PETALING JAYA: The hike in minimum wage, albeit by only RM200 monthly per worker, will impact labour-intensive industries such as plantation, construction, manufacturing and rubber gloves.
The impact, however, will be at varying levels across the industries.
Bosses will also fork out more cash, once the government’s plan to make it compulsory for all non-citizen workers to contribute to the Employees Provident Fund (EPF) takes off in stages.
A calculation by RHB Research showed that under the new minimum wage of RM1,700, employers will have to bear an additional cost of RM221 monthly per worker.
Currently, for employees earning below RM5,000 a month, their bosses are required to contribute to the EPF at a rate of 13% of their wages.
The EPF confirmed yesterday that two million foreign workers will benefit from the mandatory EPF coverage. Mechanisms are still being worked out.
As for the new minimum wage, it will come into force effective Feb 1, 2025.
For employers with less than five workers, the effective date is deferred to Aug 1, 2025.
While RHB Research acknowledged that the higher minimum wage will translate to increased disposable incomes this will be offset by the inflationary impact from businesses passing on the higher costs.
“We gathered that major contractors such as Gamuda Bhd
, Sunway Construction Group Bhd and IJM Corp Bhd have pretty much been paying their construction workers above RM1,700 per month.
“Therefore, this is not much of a concern for them,” stated RHB Research in a note.
In a separate note, UOB Kay Hian (UOBKH) Research said the hike in minimum wage from RM1,500 is “slightly negative” to listed glove makers under its coverage.
Earnings will be impacted by 1% to 2%, but the research house said labour cost hike can be passed through via higher average selling price of gloves.
As for the palm oil planters, the new minimum wage will offset the “minor positive” from the higher price thresholds for the windfall profit levy, to a certain degree.
“Although plantation estate workers are earning above the minimum wage level, some salary adjustments are nonetheless anticipated to feed through across planters’ employee base,” said UOBKH Research.
Meanwhile, CGS International Research said the new minimum wage will have a minimal impact on its consumer companies under its coverage.
“Most companies have salary structures above the minimum wage.
“However, consumer sentiment and discretionary spending should be buoyed by the increase in minimum wage from RM1,500 to RM1,700, with a greater impact on consumer discretionary companies and brewers,” it said.
TA Research added that the average earnings impact of minimum wage increases for the consumer sector is approximately 1.8%.
“We believe this impact is manageable, supported by the companies’ top line growth and cost effective measures.”
In the technology sector, Maybank IB Research said the higher minimum wage is “prima facie negative” for outsourced semiconductor assembly and testing (OSAT) players.
About 20% to 30% of an OSAT’s workforce are blue-collar operators earning roughly the minimum wage.
“Our channel checks with local public listed companies implies additional overhead cost pressures once the new threshold comes into effect.
“Although OSATs are theoretically able to pass on these costs to end-customers during upcycle periods of robust utilisation due to cost-plus pricing mechanisms, we believe current industry dynamics makes it challenging for them to do so,” stated Maybank IB Research.
