PETALING JAYA: There should be a balance between benefits for workers and employers when reviewing the minimum wage order this year, say experts.Industry players said that while increasing the minimum wage rate would help workers cope with pressing living costs, the interests of businesses should also be accounted for to avoid inflationary effects from any hike.
Malaysian Employers Federation president Datuk Dr Syed Hussain Syed Husman said businesses that need to pay higher salaries for their workers will need to pass on the increase in costs to consumers.
“Businesses are also affected by the current increase in service tax, especially when 97.4% of businesses in Malaysia are made up of micro, small and medium enterprises (MSME).
“Companies that perform well can afford to pay a higher minimum wage. But most of the 650,000 micro-companies will find it difficult to absorb the increased cost of higher minimum wage rates,” he said in an interview yesterday.On Thursday, Human Resources Minister Steven Sim said the government will review the minimum wage this year, taking into account the views of both employers and employees.
He said the review would be based on the National Wages Consultative Council Act 2011.
According to Section 25(1) of the Act, the minimum wage should be reviewed at least once every two years. However, the council is allowed to review the order upon direction from the government.
The last time the minimum wage was reviewed and enacted was in May 2022, increasing it from RM1,200 to RM1,500.
Syed Hussain said the new minimum wage rates should also take into account the current cost of goods and services, an increase in productivity, the poverty line index and the employer’s ability to pay.
“The new minimum wage rate, set to be reviewed this year, should be realistic and take into account the needs of both employers and employees,” he added.
Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry president Nivas Ragavan echoed the sentiment, saying that the government should ensure the new rates are tallied with policies affecting industries.
“The government needs to discuss this with us in the industry. Recently, there have been a lot of new taxes affecting the industry.
“We also want to make sure that we pay the workers fairly in accordance with their skill sets and knowledge,” he said.
Nivas added that, aside from revising the minimum wage, it must also come in tandem with other government initiatives to help both workers and employers.
“Most MSMEs are still struggling financially. Incentives should be introduced for both workers in the formal and informal sectors,” he added.
Malaysian Trades Union Congress president Mohd Effendy Abdul Ghani also agreed that there must be a balance between ensuring fair compensation for workers and providing stability for employers.
“Regular reviews of the minimum wage are crucial for maintaining fairness and adequacy in compensation, reflecting economic realities and ensuring the well-being of workers.“This process helps address any disparities and allows for adjustments to meet evolving socioeconomic conditions,” he said in a statement to The Star.
“Feedback from stakeholders and careful analysis of economic indicators can help inform whether the current interval is appropriate or if adjustments are needed,” added Mohd Effendy.
He also warned that “frequent increases in the minimum wage can potentially contribute to inflation, as they may lead to higher production costs for businesses”.
“However, the extent to which minimum wage increases directly impact inflation depends on various factors, including the overall state of the economy, the magnitude of the wage increases and the responsiveness of businesses to adjusting prices,” Mohd Effendy said.Small and Medium Enterprises Association of Malaysia national president Datuk William Ng said the government should instead focus on attracting high-value industries that offer high-paying jobs.
This is to ensure that Malaysians are adequately trained and reskilled for the said jobs.Ng said that mandating a minimum wage is not the most efficient way to increase the salaries of workers.
“It is meant to be used sparingly, with the aim of raising the income for the lowest earners.
“When done without a corresponding increment in productivity or business margin, it will hurt the increment and promotion prospects of more productive workers and distort the labour market as businesses are forced to reduce jobs,” said Ng.
