SME Association president Chin Chee Seong.
PETALING JAYA: The Small and Medium Enterprises (SME) Association of Malaysia has asked the government to take immediate action to address concerns arising from the proposed minimum wage increase and mandatory Employees Provident Fund (EPF) contributions for foreign workers.
SME Association president Chin Chee Seong said the proposals could have a risk of inflicting lasting damage on the SME sector if implemented without additional support and flexibility.
He pointed out that SMEs, which constitute over 97% of Malaysia’s business landscape, operate under a significantly tighter margin.
Among key concerns are further increase in operational costs, negative impact on employment and hiring practices, as well as the limited ability to pass on costs to consumers.
“Many SMEs are still reeling from the economic fallout of the Covid-19 pandemic.
“Recovery has been slow and just as the businesses are beginning to rebuild, the minimum wage hike and EPF contribution issue have threatened to derail their efforts,” Chin said.
Prime Minister Datuk Seri Anwar Ibrahim had announced an increase in minimum wage in the country to RM1,700 from RM1,500 monthly, effective Feb 1, 2025.
Under Budget 2025, EPF contributions would be made mandatory for all foreign workers in a move to ensure that all workers have access to social protection compared with the voluntary contributions previoiusly
Chin said while a wage increase would benefit the workers, it could harm the employment market in the long-term as businesses need to cope with the higher salary and mandatory EPF contributions.
He added that raising prices to cover the new expenses could result in lower revenue and shrinking profit margins.
Additionally, the association argued that the latest development might stunt business innovation and expansion, causing inequitable impact on different SME sectors and inadequate financial support.
“Many businesses are already holding off expansion plans due to cash flow constraints.
“These new proposals will further delay growth initiatives that are critical to achieving long-term sustainability and staying competitive globally,” he added.
In light of the key concerns, the association said the government should adopt a balanced and thoughtful approach to address the issue.
