KUALA LUMPUR: Contractors need to review their payment rates to vendors, as the minimum wage is set to increase, says the Malaysian Employers Federation (MEF).
Its president Datuk Dr Syed Hussain Syed Husman called for the review of their contracts due to the rise in minimum wage.
"Employers need to ensure that the increase in minimum wage to RM1,700 starting Feb 1, 2025, be provided for in their 2025 budgets and operational costs.
"It is critical for employers to plan ahead to avoid cash flow challenges.
"Employers with five employees or more, need to review their salary structures and ensure that employees earning less than RM1,700 are adjusted to the new rate (RM1,700).
"While after a six-month grace period, those with fewer than five employees will be subjected to the same increase on Aug 1.
"Early preparation will ensure better compliance with the new minimum wages order thus avoiding penalties due to non-compliance," he said in a statement on Sunday (Oct 27).
He said vendors to main companies will experience challenges in meeting the new minimum wage of RM1,700 as their contracts run beyond 2025 and some even up to 2027 and beyond.
"The charging rates were determined based on the minimum wages at the material time when their contracts were agreed, that being RM1,500 per month.
"With the new minimum wages as announced by Prime Minister Datuk Seri Anwar Ibrahim, coming into effect on Feb 1 (more than five employees), and Aug 1 (less than five) next year, many vendors will have issues as they will find it hard to amend their contracts and get their rates reviewed based on the new RM1,700 per month minimum wage.
"We urge all parties including multinational companies, government link companies, government-linked investment companies and large companies to amend their contracts with vendors or have a separate agreement in running contracts to make the necessary changes to the rates.
"They need to take into account the new monthly minimum wage," he said.
Syed Hussain said the review of the payment rates taking into account the hike in minimum wages will enable the vendors to fulfill their obligations to implement the increase.
"As responsible members of the society, we must all cooperate to honour the new minimum wages.
"We must treat people humanely and understand their challenges and issues," he said.
It was reported that the national minimum wages will be increased to RM1,700 from RM1,500, with effect from Feb 1, 2025 for employers with five and more employees.
Micro businesses with less than five employees are given a grace period of six months to implement the new minimum wages, coming into effect from Aug 1, 2025.
