Update contracts automatically if new minimum wage introduced, says security industry association

KUALA LUMPUR: The Security Industry Association of Malaysia (PIKM) has called on the government to update all contracts with security companies automatically if a new minimum wage rate is introduced.

Its president Datuk Seri Ramli Yusuff said that the association is aware that the government will be finishing its study on an increase to minimum wage at the end of the year.

"On top of an increase (to minimum wage) every two years, we need to raise the issue of whether the government is capable of making payments to association members, who are providing security services at government premises.

"Currently, the government is using the 'Pay First, Claim Later' mechanism meaning if there is a change to minimum wage, the government will not update or streamline contracts beforehand," he said in a statement on Wednesday (Nov 10).

Instead, security companies would be instructed to increase the salaries of personnel when a new minimum wage was gazetted, Ramli said.

"The changes can only be claimed by the companies after the respective ministries are ready to make payment a year later or after the current contract expires.

"However, security companies have to cover other costs as well. For example, when the minimum wage is raised from RM1,100 to RM1,200, it does not mean each company has to bear the cost of an increase of RM100.

"It also involves other increases amounting to RM400, which covers overtime, Employee Provident Fund (EPF) and Social Security Organisation (Socso) contributions, insurance and other costs," he said.

Most ministries would not update its contracts based on the new gazetted minimum wage as the current contract had not expired despite such contracts being signed based on previous minimum wage and treasury budget, he added.

"Only the Education Ministry seems serious in updating its contract (with security companies) based on the current minimum wage.

"PIKM records showed that there are still backlog payments for updated contracts for minimum wage in 2018 and 2020.

"The 'Pay First, Claim Later' mechanism clearly does not ensure long term economic stability as it can cause companies to close down due to various factors, including late payments and burden of higher cost," he said.

Ramli called on the government to fully update and streamline all existing contracts automatically based on current minimum wage.

"It includes the readiness of the government to make payment based on the rate of the updated contracts in the first month of when the minimum wage is gazetted.

"The National Audit Department should gauge the effectiveness of the 'Pay First, Claim Later' mechanism.

"There should not be any backlog of payments for updated contracts if such a mechanism is truly effective," he said.

The government should understand that the security industry is labour intensive, he added.

"Some 900 companies with almost 200,000 personnel are big contributors to the Gross Domestic Product (GDP).

"Thus, difficulties in the payment mechanism will only disrupt GDP growth.

"If the government is not ready to update the contracts as and when the new minimum wage is gazetted, they should allow companies to conduct operations based on the old rate of wages.

"Following the new mandated minimum wage is only compulsory only after the contracts have been updated and streamline," he said.

Ramli said such methods seem fair for not only the security industry but other industries as well.

"We believe the government's decision to raise the minimum wage will be accepted more positively if its implementation is done fairly," he said.