Rafizi details progressive wage plan for those earning under RM5k

The government has tabled a white paper outlining its plans for a progressive wage policy that would be implemented next year, with a proposal that it target workers earning less than RM5,000 per month.

This comes as the Department of Statistics Malaysia said the median wage for those in formal employment, making two-thirds of citizens, is RM2,600 a month.

Economy Minister Rafizi Ramli said that enrolment in the programme is voluntary but it would come with financial incentives for participating employers.

As a start, he proposed that employers can get a fixed incentive of up to RM200 per month for entry-level workers and up to RM300 per month for workers for a period of 12 months from the government.

Increments, he said, would be tied to workers’ productivity and skills.

Thus, companies that enrol in the programme are required to send eligible employees to attend training and upskilling courses, and workers in turn must ensure this translates into higher productivity in line with their higher pay.

He said a pilot programme would kick off in June next year involving 1,000 companies, with a focus on micro, small, and medium enterprises.

Elaborating on the policy, Rafizi said the wage ceiling and the incentives will be revised yearly, depending on the government’s financial situation.

He said there will also be a committee that annually reviews the proposed rates for annual increments to eligible workers based on economic sector and job role.

Further, the minister said there would be a star ranking system to evaluate companies enrolled in the programme based on two components.

More GDP, tax revenue, EPF savings

According to the white paper, the first component has three basic elements - the number of workers being paid at or above the recommended annual increments; how much higher the increments are than the proposed rate; and how long a company is enrolled in the programme.

There is also a bonus component that evaluates companies based on the difference between the lowest and highest wage on their payroll, and the ratio of women working in the middle and top positions.

Rafizi said the purpose of the star rating system is to encourage healthy competition among companies in giving good wages.

In terms of economic impact, Rafizi estimated that if the government allocates RM2 billion for progressive wage incentives, this would benefit 1.05 million workers and result in an additional RM3.3 billion in gross domestic product (GDP).

It would also add an additional RM0.79 billion in EPF savings and RM1.8 billion in tax revenue as there would be around 37,000 more taxpayers in the first year of implementation, he said.

READ MORE: At RM2,600, median wage up year-on-year, but dipped in Q2

However, Rafizi cautioned that while the government would get more returns from what it invested, this does not mean Putrajaya should simply allocate a huge sum for progressive wage incentives.

Instead, he said there was a need to find a “sweet spot” between increasing salaries and its impact on inflation, which he said were intertwined.

The progressive wage policy does not entail new legislation. However, the white paper is being debated by the Dewan Rakyat.

White paper on progressive wage policy on Nov 30 - Rafizi

Progressive wage expected to incur minimal cost to employers

COMMENT | Will progressive wage model to boost pay, productivity work?

YOURSAY | Economy is the key to all

Make progressive wage system mandatory, urges labour group

Progressive wage policy: Employers to get cash incentives - Rafizi