Gov't minimum wage hike to have little impact on plantation sector

KUALA LUMPUR: The government's announcement of a new minimum wage of RM1,050 a month effective January 2019 is negligible to the plantation sector as most player have already adopted a higher minimum wage level.

PublicInvest Research said plantation companies would see little impact to their operating costs as they currently provider a minimum wage level ranging from RM1,200 a month to RM1,350 a month for the combination of basic salary and allowance.

It maintained neutral on the sector outlook with a full-year CPO price outlook of RM2,350 a metric tonne.

The current minimum wage stands at RM1,000 a month for Peninsular Malaysia and RM920 a month for East Malaysia.

The research house said that given the lower current minimum salary in East Malaysia, plantation companies would likely experience more pressure there as the wage increase would be significantly higher than for their counterparts in Peninsular Malaysia.

"In addition, there could be a ripple effect on the entire company workforce as the more senior ranking officers might also demand similar wage growth," it added

The new government plans to grow the minimum wage level by a staggering 50% to 64% from current levels to a standardisd level of RM1,500 a month over the next five years.

According to its manifesto, the government will share 50% of the wage hike to ease the financial pressure on companies as labour cost accounts for 20% to 25% of the labour-intensive palm oil industry's operating cost.