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KUALA LUMPUR: The SME Association of Malaysia has raised significant concerns about the proposed wage increase and higher mandatory Employees Provident Fund (EPF) contributions in Budget 2025.
While national president Chin Chee Seong commended the government's focus on improving worker welfare, he warned that these measures could impose unsustainable financial strain on small and medium enterprises (SMEs), many of which are still in a fragile state of recovery following the pandemic.
"We cannot ignore the fact that the proposed wage and EPF adjustments, if enforced without additional support mechanisms, may threaten the survival of countless small and medium-sized enterprises.
"SMEs, which constitute over 97 per cent of Malaysia's business landscape and employ millions of people, operate under significantly tighter margins compared to larger corporations.
"Their ability to absorb these additional costs is minimal, and many are already struggling with escalating costs in raw materials, energy, logistics, and financing," he said in a statement.
Chin said the proposed wage and EPF contribution increases will not impact all sectors equally. Labour-intensive industries such as manufacturing, retail, and services will be disproportionately affected compared to capital-intensive sectors.
For these industries, where profit margins are already razorthin, this could result in reduced hours for workers or even a shift towards automation, ultimately displacing jobs, he said.
In light of the above, Chin said the association recommended the government introduce a gradual increase in wages and EPF contributions over an extended timeline to allow SMEs sufficient time to adapt.
Meanwhile, he also recommended the government allocate additional funds specifically aimed at providing relief to SMEs, particularly in labour-intensive sectors, to help them comply with the new regulations without sacrificing their financial viability.
In addition, Chin said the government should also introduce government-sponsored programs that provide SMEs with incentives to invest in employee training and upskilling, enabling them to offset wage increases with improved productivity and competitiveness.
"As the National President of the SME Association of Malaysia, I implore the government to take immediate action to address these concerns.
"The proposed wage and EPF contribution increases, if implemented without additional support and flexibility, risk inflicting lasting damage on the SME sector, which is vital to the overall health of Malaysia's economy," he added.
Source: https://www.nst.com.my/business/corporate/2024/10/1124093/wage-hike-mandatory-epf-contributions-could-create-financial