SMEs want minimum wage to be staggered

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An organisation representing small and medium enterprises (SMEs) is demanding that the minimum wage policy be implemented in a staggered manner so as to spread out the impact on bottom lines.

According to a member of the Minimum Wage Implementation Steering Committee, Sai Chin Hock, the mandatory RM900 per month minimum wage for peninsular Malaysia and RM800 for Sabah and Sarawak could put SMEs out of business.


“We support the minimum wage policy for local workers, considering the costs of living, but we believe it should be staggered, as well as differentiated according to regions.

“For example, in Jasin, workers are paid RM16.50 per day (RM429 per month) and pushing it to RM34 per day would mean that employers would need to fire workers. This is the situation in rural areas,” said the Julie’s Biscuits founder.

Sai, whose business has an annual RM200 million turnover, estimates that the policy will raise the costs of wages for Julie’s by 32 percent. The company hires 800 workers, of which 400 are local.

He claims that the jump in costs is driven by a “ripple effect”, whereby employees who already earn higher than the minimum wage will have their wages revised upwards, in accordance with the wage hikes enjoyed by those on a lower pay scale.

“We will do this when we do our annual wage revision in June,” he said.

He noted that employers are forced to do this to maintain "harmony" at the workplace.

Local workers ‘very upset’

Sai claims that local workers are already “very upset” as the new policy does not discriminate against foreign workers, who prior to this, were paid at a different pay scale than the locals.

“I have an employee who has worked for me for 10 years, and he tells me he did not sleep for a few days, fretting about how his wages only went up RM50, but the foreign workers’ wages went up by RM300.

“In some factories, workers are already threatening to strike over this,” he said.

As such, he said, SMEs are seeking for the government to maintain the status quo for foreign workers as contracts have already been signed with their respective embassies.

“Their contracts say that we have to pay them (foreign workers) RM546 per month basic pay, and guarantee them a take home pay of RM800 (including overtime allowances etc.),” he said.

Sai said that to cope with the policy, Julie’s Biscuits will cut down on the foreign workers’ overtime hours and hold back on any expansion plans.

“For the first time in 30 years, I don’t know how to give price quotations, as I don’t know how much my suppliers will pass on to me. This would have inflationary effects,” he said.

The steering committee had held a peaceful demonstration at the prime minister’s department over the matter last month.

The government had earlier agreed to shift the burden of foreign workers’ levy to the employees to alleviate costs sustained by businesses due to the minimum wage.

Unions have, however, called for the move to be rescinded, claiming that this then nullifies the benefits gained from the minimum wage policy.

‘Good for the economy’

The minimum wage rate was set by the National Wage Consultative Council, from which included various stakeholders. However, Sai claims that the Association of Chinese Chamber of Commerce, which members include many SMEs, was not part of the council.

The council, along with the Federation of Malaysian Manufacturers have panned the government for “poor implementation”, and have since sent several memoranda to the government on the matter.

On the other hand, analysts argue that the minimum wage will push up productivity, and put more money into the economy.

CIMB analyst Lee Heng Guie, in a note on the matter, said that there is empirical evidence showing that the impact of higher wages offsets a smaller negative impact caused by job cuts.

“Arguably, the higher wage will have a net positive impact on the economy, as any potential small loss of jobs will be more than covered by its multiplier effect, thus putting more money in the hands of workers, thereby releasing pent-up consumption, albeit with some inflationary impact,” he said.

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