Reminder: Minimum wage doesn’t include OT, allowances

PETALING JAYA: The minimum wage of RM1,500 a month is specifically for the basic salary and does not include allowances and overtime, says Human Resources Minister Datuk Seri M. Saravanan.

“(It is the) basic,” Saravanan said when contacted by The Star on whether overtime and other allowances are taken into account.

SME Association of Malaysia president Ding Hong Sing said more than 90% of Malaysians employed by small and medium enterprises were already receiving RM1,500 or more monthly if allowances and others are taken into account.

He said bosses might resort to slashing their employees’ allowances now that the basic wage rate had increased.

Ding said if the basic salary is RM1,500, then employers may have to reduce the allowances because this was a form of incentives due to their low wage rate.

However, he said employers would not mind raising the wage rate, inclusive of allowances, up to RM2,500 if employees perform well and if employers can afford it.

“Foreign workers are getting RM1,200 because we have to provide them with accommodation, pay the levy and Foreign Workers’ Medical Examination Screening System medical check-ups. When you include all that, it is more than RM1,500,” said Ding.

He said enforcement of the new minimum wage would lead to spikes in the prices of goods and services as employers’ costs would increase.

“Prices of goods will increase by 15% to 30%,” he said, anticipating another round of price hikes this month.

“There is no choice because the salary has increased by 25% (from the previous minimum wage of RM1,200) while in rural areas it is 36%,” he added.

Ding also said employers who could not afford to pay their employees a basic salary of RM1,500 might resort to downsizing their manpower or – in worst-case scenarios – close shop.

“Those who can survive will increase the prices of their goods,” he added.

The new minimum wage rate of RM1,500 – which translates into RM7.21 per hour – came into effect on May 1.

This is applicable for employers with five or more staff members and are classified under the Malaysia Standard Classification of Occupations list which is published by the Human Resources Ministry.

Employers with fewer than five employees can maintain the previous minimum wage of RM1,200 until year-end, and start with the new minimum wage next year.