PETALING JAYA: The Progressive Wage Policy (PWP) should remain voluntary as small and medium enterprises (SMEs) continue to face challenges, say industry leaders.
While the PWP pilot project continues to unfold, they said mandatory adoption could further strain businesses amid high operational costs, a volatile global market and lingering effects from the Covid-19 pandemic.
They also called for flexible implementation and additional government support to help SMEs balance wage increases with financial sustainability and market competitiveness.
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Small and Medium Enterprises Association of Malaysia (Samenta) national president Datuk William Ng said the PWP should be kept voluntary and sector-agnostic instead of being made compulsory as suggested by comparisons with Singapore.
“Unlike Singapore, we recently revised our minimum wage policy upwards. The upcoming multi-tiered levy system will likely support wages across sectors, making compulsory PWP unnecessary,” he said.
Voicing their concerns: (From left) Ng, Ragavan and Chin.
While the PWP is based on the assumption that higher wages and training would boost productivity, he cautioned that it was too early to measure its success due to structural productivity challenges.
Ng acknowledged that the PWP is beneficial, especially for SMEs considering wage increases through training and re-skilling.
However, he said SMEs also face structural challenges regarding productivity, which he believes are not just solvable through automation and digitalisation.
“Many SMEs handle labour-intensive tasks like cleaning, maintenance and logistics outsourced by larger firms that (want to) avoid increasing headcounts.
“Also, 98% of SMEs are small or micro-enterprises, often lacking the academic foundation to develop productivity and process improvement programmes,” he added.
Ng suggested the future integration of a productivity-linked wage system (PLWS) to incentivise employees based on individual and firm productivity for a more tailored approach to enhancing SME productivity.
During his Budget 2025 announcement last month, Prime Minister Datuk Seri Anwar Ibrahim said the PWP would be fully implemented next year, with an allocation of RM200mil benefiting 50,000 workers, following a pilot programme that ran from June to September this year.
The pilot programme introduced multiple wage floors above the minimum wage, helping employers pay Malaysian workers PWP-determined wages.
According to the Human Resources Ministry’s “Guidebook of Starting Basic Salaries and Annual Salary Increment for Selected Sectors”, the lowest paying job under the programme starts at RM1,810, for entry-level pawnbrokers and moneylenders.
Deputy Human Resources Minister Datuk Seri Abdul Rahman Mohamad had previously told the Dewan Negara that as of July 29, a total of 996 employers had opened accounts under the pilot project, of which 416 have applied to the programme.
Kuala Lumpur and Selangor Indian Chamber of Commerce and Industry president Nivas Ragavan said the seemingly lukewarm sign-up rate for the pilot project should not imply a lack of interest in fair wages among SMEs.
“It highlights the significant challenges SMEs face in adopting it, especially under current economic pressures.
“SMEs are assessing whether they can sustain wage adjustments while staying competitive. The timing might not be ideal, especially for sectors with tight margins,” he said.
Ragavan added that there was a need for firm assurances and additional support measures to encourage broader adoption.
“SMEs are interested in improving wages and working conditions.
“With continued dialogue and targeted support, I believe we’ll see more enthusiasm over time,” he said.
For long-term success, he said the government should offer grants or subsidies for skills development and operational upgrades, alongside tax incentives.“The PWP is a step towards an equitable workforce, but flexible, phased implementation is essential. This would encourage more businesses to adopt the policy without compromising their financial health.
“Continuous dialogue between policymakers and industry players will refine the approach for mutual benefit,” he added.
SME Association of Malaysia president Chin Chee Seong said members’ feedback indicated that they found the PWP cumbersome.
“Most SMEs haven’t taken up this scheme because it’s complicated and requires applying for grants without immediate results,” he said.
Chin added that many members prefer their staff increment systems, believing they understand their employees’ needs better.“Increasing salaries isn’t a priority. Only 20% of our members are doing well, while 80% are struggling. The lack of immediate business benefits and the burden of partially subsidising wage increases make it difficult for SMEs to consider the PWP,” he said.Chin also said many SMEs lack the manpower to implement the policy effectively.
“This programme suits GLCs (government-linked companies) and MNCs (multinational corporations) more, as they have the necessary staff and performance systems,” he said.
With 13,000 members nationwide and some 80% being smaller firms, Chin said larger firms in his association are hesitant, fearing they could not sustain wage increases amid uncertain business conditions, such as the costly integration needed for implementing e-invoicing.
Malay Businessmen and Industrialists Association of Malaysia president Mohd Azamanizam Baharon said the PWP was essential for reforming Malaysia’s labour market and retaining talent.
“It’s a government-led initiative to gradually increase wages alongside productivity,” he said, emphasising the need to retain talent that otherwise seeks better pay abroad.
With fewer than 500 companies registered, Azamanizam suggested that incentives for automation could boost participation by reducing reliance on unskilled labour.
“Relying on cheap foreign labour is unsustainable. The PWP provides a path for SMEs to modernise and automate, ensuring our economic resilience,” he added.
