President of NCCIM and ACCCIM, Dato’ Low Kian Chuan has expressed big disappointment with announcement by YB Datuk Seri M. Saravanan, Minister of Human Resources (MOHR) that the steep hike of 25 36% in minimum wage to RM1,500 per month will take effect from 1 May 2022.
The exemption will only be given to micro companies with less than 5 employees, informal sectors and those experiencing financial losses from Covid-19 pandemic. Most of the SMEs will be affected by this announcement. We get bits and pieces of news about the new minimum wage in media. Prime Minister and Minister of Human Resource have repeatedly promised to have engagement session with the business associations but to our disappointment this announcement was made without any prior engagement and consultation with us. In the past practices, there was sufficient engagement and timeline for the implementation of minimum wage.
Our deep concern is that a steep increase in minimum wage comes at a time when businesses are facing substantial increases in business costs, hike in electricity surcharge and also experiencing the worker shortages. Imposing additional labor cost on businesses could force the impacted business owners to raise prices of goods and services (consumer inflation) and reduce employment to preserve their business margin. The knock-on effect of the proposed minimum wage on other categories of workers will add to higher employment and operating costs.
Business community needs breathing space to rebuild their business as they are still reeling from the economic and business shocks inflicted by the two years long of the pandemic impact, and is now worsened by the on-going Russia-Ukraine conflict. Most businesses are not financially stable to implement the proposed new minimum wage as their cashflow and revenue are still on the mend and have not fully restored back to pre-pandemic level.
NCCIM concurs with YB Minister that minimum wage needed to be reviewed every two years but could not agree the steep hike from between RM1,100 and RM1,200 to RM1,500 per month. NCCIM said that MOHR’s proposal that new minimum wage would be exempted for micro companies, informal sectors and those experiencing financial losses from the COVID-19 pandemic would worsen their plight of getting workers as the large wage differential between old (RM1,100-RM1,200) and new minimum wage (RM1,500) will disincentivize workers to be employed in those exempted sectors.
NCCIM hopes that the Government would consider to stagger the rise in minimum wage in smaller quantum (RM100-RM150) instead of a steep rise of 25-36% to ease businesses’ financial burden during this challenging transition from pandemic to endemic phase. The risks to Malaysia’s economic recovery remain tilted to the downside.
If the Government insists to implement the new minimum wage of RM1,500 per month, NCCIM proposes to have a co-sharing of wage cost for SMEs through a 50% wage subsidy of the new minimum wage. We look forward to engaging in a more in-depth discussion with the Government and MOHR on reaching an amicable approach to implement the new minimum wage without significantly disrupting the economic and business recovery track and more importantly, resulting in higher consumer inflation pressure.