is currently fixed at RM 1,700. Findings from a BNM study released in 2018 show that the living wage estimates for Malaysia range from a minimum of RM 2,700 for a single adult to RM 6,500 for a couple with two children (refer to Table 1), highlighting a considerable gap relative to the prevailing minimum wage. Factoring in Malaysia’s cumulative inflation rate of 9.9% from 2019 to 2024, these living wage figures would require an upward adjustment to reflect today’s economic realities.
| Family size | Living wage (per month, in RM) | |
2018 estimate (based on BNM’s 2018 study) |
2024 estimate (based on Malaysia’s cumulative headline inflation rate from 2019 to 2024 at 9.9%) |
|
| Single adult | 2,700 | 2,967 |
| Couple without children | 4,500 | 4,946 |
| Couple with two children | 6,500 | 7,144 |
Table 1: Living wage estimates based on family sizes in Malaysia (2018 vs. 2024)
To address the disparity between today’s wage reality and the income needed for a decent standard of living, the Malaysian government is making strides to address poverty and income inequality through wage policy reforms. Malaysia’s progressive wage policy (PWP) pilot programme, launched in June 2024 across five key sectors, reflects a commendable effort to improve wage practices.
Emerging international regulations are also driving change. For example, the European Union Corporate Sustainability Due Diligence Directive (CSDDD) contains living wage requirement, mandating in-scope EU and non-EU businesses to evaluate and adapt their business plans, strategies, as well as operations such that they contribute positively to living income for their own workers and suppliers’ workforce. As such, Malaysian businesses, especially those with international trade activities, could strengthen their competitive advantage by proactively improving their wage practices to stay ahead of policy changes.
Beyond regulatory push, industry-specific initiatives such as that within the palm sector are also progressively recognising the urgency to define and implement living wage. This includes requirements to conduct living wage assessments using recognised methods (e.g., the Anker methodology) in addition to sustainable certification standards such as the Roundtable of Sustainable Palm Oil (RSPO) which already contain living wage criteria. In addition to mitigating reputational risks and trade expectations of foreign border enforcement agencies (such as the US Customs and Border Protection), businesses in Malaysia’s key sectors such as plantations have publicly acknowledged the business benefits—including the maintenance of operational and supply chain stability—as a core reason for promoting fair compensation for workers.
The Malaysian private sector’s role in providing decent standard of living
‘There’s money to be saved’: The financial case for businesses
Businesses are key drivers in supporting the government’s efforts to rectify wage disparities. According to PwC’s Global Living Wage Survey, two-thirds (67%) of businesses believe that paying a living wage is a priority for their operations, signalling increased momentum in private sector actions regarding living wage. While the push for a living wage is centred on fair treatment of workers, it also delivers direct business benefits that make a compelling case for this positive change.
The financial case for businesses to pay living wages
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1. Reduction of turnover cost through improved talent retention:
Paying a living wage, although not currently mandated by the Malaysian law, is a strategic choice for employers seeking to stand out in a competitive business environment characterised by skill shortages. The cost of turnover is high, arising from the need to recruit, train new employees and allowing lead time for new employees to reach full productivity level. By offering a living wage, employers can enhance employee loyalty, especially given that financial reward remains a top priority for 82% of workers in Malaysia, according to findings from PwC’s Workforce Hopes and Fears Survey 2024. External research further re-affirmed the effect of living wage on employee retention, showing that the implementation of living wage can help to reduce turnover by 41% for smaller firms and 19% for larger firms, representing significant cost savings which can be allocated to revenue-generating activities.
2. Increased productivity and morale, reduced absenteeism:
Living wage improves affordability of healthier lifestyles that supports decent living. Companies that commit to and implement a living wage see improved staff productivity in the form of enhanced work quality and reduced absenteeism, which in turn can result in higher customer satisfaction and better financial performance. A 2019 study showed that the implementation of fair wages by 81 suppliers of global brand have reduced management concerns about productivity by more than 5% within one year, and sickness-related absenteeism by nearly 10% over the same period. These examples indicate that if employees are able to live without financial stress, their productivity, work quality and engagement level also increase. Ultimately, this translates into minimised delay, rectification or rework, therefore saving costs for businesses.
3. Appeal to investors and ease of capital raising:
On the ESG front, the implementation of living wage can be a differentiator for investors. As investors are increasingly evaluating companies on their social impact metrics, wage practices are becoming a proxy for the assessment of long-term workforce sustainability and ethical governance. Implementing living wage may help a business attract new capital from investors, as ethical practices are increasingly valued in investment decisions. Analysis by Schroeders, an asset management firm, found that the returns of public listed companies paying higher wages outpaced that of lower-paying competitors by over 3% per annum over a five-year period. Closer to home, Bursa Malaysia in 2024 released a market update which revealed that the FTSE4GOOD (F4GBM) Index—comprising companies that meet the criteria of robust ESG practices—outperformed the FTSE Bursa Malaysia KLCI (FBM KLCI) in six of the past nine years.
‘Advancing corporate stewardship’: The reputational case for businesses
The reputational case for businesses to pay living wages
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A compelling reputation is a powerful driver of business success. The Living Wage Foundation found that 86% of companies adopting living wage reported improved reputation as an employer. Such ethical practices elevate brand loyalty and extend their influence on broader business dynamics.
1. Building public trust and positive public image:
Beyond attracting top-talents and trusted supply-chain partners, implementing a living wage can significantly enhance a company's reputation to the Rakyat by demonstrating a commitment to ethical practices and social responsibility. Companies that pay a living wage are often viewed more favourably by the public, as they are seen as contributing to the wellbeing of their employees and the broader community. After all, the push for a living wage is centred on the fair treatment of workers.
2. Increased customer loyalty:
In a similar vein, consumers are increasingly seeking out brands that align with their values. According to PwC’s Voice of the Consumers Survey 2024: Asia Pacific, findings showed that barring factors such as inflation, macroeconomic volatility and cost of living concerns, consumers display willingness to pay about 11% more for sustainable products. By implementing and making disclosures on living wage, companies can build stronger relationships with customers, which may translate into sustained revenue growth and bring a competitive edge.
Besides, adopting living wage dovetails with broader economic goals—promoting social equity, stimulating local economies and contributing to national development. Ultimately, businesses that prioritise living wage can achieve a harmonious balance between profitability and social impact, paving the way for a future that is both inclusive and prosperous.
So, how can corporate Malaysia respond?
The Malaysian private sector’s call to action
Outcomes of implementing living wage, insights from the BCTI x PwC Unilever case study
The report titled ‘How Unilever builds and delivers its social performance strategy,’ developed in partnership with PwC, lays out a compelling case for companies to conduct a baseline and maturity assessment to evaluate existing policies and partnerships addressing wage inequality. Below is a snapshot of Unilever’s strategies for implementing living wage globally as part of their social performance strategy, as highlighted in the report:
Insights from the report
Internal living wage implementation:
Unilever has been paying living wage to all its direct employees since 2020, impacting thousands of workers globally.
Improved employee satisfaction from improvements in employee wellbeing:
The implementation of living wages has led to greater employee satisfaction from the positive impacts of the benefits of living wages on employees (including better health, improved living conditions, increased engagement and encouraging participation within their community).
Supplier engagement:
Unilever’s effort of paying living wage to its direct employees laid the foundation for its procurement team to engage directly with suppliers, with the aim of fostering decent livelihoods for workers in its supply chain.
Effective measurement and reporting of targets:
Clear definition and measurement methods inform Unilever’s data collection approach and performance assessment for consistent reporting and impact evaluation.
Enhanced business trust:
Integrating living wage into their social impact strategy has helped Unilever build trust with stakeholders and the wider community.
Advocacy and influence:
The organisation’s global sustainability team drives an advocacy agenda to accelerate living wage commitments across other companies, promoting broader industry change.
Learning to lean into social sustainability
Drawing on Unilever's experience of effectively implementing living wage across their entire business, businesses in Malaysia can follow several frameworks to align their pay practices with the principles of fair compensation. International bodies such as the ILO and United Nations Global Compact (UNGC) emphasised that the living wage must reflect contextual nuances such as the national cost of living and average work hours.
In the case of Unilever, they prioritised action areas based on material interest and potential impact, starting with their own operations and extending those actions to their value chain. Unilever's approach involved several key steps:
1. Impacting the workforce and the supply chain: Prioritising action areas
The company focused on areas of material importance, starting with their own operations and workforce, then extending to their value chain—actively engaging with suppliers across the globe to promote compliance with living wage standards.
2. One of many key components of the company’s sustainability agenda: Strategic integration and implementation with overall sustainability agenda
As a core element of their sustainability strategy, Unilever integrated living wage into its broader business plan. Apart from fair compensation, other elements include embedding relevant capabilities across the organisation to emphasise the business case for sustainability in driving growth, reduce costs, mitigate risks and build public trust.
3. Measuring success: Defining targets social performance review
Clear definitions and methods for measuring social performance were established, ensuring consistent reporting and using impact studies to evaluate program effectiveness. Unilever also acknowledged the challenge of obtaining reliable data, emphasising that you can only change what you can measure.
4. Avoiding the greenhushing: Communications on social sustainability progress
Unilever maintained transparent communication through various channels, including their Annual Report & Accounts, additional disclosures on their global website and participation in corporate sustainability benchmarks.
5. A global effort to localise wage solutions: Baselining and maturity assessment
Unilever assessed existing policies, projects and partnerships to identify and address inequality, demonstrating a commitment to transform business strategies and sustainability goals, including the implementation of living wage. This is further re-affirmed by their efforts in partnering with the WageIndicator Foundation to provide public living wage estimates for 173 countries, helping suppliers understand and implement living wage.
What could be a good starting point
As the concept of living wage grows in public consciousness, organisations have to consider their obligations under regulations and beyond, the expectations of both internal and external stakeholders, and how best to balance progress and cost. At the heart of this journey is the living wage assessment, a vital first step that evaluates current pay levels, assess financial feasibility and identify wage gaps, setting the course for meaningful change.
Aligning wage strategies with sustainability goals—as well as embedding it within the workforce strategy—and responsible supply chain practices further enhances credibility and guides actions. Regular reassessment is essential for living wage amounts to remain relevant, by accounting for inflation and shifting socioeconomic conditions.
It is worth noting that micro, small and medium enterprises (MSMEs) often face challenges in offering wages above the minimum threshold, citing limited capacity and financial resources. Without targeted policy support, they risk being left behind. With the PWP’s official implementation underway in 2025, MSMEs could consider signing up to the programme as a first step towards paying living wage. Enrolling in the PWP would allow businesses to leverage financial incentives in the form of wage supplement amounting up to RM 300 per employee provided by the government. The wage supplement is an enabling factor that helps MSMEs overcome constraints of financial resources, which would otherwise hinder the implementation of living wage.
For businesses that have reached a level of maturity in their journey towards paying living wage, integrating the policy throughout an organisation’s operational and strategic framework offers transformative potential. For example, L'Oréal, a global beauty brand leveraged their influence by extending living wage commitments across their value chain, with a bold target of having all employees of its strategic suppliers earn a living wage by 2030. Such initiatives could boost worker morale and retention, which can potentially enhance supply chain resilience and stability. The example further demonstrates that mature businesses could lead by example and support suppliers towards living wage payment with time-bound and measurable goals.
To strengthen transparency, businesses could carry out internal audits, and accept third party verifications or supplier audits on the payment practices of living wage to build stakeholder trust.
Initiating a living wage assessment is just the beginning, the subsequent implementation of living wage in a timely and strategic manner is highly essential to bridge the gap between minimum and living wage. This requires a concerted effort from both the public and private sectors to advance wage reforms that are inclusive and impactful.
The commitment to living wage is not just a moral imperative but a strategic business decision that can yield significant economic and social benefits. Corporate Malaysia can capitalise on this opportunity to set an example for other societies to follow. Together, corporate Malaysia can create a future where fair wages are the norm, and sustainable growth is within reach for all.
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