PETALING JAYA: The Federation of Malaysian Manufacturers (FMM) expressed support for a review of minimum wages but prefers a gradual adjustment over a sharp increase to RM2,000 as proposed by some groups.
FMM president Tan Sri Soh Thian Lai said a gradual adjustment could provide a balanced approach to enhancing workers’ wellbeing without the steep financial burden on businesses which are only just starting to see prospects of more positive business conditions.
"The quantum of increase of some 33% on the basic salary will have a spiralling knock-on effect on the overall payroll costs.
"With micro small and medium enterprises (MSMEs) accounting for 96.9% of overall establishments in Malaysia based on 2023 data, the industry strongly feels that such a sharp increase would have an undesirable impact on the economy and business sustainability," he said in a statement on Thursday (Aug 15).
Economists and labour players have suggested that the minimum wage in the country should be at least RM2,000 monthly to cover basic living expenses in the current economic climate.
On Aug 12, the Malaysian Trades Union Congress said the RM1,500 minimum wage is no longer reasonable due to the high cost of living.
Soh said MSMEs, especially those in the suburban areas would be most impacted by a sharp rise in wage cost.
"At the same time, the economy would also see an immediate additional monthly outflow of close to RM800mil with the repatriation of funds by foreign workers (based on 1.6 million legal foreign workers) with no direct positive impact on the local economy.
"A gradual adjustment to minimum wages would help avoid shock to businesses, particularly the MSMEs which may not have the financial flexibility to absorb a large increase in labour costs," Soh said.
He also noted that such a move would allow businesses to adapt gradually, making necessary adjustments in their cost structures, operations and productivity to handle increased wages.
"Businesses would also be able to maintain sustainability without resorting to drastic measures like layoffs or price increases to cope with the added costs as well as mitigate inflationary pressures.
"An immediate steep wage hike could lead to inflationary pressures as businesses might have to pass on the increased costs to consumers," Soh said.
He also said it would be unfair and misleading to use the increase of minimum wage of civil servants to RM2,000, as announced by the Prime Minister in May, as the yardstick for the private sector.
According to news reports, the total income in arriving at RM2,000 for civil servants would include fixed allowances and would not be automatic for all.
"The National Wages Consultative Council Act stipulates that the minimum wage is calculated based on the basic wage alone, excluding any allowances or additional benefits.
"This distinction highlights the different considerations and components of remuneration between the public and private sectors.
"It is important to treat these benchmarks separately when discussing wage policies," he pointed out.
Based on the preliminary findings of the recent FMM Business Conditions Survey 1H2024, Soh said the first half of 2024 continued to be challenging albeit with some improvements from the second half of 2023, while the industry projects a more positive outlook for the second half of 2024.
"FMM urges the government to take cognisance of the multiple cost increases which the industry continues to face this year and adopt a more holistic approach in the review process of the minimum wages order including having earnest engagement with stakeholders," Soh added.
