News & Events

Industry Disappointed That Call For A Progressive Adjustment To The Minimum Wages Not Considered Under Current Business Conditions

Kuala Lumpur – The Federation of Malaysian Manufacturers (FMM) is deeply disappointed that its call for a progressive adjustment to the minimum wages under the current business conditions have not been considered. The increase from the current minimum wages rate of RM1,200 to RM1,500 represents an immediate increase of 25% on the basic salary which will have a knock-on effect to the overall payroll cost and have a spiralling impact on business cost and could potentially derail business and economic recovery.

Based on the findings of the recent FMM-MIER Business Conditions Survey 2H2021 which was conducted from January 5 – February 10, 2022, majority of the survey respondents opined that RM100 increase in the minimum wages is an acceptable rate in this current review given the current economic conditions. In this regard, FMM had proposed to the Government for the minimum wages adjustment to be implemented gradually with a RM100 increase in the third quarter of 2022 and a subsequent adjustment in 2023/2024 to reach RM1,500.

In addition, the survey also noted the escalating cost of doing business which stems from multiple cost factors which would have a profound impact on business recovery and sustainability:

  1. Continued risks posed by the pandemic and the current Omicron variant that continue to impact global supply chains and logistic connectivity;
  2. Rise in raw material prices including impact of higher sea freight charges which has impacted the industry since July 2021 and continue to do so due to the global shortages in containers.
  3. Cost pressures due to rising commodity prices, energy prices, labour supply shortages, etc.
  4. Higher electricity cost with the electricity surcharge announced from February to June 2022, which has resulted in an increase in the electricity charges in the range of 13.7% to 15.8% for low voltage industrial users that are mostly SMEs while medium and high voltage industries would experience an increase of 18.4%.

While we note that the micro enterprises that make up 78.6% of the 97.4% of the micro small and medium enterprises (MSMEs) establishments in the country would be exempted from this new minimum wage, the small and medium enterprises with employees up to 200 are not spared and such a steep increase would have an undesirable impact on their business recovery. Within FMM’s own membership, only less than 2% of our membership would be exempted thus impacting the majority of our members. Furthermore, given that foreign workers would also enjoy the increase in wages, it would lead to an additional outflow of close to RM2 billion annually (based on 1.6 million legal foreign workers) which will eventually rise to close to RM6 billion annually when the minimum wage reaches RM1500.

In this regard, we appeal to the Government to reconsider the decision to immediately increase the minimum wages to RM1,500 in May 2022 and instead take on the progressive increment approach as we have suggested. We strongly feel that a more gradual increase in Industry Disappointed That Call For A Progressive Adjustment To The Minimum Wages Not Considered Under Current Business Conditions the wage rate would still be able to address the increase in the cost of living which is a result of the pandemic and the supply disruptions that have ensued. In addition, employers continue to plan for salary increments in 2022 and this would further address the cost of living pressures.

FMM strongly believes that with the necessary controls on cost increases in place by the Government as well as concerted efforts by the industry to defray cost increases internally, employers can continue to maintain employment and wage adjustments.