KUALA LUMPUR: The proposed progressive wage model will help complement the mandatory RM1,500 minimum wage order, said Rafizi Ramli.
The Economy Minister said that a more balanced approach was in favour of cushioning the impact on small and medium businesses while allowing better salaries, particularly for entry-level graduates in the job market.
"There has been extensive discussion over the past seven months on whether there should be laws such as a Minimum Wage Order.
"Following which, the Cabinet has approved a policy for a progressive wage model," he said when replying to a supplementary question by M. Kulasegeran (PH-Ipoh Barat) in the Dewan Rakyat on Thursday (Nov 30).
Earlier this month, in a written reply in Parliament, Human Resources Minister V. Sivakumar said the current two-year minimum wage order is being reviewed in line with the National Wages Consultative Council Act 2011.
The minimum wage order was enacted on May 1, 2022, with a monthly minimum wage of RM1,500 for all sectors, regardless of region, for employers with five or more workers.
Rafizi said that 80% of the 1.1 million registered businesses in the country were micro enterprises.
These are businesses with five or fewer employees and are mainly in the F&B (food and beverages) sector.
"Another 15% are small businesses while medium and big businesses comprise 2.5% each.
"If we enforce a mandatory minimum wage order without government intervention, such as providing incentives, many of these businesses will shutter.
"Also, many workers will switch to the informal sector and become contract workers, making the situation even harder.
"That is why we are taking the middle road by introducing a policy and model based on incentives provided by the government and related to workers' skill and productivity," he said.
Rafizi added that a mandatory minimum wage order would only force employers to focus on paying their employees minimum wages at the expense of offering better salaries for entry-level graduates.
"The minimum wage is RM1,500 while an entry level graduate salary is currently RM1,600," he added, saying that the companies participating in the progressive wage approach are voluntary.
Rafizi is scheduled to table a White Paper on Progressive Wages in Dewan Rakyat later Thursday (Nov 30).
