Budget 2027: what Malaysian payroll and HR managers need to know
Budget 2027 was tabled on 9 October 2026. Here are the measures that touch payroll, what's confirmed, and what to prepare for.
Prime Minister Datuk Seri Anwar Ibrahim tabled Budget 2027 on 9 October 2026. For payroll teams, the headline is a higher minimum wage — but several tax and statutory changes will reach payslips in 2027 too.
Proposals until legislated
Budget measures take effect only once the relevant law, order or guideline is passed or gazetted. For PCB, changes apply only when LHDN publishes its 2027 computerised calculation specification. We'll update this page as details are confirmed.
1. Minimum wage rises to RM2,000 from June 2027
The monthly minimum wage will rise from RM1,700 to RM2,000 from June 2027. MSMEs with annual sales below RM50 million are exempted, with no end date announced. A separate RM2,500 minimum for semi-skilled workers and graduates was also mentioned, without a start date. The new Minimum Wages Order, the exact start day and the precise MSME definition are still to be published. Read what RM2,000 means for your payroll.
2. Lower income tax for middle earners (YA 2027)
Proposed changes to resident individual tax from year of assessment 2027:
| Chargeable income band | Current rate | Proposed rate |
|---|---|---|
| RM70,001 – RM100,000 | 19% | 18% |
| RM100,001 – RM150,000 | 25% | 24% |
| RM1,000,001 – RM2,000,000 | 28% | 30% |
The individual relief rises from RM9,000 to RM12,000. Once LHDN's 2027 PCB specification reflects these changes, many employees' monthly PCB will fall slightly from January 2027 — payroll software must update its PCB tables.
3. Wages must go through bank accounts to be tax-deductible
For companies other than MSMEs, wages will be deductible for company tax only if paid through bank accounts permitted under the Employment Act. No start date was given. If you still pay some staff in cash, plan the move to bank or approved e-wallet payments now.
4. SOCSO and EPF measures
- The RM350 SOCSO tax relief is extended to mandatory Lindung Kendiri contributions, with up to RM150 more for voluntary contributions.
- E-hailing and p-hailing workers get a 35% SOCSO match and an EPF match of up to RM600 a year.
- Automatic EPF membership for every citizen at 18 was proposed, with no start date.
5. Talent and training
- Spouses of Category I Employment Pass holders on dependant passes may work from 1 January 2027.
- HRD Corp will fund around 3 million training places with RM3 billion from the levy fund; the levy rate is unchanged.
- Tax deductions for companies that settle employees' PTPTN loans in 2027–2028.
- The living wage at GLCs rises to RM3,400.
What payroll teams should do now
- Budget for RM2,000 — identify everyone below RM2,000 and cost the increase, including EPF, SOCSO, EIS and HRDF on top.
- Confirm MSME status for each company in your group once the definition is published.
- Move remaining cash payments to bank or approved e-wallet channels.
- Watch for LHDN's 2027 PCB specification and make sure your payroll software applies it from the first 2027 run.
altomateHR tip
altomateHR is cloud software, so statutory calculation updates are rolled out by the altomateHR team rather than maintained by each customer. Multi-company groups can review every entity's payroll from one login when planning for the new minimum wage.
FAQ
When does the RM2,000 minimum wage start?+
Budget 2027 announced RM2,000 from June 2027. The exact date will be set in the new Minimum Wages Order, which had not been gazetted as at November 2026.
Are small businesses exempt from the RM2,000 minimum wage?+
Budget 2027 announced an exemption for MSMEs with annual sales below RM50 million. The precise definition is still to be published.
Will PCB change in January 2027?+
Budget 2027 proposed lower rates for the RM70,001 to RM150,000 bands and higher individual relief from YA 2027. PCB changes once LHDN publishes its 2027 calculation specification.
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